GM "Recovery" Strategy: Close Plants, Lay Off Workers

The headlines declare that General Motors is "recovering."

Despite continuing to lose money at what historically would have been identified as an astronomical rate, the auto company is losing less money and doing so at a slower pace than was the case a year ago.

So Obama administration aides now say they are "encouraged" by what the New York Times refers to as "signs of life" on the part of a company that many thought had "problems (that) were too big and numerous to fix."

Things are going so great, chirps G.M.'s chief executive Fritz Henderson, that he suggests that returning to the days of big bonuses for corporate executives is again "an open question."

But GM's "recovery" is a paper improvement, not a real one.

The company's improved position was purchased with an infusion of $50 billion in taxpayer dollars.

Even now, as Henderson and other GM officials talk of repaying some of the federal money they took, the Times notes the inconvenient truth that: "The money it is returning to the government is simply part of the loan that the company does not need."

In other words, GM is using borrowed money to pay back borrowed money.

That's not exactly a triumph of capitalism.

Worse yet, GM's "signs of recovery" have been purchased at immense cost to working Americans.

The company has used its massive federal bailout to begin a process of shuttering more than a dozen factories, to lay off tens of thousands of auto workers, to eliminate more than one thousand car dealerships and to eliminate tens of thousands of jobs at those facilities across the country.

Even as the bailout was being arranged, GM was busy shuttering plants in communities such as Janesville, Wisconsin, leaving thousands of workers for the company and its suppliers jobless. Since the bailout, the rate of factory and warehouse closings has actually accelerated as the company has used federal dollars to pay to padlock facilities in the U.S. and to open plants in Mexico and China.

The raw numbers are staggering. In June, GM announced that 14 plants and three warehouses would be closed, at a cost of up to 20,000 jobs in communities across states such as Michigan and Ohio, as well as a number of other states.

Around the same time, the company announced that it was pulling the plug on 1,100 dealerships, at the expense of 100,000 additional jobs.

That was not a "recovery" plan. It was an exit strategy.

And, as promised, GM has not recovered. It has exited, leaving traditional manufacturing towns across the upper Midwest devastated.

What's infuriating is that this process is being facilitated with U.S. tax dollars.

Under this "bailout" plan, GM is remaking itself as a corporate entity that employs fewer Americans, produces fewer cars in the U.S. and sustains fewer communities – effectively undermining the core arguments that were made in the first place for providing bailout funds to the company.

Instead of building itself back up as a great American manufacturer – with new approaches and better ideas for reconfiguring U.S. plants and retraining U.S. workers – GM has used the federal money to offshore its manufacturing operations and downsize its U.S. distribution network by pulling out of inner cities and small towns.

In other words, the taxpayers of the United States have paid for plant closings, layoffs, dislocation and downsizing of what was once a major employer. In return, they may get some of their money back.

That is not cause for celebration.

The auto bailout has been horribly mismanaged from the start.

The fundamental problem was that it was organized with an eye toward preserving the names of two companies – General Motors and Chrysler – but not the reality of those companies.

General Motors and Chrysler are not being "saved" as anything more than investment vehicles for the Wall Street speculators who have in the past year been so favored by powerful Republicans and Democrats in Washington.

What needed to be saved – the family-supporting jobs, the plants that were bedrock employers for communities across the country, a dealership network with many minority owners and all the jobs linked to it – have instead been severely undermined.

It will be suggested that, had the federal government not allocated bailout funds to GM and Chrysler, the two companies would have collapsed altogether – causing more job losses and plant closing.

That may be true. But the government did intervene, and we still ended up with massive job losses, too many plant closings and the loss of dealerships that did not need to close.

That's what's wrong with the bailout.

Instead of getting bang for its bucks, the federal government has giving bucks to corporations that are banging around American workers and the communities.

Comments (55)

1. "GM "Recovery" Strategy: Close Plants, Lay Off Workers "

   In other words...we can't survive with the union contrats of the past along with the legacy costs and will not in the survive in the future with the union contracts and demands...

   solution.....hire and pay workers under the model of car companies that are selling cars today....and design cars that the people want to buy....not what the govt thinks you should be buying...ie...play to the demands of the market..

   Posted by YourJomamma at 11/18/2009 @ 1:11pm

2. "The fundamental problem was that it was organized with an eye toward preserving the names of two companies – General Motors and Chrysler – but not the reality of those companies."

   This is true..

   and the reality is those companies should have gone into bankruptcy and another successful model of a car company, German or Japanese, would have bought the remennants and re opended by now.....

   so this was nothing more than a pay off for the union after elections....and the promises of those elected are going un fulfilled because they never were able to be fulfilled...it flew into the face of reality economics....

   you can't pay workers who dont work for years plus the health care cost of those workers and include that cost into the price of the cars...cars that no one likes or wants.

   Posted by YourJomamma at 11/18/2009 @ 1:20pm

3. JN..."The company has used its massive federal bailout to begin a process of shuttering more than a dozen factories, to lay off tens of thousands of auto workers, to eliminate more than one thousand car dealerships and to eliminate tens of thousands of jobs at those facilities across the country."

   And yet it was "The Nation" who supported the GM bailout.

   Posted by fram at 11/18/2009 @ 1:22pm

4. "That's not exactly a triumph of capitalism."

   GM stopped being a "triumph of capitalism" a long time ago. A bloated welfare state business model microcosm that years ago made terrible decisions on the erroneous belief they'd never be seriously challenged for the American dollar by Toyota or Honda.

   "General Motors and Chrysler are not being 'saved' as anything more than investment vehicles for the Wall Street speculators who have in the past year been so favored by powerful Republicans and Democrats in Washington."

   Investment vehicles? Who in the heck would invest in GM right now? This is about labor unions, elections, and campaign donations.

   GM and Chrysler were not "saved". What was bailed out was the antiquated closed union shop political machinery that spends so much money re-electing Democrats and handing them Michigan each election.

   That Obama overruled at least a century of business law and gave first dibs to the UAW on profits BEFORE the bondholders is all the evidence you need.

   Posted by Citizen_Carrier at 11/18/2009 @ 1:22pm

5. "That's not exactly a triumph of capitalism."

   GM stopped being a "triumph of capitalism" a long time ago. A bloated welfare state business model microcosm that years ago made terrible decisions on the erroneous belief they'd never be seriously challenged for the American dollar by Toyota or Honda.

   "General Motors and Chrysler are not being 'saved' as anything more than investment vehicles for the Wall Street speculators who have in the past year been so favored by powerful Republicans and Democrats in Washington."

   Investment vehicles? Who in the heck would invest in GM right now? This is about labor unions, elections, and campaign donations.

   GM and Chrysler were not "saved". What was bailed out was the antiquated closed union shop political machinery that spends so much money re-electing Democrats and handing them Michigan each election.

   That Obama overruled at least a century of business law and gave first dibs to the UAW on profits BEFORE the bondholders is all the evidence you need.

   Posted by Citizen_Carrier at 11/18/2009 @ 1:22pm

6. The GM recovery mirrors the US recovery. This is our lot from now on. GM is shipping jobs to China, as Obama kowtows to our No. 1 creditor.

   The party's over, folks, as the GMs & Wall St crowd grab as much as they can from us before the well runs dry & the Pentagon takes over, at least de facto if not de jure.

   Obama & Co are nothing more than well cared for place holders. The US presidency will eventually assume the trappings & lack of substance of a Japanese or Chinese emperor.

   Posted by sloper at 11/18/2009 @ 2:02pm

7. Posted by sloper at 11/18/2009 @ 2:02pm

   I think where you are wrong is in your assumption Wall Street is now, or has ever been 'patriotic.' Wall Street has a goal of a borderless world.

   And Obama was hand-picked with this goal in mind. Remember, an autonomous US is a barrier to the new world order based on collectivism. With that frame of reference, suddenly current events start to make perfect sense. Check it out.

   Posted by freiheit1 at 11/18/2009 @ 2:09pm

8. 'Since the bailout, the rate of factory and warehouse closings has actually accelerated as the company has used federal dollars to pay to padlock facilities in the US and to open plants in Mexico & China."

   Seems that both parties want to transfer power (in this case, auto mfg.) to foreign governments, dems through outsourcing by way of "former" American corporate entities and repubs by welcoming foreign corporate invasion onto American soil.

   No wonder repubs are unanimously supportive of American invasion/occupation/hegemony overseas. They're equal opportunity. They welcome foreign invasion here too.

   Only the foreigners aren't wasting bullets.

   Posted by Sorelish at 11/18/2009 @ 2:12pm

9. Conservatives like those of us who post here were railing against the bailout of GM and Chrysler last year, and we were insulted and told how wrong we were by many on the left.

   Unfortunately, the US got what it paid for when it bought GM. A dinosaur that should have been let go and let investors restructure with whatever was truly recoverable.

   Now Obama and the Dems own GM and some are getting buyers remorse.

   Posted by antisocialist at 11/18/2009 @ 2:31pm

10. To be fair, Obama didn't have a choice. His party is owned by the UAW. It is important for him to pay the UAW leadership for those votes with all of our money.

    I'm just wondering what Obama is possibly going to run on in 2012... It's going to be really interesting. The democrats are probably busy writing up voter fraud conspiracy scenarios already!

    Posted by freiheit1 at 11/18/2009 @ 2:39pm

11. Now that the left and Demoncrats have embraced the idiocy of Obamanomics the chickens are home to roost and they don't like it! Yet they all wish to entrust national healthcare to these unmitigated fools!

    Such myopic idealouges misconstrue power mad marxist inspired partisonship for intelligent rational and prudent goverance!

    Posted by BigPasture at 11/18/2009 @ 2:43pm

12. Posted by freiheit1 at 11/18/2009 @ 2:39pm

    Better work on your Rosetta Stone course dude. You're gonna need it. Btw, who's buying those Toyotas these days? The plant in Fremont Calif. is closing.

    Posted by Sorelish at 11/18/2009 @ 2:55pm

13. Hey, Maasch, moving the timeline up a bit from the 1950s....

    how is it we had that "Reagan Boom" in the 1980s (some say to beyond)....when union membership (less PATCO) was HIGHER than it is now?!??!??

    Given business is "hamstrung, nay crippled by the unions"?

    Posted by Mask at 11/18/2009 @ 2:58pm

14. Most seem to agree, the Govt. rescue was a bad ides.

    But one basic point of this artoicle is totally confused. If there exists too much productive capacity at too many plants, so that it cannot be supported by the current market or near-term sales, then what SHOULD GM do? They can't continue making more cars for carrying in unsold inventory! They can't pay the peop.le to come in each day as a social club! How can tey ever recover if they keep the expenses going without supporting sales and the needed profits they generqe?

    JN sems clueless on basic economics.

    John D. Froelich

    Posted by balataf at 11/18/2009 @ 3:00pm

15. Posted by balataf at 11/18/2009 @ 3:00pm

    I suppose if you were marooned on a desert island with a yacht owner & his stores & he got mad at you & forbade you from consuming his grub, you'd starve to death because any other means would amount to theft.

    Basic morality?

    Posted by Sorelish at 11/18/2009 @ 3:11pm

16. Posted by Sorelish at 11/18/2009 @ 2:55pm

    Sad, but true. I love California. Meg Whitman might be someone who can start the turnaround. But liberalism has so damaged the state, it is going to get worse before it gets better. I'm optimistic though.

    Posted by freiheit1 at 11/18/2009 @ 3:15pm

17. Sad, but true. I love California. Meg Whitman might be someone who can start the turnaround. But liberalism has so damaged the state, it is going to get worse before it gets better. I'm optimistic though.

    Posted by freiheit1 at 11/18/2009 @ 3:15pm

    I was born in CA and I no longer share your optimism for the state. I think their next step has to be bankruptcy. Maybe they can divide the state?

    Posted by antisocialist at 11/18/2009 @ 3:17pm

18. Posted by antisocialist at 11/18/2009 @ 3:17pm

    I think it would be wrong to split the state. And, as someone I admire, I'm disappointed to hear you don't share my optimism. But I also can't argue you're wrong.

    Posted by freiheit1 at 11/18/2009 @ 3:26pm

19. What did you expect JOHN NICHOLS? Perhaps "recovery"s a misnomer, but what other possible debacle could one expect in a company where Execs refuse to change with the times,employees can sleep on top of the refrigerator and get paid for it, and all produce vehicles that no one wants.

    Posted by CHIP THORNTON at 11/18/2009 @ 3:27pm

20. Perhaps we should consider the Kellogg solution, from the Great Depression:

    There was, for a time, a visionary alternative. In 1930 Kellogg Company, the world's leading producer of ready-to-eat cereal, announced that all of its nearly fifteen hundred workers would move from an eight-hour to a six-hour workday. Company president Lewis Brown and owner W. K. Kellogg noted that if the company ran "four six-hour shifts . . . instead of three eight-hour shifts, this will give work and paychecks to the heads of three hundred more families in Battle Creek."

    This was welcome news to workers at a time when the country was rapidly descending into the Great Depression. But as Benjamin Hunnicutt explains in his book Kellogg's Six-Hour Day, Brown and Kellogg wanted to do more than save jobs. They hoped to show that the "free exchange of goods, services, and labor in the free market would not have to mean mindless consumerism or eternal exploitation of people and natural resources." Instead "workers would be liberated by increasingly higher wages and shorter hours for the final freedom promised by the Declaration of Independence--the pursuit of happiness."

    http://www.orionmagazine.org/index.php/articles/article/2962/

    Posted by srjenkins at 11/18/2009 @ 3:32pm

21. Posted by freiheit1 at 11/18/2009 @ 3:15pm

    Yeah, think California's problem is that too many people from top to bottom on the economic scale thought the high life would last forever.

    Welfare cases did move there to take advantage of higher payouts & the weather not realizing the cost of living is astronomical. The upper middle classes & the wannabes mounted the RE bubble & thought they'd live off the fat of the land into perpetuity.

    The answer is for the state to cut govt. salaries across the board & raise wages in the private sector for the rank & file. Collective bargaining is the answer.

    Stop the teacher layoffs & hit the upper levels of admin. to save taxpayer cash.

    Btw, by all means, dramatically increase taxes on the wealthy. Where will they go from paradise?

    Posted by Sorelish at 11/18/2009 @ 3:45pm

22. Posted by srjenkins at 11/18/2009 @ 3:32pm

    Thank you so much for that link to a very worthwhile article!

    Posted by freiheit1 at 11/18/2009 @ 3:52pm

23. HELLO, YourJoMamma, Citizen Carrier and Frieheit1, it's the unionized workers who are getting screwed over here while the corporate execs and Wall Street parasites are making out like bandits!! Obama is doing what Carter and Clinton did, screwing over the working class in only a slightly less obvious way than Reagan and the Bushes.

    The far left saw this coming, and old-line nationalist conservatives of The American Conservative type did too, although they would have come up with different prescriptions: worker or government takeover, period, combined with controlling exports and imports by the former, vs. keeping them private but raising tariffs if Japan and South Korea, for instance, didn't open up their auto markets in the latter. Either way, "free trade" for the exclusive benefit of Big Capital would be put on a leash.

    Anyone else know if the rest of the Japanese auto companies are hemmoraging money like Toyota is?

    Posted by cka2nd at 11/18/2009 @ 3:58pm

24. Posted by srjenkins at 11/18/09 @3:32pm

    The best answer yet!

    Posted by Sorelish at 11/18/2009 @ 4:00pm

25. I would still really rather have a Buick...

    ...and still enjoying my Ultra, thank you.

    Wish they still made 'em.

    Posted by schnellerheinz at 11/18/2009 @ 4:12pm

26. Hey, Maasch, moving the timeline up a bit from the 1950s....

    how is it we had that "Reagan Boom" in the 1980s (some say to beyond)....when union membership (less PATCO) was HIGHER than it is now?!??!??

    Given business is "hamstrung, nay crippled by the unions"?

    Posted by Mask at 11/18/2009 @ 2:58pm

    The TREND of union membership in the market place is downward and it continues....

    ...the increase is in govt jobs....

    ...which is really puzzling since there is no competition to worry about and concern for profits or losses....

    ..wait a minute...

    I answered my own question.

    Posted by YourJomamma at 11/18/2009 @ 4:51pm

27. Anyone else know if the rest of the Japanese auto companies are hemmoraging money like Toyota is?

    Posted by cka2nd at 11/18/2009 @ 3:58pm

    I believe the best selling car is...Buick. And I saw them on the streets there bny the millions. VWs too...

    The question one has to ask is why are the German and Japanese companies doing beeter here...why they still sell and GM is tanked?

    Exec salaries aint the problem...add up all the salaries on top and you have a fraction of what the unions received for three years NOT to work...

    Posted by YourJomamma at 11/18/2009 @ 4:59pm

28. Let's just cut to the chase...

    This is ALL THE FAULT OF THOSE MARXIST SOCIALIST TYPES WHO DON'T CARE ABOUT AMERICA AND JUST WANT EXPENSIVE RETIREMENT PLANS AND UNIONIZED LABOR CONTRACTS AND FOOD STAMPS AND FREE HANDOUTS, OH WOE, WHAT HAVE THEY DONE TO MY LOVELY AMERICA?

    There's nothing left for us to sell - 'cause it's all been sold - twice. What happened to the free market? It's not free anymore. I'll buy that for a dollar!

    Posted by ficheye at 11/18/2009 @ 5:40pm

29. My sympathy to those of you who mourn for California. I managed to escape from there in 2002, well before the Exit Visa program will be put into place. I wouldn't worry too much about it though. If you like Mexico, you'll like New Aztlan(tm).

    Posted by sntauri at 11/18/2009 @ 5:53pm

30. NICHOLS: "That is not cause for celebration."

    But it is definitely Change You Wanted!

    Whether bailed out or having to file bankruptcy, what is unfolding w/GM was explicitly spelled out, maybe not exactly how many plants or where, but shrink it must..........unlike most of Magic's pre-election `Hopey' garbage!

    By the way, please lighten up and celebrate, based on JOBS SAVED......probably more effective and REAL than the $787 Billion going to non-existent districts!

    Posted by Happy at 11/18/2009 @ 6:11pm

31. Since the crazies only want to talk of the evil unions, lets have a history lesson. Without unions, this country has no middle class, period. Strong unions provide for a strong middle class. This is not arguable. The fall in union membership tracks the flattening and, even, lowering of wages, making keeping a middle class lifestyle harder to keep.

    As for 'capitalists.' The larger the corporation, the less interested CEO's seem to be in capitalism. They are more interested in lobbying for perks and protection from govt.

    Posted by erazma at 11/18/2009 @ 6:44pm

32. making keeping a middle class lifestyle harder to keep. Posted by erazma at 11/18/2009 @ 6:44pm

    erase that 'to keep.' at the end of paragraph one. A bit redundant...

    Posted by erazma at 11/18/2009 @ 6:47pm

33. Since the crazies only want to talk of the evil unions, lets have a history lesson. Without unions, this country has no middle class, period. Strong unions provide for a strong middle class. This is not arguable. The fall in union membership tracks the flattening and, even, lowering of wages, making keeping a middle class lifestyle harder to keep.

    As for 'capitalists.' The larger the corporation, the less interested CEO's seem to be in capitalism. They are more interested in lobbying for perks and protection from govt.

    Posted by erazma at 11/18/2009 @ 6:44pm

    What leftist BS. we've never had anywhere near a plurality of workers in unions. And most middle class derive their status from either professional occupations or self employment. Neither of which is helped by your marxist unions. they are a plague on our freedom, not a help.

    Posted by antisocialist at 11/18/2009 @ 7:37pm

34. What leftist BS. we've never had anywhere near a plurality of workers in unions. And most middle class derive their status from either professional occupations or self employment. Neither of which is helped by your marxist unions. they are a plague on our freedom, not a help. Posted by antisocialist at 11/18/2009 @ 7:37pm | ignore this person | warn this person

    --I'm sure you'll call lobbyism "free speech" though...and not a "plague on our freedom"

    Posted by urmygyro at 11/18/2009 @ 8:53pm

35. Without unions, this country has no middle class, period.

    Posted by erazma at 11/18/2009 @ 6:44pm

    Then, how is China able to rapidly built up a middle class of some 250~300 million in just 20 years and another several hundred millions on the way?

    Hint: No UNIONS to speak of!

    Posted by Happy at 11/18/2009 @ 8:59pm

36. Then, how is China able to rapidly built up a middle class of some 250~300 million in just 20 years and another several hundred millions on the way? Hint: No UNIONS to speak of! Posted by Happy at 11/18/2009 @ 8:59pm | ignore this person |

    --are you happily speaking of communism?! haha!

    Posted by urmygyro at 11/18/2009 @ 9:20pm

37. --are you happily speaking of communism?! haha!

    Posted by urmygyro at 11/18/2009 @ 9:20pm | ignore this person | warn this person

    :)

    Posted by schnellerheinz at 11/18/2009 @ 9:42pm

38. That was a zinger.

    Posted by schnellerheinz at 11/18/2009 @ 9:42pm

39. Of course, when you have political prisoners, children, the infirm, and little old ladies working the line, well, your costs tend to be contained...

    Posted by schnellerheinz at 11/18/2009 @ 9:45pm

40. Not to mention the leaded toy paint and the toxic drywall...an economic miracle!!!

    Posted by schnellerheinz at 11/18/2009 @ 9:54pm

41. Get a Prius!!! toyota is so far ahead of us in hybrid technology its painful. Wanna save jobs in america? Give the money to toyota and have them buy GM and make cars here in america that americans want. So simple. But not us...we have to develop our own technology and NOT copy someone elses technology that 10 years ahead of ours. Patriotism sometimes has downsides

    Posted by notsleepy at 11/18/2009 @ 9:57pm

42. A lot of "union" this and "union" that in the comments.

    Yet no recriminations for the executives who signed those contracts lest they lose their cash cow.

    No recriminations for the executives who didn't want to make energy-efficient vehicles lest they lose their cash cow.

    No recriminations for the executives whose retirement packages make those of dozens of line workers put together pale in comparison.

    Strange, how the right likes to blame corporate failure on "unions" and "labor", when it is management who is tasked with guiding a company.

    And it is management who harvests huge rewards regardless of whether their decisions cripple the corporation in the long run.

    Posted by ibsteve2u at 11/18/2009 @ 10:05pm

43. ....a zinger.

    Posted by schnellerheinz at 11/18/2009 @ 9:42pm

    Sure was......urmy actually believes China's economy is communistic!

    Posted by Happy at 11/18/2009 @ 10:11pm

44. Hint:no UNIONS TO SPEAK OF!Posted by Happy at 11/18/2009 @8:59pm

    ^The above^, along with your unforgettable Lincoln observation. Something about the Great Emancipator not having troubles in his administration of the magnitude of GW Bush, if I remember correctly.

    The wit & wisdom of a passive gas passer. Open the portholes, here comes the "energy" expert!

    Posted by Sorelish at 11/18/2009 @ 10:58pm

45. Well I am glad the American Conservative Movement here that is championed by Santi,Big Pissture,and the Droopster have reasoned that it is the worker who torpedoed our economy.Somehow a Central Committee in Capitalist China,a Japanese government that subsidizes it car makers,and the Marxists amongst us have taken our economic engine away. No mention of the continuing corporate takeover of the economy that benefits about 6 people.Why are the unions at fault?When we as a nation out source every thing from jeans to blankets and no one blinks "we" as a nation are at fault. Not liberals or conservatives,Democrats or Republicans, we as Americans. An easy life for whom is what we are going to say. We are talking here about General Motors. Which company will be next to get money one way or another,and to satisfy shareholders quest for dividends,offshore more American jobs. Let's see if our son's and daughters have jobs in the future. Oh,look at China,no cares about treating their workforce fairly,who will complain?A call for freedom in China on the internet? They have a crackdown whenever they want. Again to you fools on the right,Communist China is alive and well and loves it's cheap labor force that it can exploit quietly.When the time comes and the apply the pressure and 1.The dollar is not the international currency. 2. They call in our loans which every successive government will use.3. We fight a war without a technological advantage and a substantial man power shortage. We are going to do this out of greed and sheer stupidity.

    Posted by whatozz at 11/19/2009 @ 08:38am

46. Well I am glad the American Conservative Movement here that is championed by Santi,Big Pissture,and the Droopster have reasoned that it is the worker who torpedoed our economy.Somehow a Central Committee in Capitalist China,a Japanese government that subsidizes it car makers,and the Marxists amongst us have taken our economic engine away. No mention of the continuing corporate takeover of the economy that benefits about 6 people.Why are the unions at fault?When we as a nation out source every thing from jeans to blankets and no one blinks "we" as a nation are at fault. Not liberals or conservatives,Democrats or Republicans, we as Americans. An easy life for whom is what we are going to say. We are talking here about General Motors. Which company will be next to get money one way or another,and to satisfy shareholders quest for dividends,offshore more American jobs.

    Posted by whatozz at 11/19/2009 @ 08:38am

    You need to re-read my posts. Nowhere did I say that workers "torpedoed" our economy. My comments were directed at something else completely, which was the false notion that you could not have a middle class without the unions.

    And I certainly blame the management as much if not more than the workers for mismanaging GM. that is why I said last year that they need to just let them go bankrupt.

    Posted by antisocialist at 11/19/2009 @ 09:48am

47. What GM is doing epitomizes the American business agenda. The people at the top of the company don't take responsibility for bad business decisions if profits go south. They blame their failures on the assemblers, technicians and folks in the trenches. Their answer has been and is, cheaper labor.

    Innovation is unheard of in the high echelons of American companies. But it is not innovation we lack as a country, it's intestinal fortitude of our overpaid underachieving business tycoons running the show.

    It's really quite simple. If Joe Blow gets it in his contract that no matter how the company fares with him at the helm, what incentive does Joe Blow have for the company to do well (anybody heard of the term "golden parachute?). That has become the status quo. All of the rewards with no responsibility to go with it. The responsibility is instead put upon the factory worker, the janitor, the assembly line folks....anybody except where the real responsibility lies. The board of directors and the senior management teams.

    The U.S. car companies were very well aware in the 70's and 80's that the 4 cylinder engine cars would do well. They chose to not retool because it would require money up front and cut into their profits. So, the majority stock holders said, let's make as much as we can with these companies, and when they are falling behind, we'll slowly sell our shares and reinvest in the competition. Due to inside knowledge that the companies are doomed to fail, these oligarchs profitedt from selling what appeared to be "blue chip" stocks and then turned around and took that money and invested it back into the competition which flattened the company they once invested in...insider trading at it's best folks.

    Posted by Wolfgang1 at 11/19/2009 @ 1:36pm

48. Posted by whatozz at 11/19/2009 @ 08:38am

    Good observations! Spot on.

    Posted by Wolfgang1 at 11/19/2009 @ 1:39pm

49. But not us...we have to develop our own technology and NOT copy someone elses technology that 10 years ahead of ours. Patriotism sometimes has downsides

    Posted by notsleepy at 11/18/2009 @ 9:57pm

    We have the technology. We're just selling it to the highest bidders at the expense of our workforce. All of the yahoos going ib out about our military superiority don't realize that our even the manufacturing of our military weapons are being outsourced to "COMMUNIST COUNTRIES" lol.

    I guess it's okay to put union people out of work and it's fine and dandy to offshore jobs to cheaper labor so Joe Corporate can increase his investment portfolio. But g_d forbid we have some socialistic form of health care in this country. Give me my plastic crap from Walmart or give me death. I guess we get to have it both ways. We can have plastic crap full of lead and die from it because we can't get any medical care.....what a country.

    Posted by Wolfgang1 at 11/19/2009 @ 1:48pm

50. is GM really moving production off shore?ain't that a kick in the crotch? what a sad indictment of these bailout practices. what a sell out by the UAW. isn't it one of the major shareholders now? we already knew WS was driving firms to lower wage locations, but, et tu UAW? cynical moves like this only prove the firms should have been bakrupted long ago. the american dream, for now anyway, is looking more like cooolie wages for all.

    Posted by mikeflynn at 11/19/2009 @ 2:07pm

51. cynical moves like this only prove the firms should have been bakrupted long ago. the american dream, for now anyway, is looking more like cooolie wages for all.

    Posted by mikeflynn at 11/19/2009 @ 2:07pm

    Yes. The real crisis is that's actually the goal.

    Posted by freiheit1 at 11/19/2009 @ 2:43pm

52. Posted by antisocialist at 11/18/2009 @ 7:37pm

    True, we've never had a plurality of workers in unions, but because the unionized companies were forced to pay good wages and give decent benefits, non-unionized companies had to follow suit at least part of the way so as not to lose their workers to the competition. Or, as in the South, they relied on the the politicians, courts, cops and Klan to stay "union-free," leaving their workers with the option of either migrating north or west or staying home and bending down to the bosses.

    Now, I don't generally like to refer to workers as being part of the middle class because that muddies the definition of both classes. Properly speaking, the middle class is different from the working class because they don't just have their labor to sell but also have either (a) a professional degree that is worth money above and beyond what the average worker without said degree can make, and/or (b) a business or property that they either own or run as management.

    However, one can legitimately say that unions are primarily responsible for a significant number of workers being able to live a classicly middle class lifestyle, including owning their own homes, taking annual vacation trips and, crucially, sending their kids to college.

    And that's the other point about unions building the middle class. It's thanks to unionization that many families were able to send their first ever generation to college. There's a huge number of Italian-, Irish-, Polish-, African- and other hyphenated American lawyers, doctors and other professionals whose parents were unionized factory workers, meatpackers, retail clerks or civil servants.

    Posted by cka2nd at 11/19/2009 @ 2:49pm

53. Posted by ibsteve2u at 11/18/2009 @ 10:05pm

    The thing that get's the least press but might be most responsible for the sorry condition of many American companies is the debt load they are carrying because of their committment to short-term profits and dividends by artifically inflating the price of their stocks.

    By constantly buying back stock, executives inflated the price of said stock, thereby insuring both higher dividends for their stockholders and higher compensation for themselves when they exercised their obsence stock options.

    Companies have also larded on the debt by pursuing market dominace (i.e., monopoly), "synergy" or diversification via corporate takeovers and mergers. Often as not, with the debt came a corporate marriage that made about as much sense as Michael Jackson and Lisa Marie Pressley. Not to mention that these corporate buyouts and mergers were often sold to investors as the best thing since sliced bread, so look, there go those shareprices rising again!

    Posted by cka2nd at 11/19/2009 @ 3:04pm

54. Posted by cka2nd at 11/19/2009 @ 3:04pm

    Too simplistic!

    Sure, there are bad mergers and unwise buyback of stocks when cash flows are ample. And, no question, one of the main/key reason for buybacks is to boost/support share prices.

    The broader rationale is very different than the `bad capitalists' buybacks you like to think is the norm.

    First, you need to recognize that equity investors always demand a higher return than debt holders. At a Price Earning Ratio of 17 (approx. historical long run average and also, roughly today's P/E ratio), the current return required by investors is about 6%, the inverse of 17. This current return is also based on the expectation of average growth in future earnings, something that is entirely missing from debt holders who receive coupon payments.

    Adding the expectation of future earnings gain, which lead to higher stock prices, the average stock is expected to yield average annual return of not less than about 10%.

    What is the cost of debt? Generally much, much less than 10%. Today, 10-year Corp. bonds (not the blue chip, just average corp. bonds) likely yield not much more than 1% or 2% over 10-year Treasury....meaning about 5% to 5.5%.

    So, if a company has excess cash & no sure way to put it to use making more than 10%, it makes sense to `retire' some of its stocks since such stocks `cost' more than the debt!

    Anyone who understands our capital market know the key difference between equity (stocks) and debt.... equity takes the much higher risk than debt and require higher return!

    Say Boeing, and its 52-week price range.....going by vague memory, it's between $30 to $55. If you were to track Boeing's bonds, there is no f*&king way its bond prices would vary by that wide swing in an average year!

    Hope this helps many!

    Posted by Happy at 11/19/2009 @ 4:32pm

55. Posted by Happy at 11/19/2009 @ 4:32pm

    I think I am understanding what you are saying and I shouldn't have given the impression that the phenomenon was an example of "bad" capitalists trying to job the system. If anything, though, your explanation just points out how illogical the whole system is.

    Why should we be encouraging stock ownership as a form of gambling with high risk and therefore a demand for high return? I can certainly understand investing in a company for the long-term, or even as a start-up, out of a committment to that company, its products and its long-term prospects to deliver a healthy return. But we have created a system, quite deliberately given the legal and regulatory shifts of the last 30 years, that instead rewards stock flipping where the risk is less (at least for the big timers) that you'll get wiped out than that you'll make only a 7% profit instead of a 20% or 30% one.

    I'm not sure this still applies, but broadcasting has been a prime example of this, where the owners were trying to squeeze every last dime out of the cost of doing business not because they were worried about going in the red but because they wanted to raise their historically high profits (around 20%) to stratospheric levels (30, 40 percent or more).

    Classical Marxists like me try - and sometimes fail - to point out that the problem with capitalism isn't "bad" people but a system that by its very logic encourages bad behavior.

    Posted by cka2nd at 11/20/2009 @ 11:19am