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"Under Restructuring, GM To Build More Cars Overseas

Published:

Our tax dollars at work.  Someone didn't look before they jumped in .... taking us down with them. 

________

"Under Restructuring, GM To Build More Cars Overseas

By Peter Whoriskey
Washington Post Staff Writer
Friday, May 8, 2009

Source WashingtonPost.com

"The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.

The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.

As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.

Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.

"It's an almost impossible dilemma," said former labor secretary Robert B. Reich, now a professor at the University of California-Berkeley. "GM is a global company -- so for that matter is AIG and the biggest Wall Street banks. That means that bailing them out doesn't necessarily redound to the benefit of the U.S. or American workers.

"More significantly, it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?"

The administration has aroused similar complaints by shepherding a merger between Chrysler and Italian automaker Fiat. But it has extracted a promise from Fiat that it will build small cars in the United States.

The complaints about GM's operations portend a potentially larger argument, a political dispute led in part by the United Auto Workers.

"The bottom line is GM would rather pay $2 an hour -- and it's a slippery slope downward," said Alan Reuther, the UAW's legislative director. "If GM is going to be getting government assistance, they ought to be maintaining their manufacturing footprint in the U.S. rather than going off to China, Mexico and South Korea."

Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits costs about $54 an hour, a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour, industry sources said.

On Tuesday and Wednesday, GM chief executive Fritz Henderson met with legislators and sought to ease their concerns over the overseas operations.
He emphasized that the company, which is shuttering factories at home, is also canceling projects in Mexico, Russia and India.

He also assured legislators that none of the figures are final, and that negotiations with the union are ongoing.

"We continue to work closely with GM, UAW, and all the stakeholders to further refine and develop GM's plan," a Treasury spokesman said.

The U.S. government has loaned GM $15.4 billion. But billions more are expected to be invested, and under the current plan, it will be the majority owner of the company.

The company forecasts that between 2010 and 2014, as the recession recedes, its U.S. sales will rise from 2.4 million to 3.1 million.

Most of that growth -- about two-thirds of it -- will occur in the United States. But about one-third of that growth will come from other countries, mostly Mexico and South Korea.

Those proportions roughly reflect how GM builds the cars it sells in the United States today -- about two-thirds come from the United States and one-third from other countries.

According to the figures shared with lawmakers, the percentage of GM's U.S. sales of cars built in the United States dips from 67 percent in 2009 to 61 percent in 2012. Yet the company projects that by 2014 the percentage will rebound to 66 percent.

Under the viability plan, "the U.S. percentage stays roughly the same," Henderson said in an interview last week.

But the union and some legislators object that the company's U.S.-funded revival should not help pay for expanding foreign operations. Moreover, they believe that planned cuts in Canadian production -- down 23 percent -- will have direct effects on U.S. jobs because the U.S. and Canadian auto industries are so intertwined.
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"If you are shutting down plants in this country, U.S. tax dollars should not go for building plants in other countries," said Sen. Sherrod Brown (D-Ohio), who was among those who met with Henderson.

But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States.

Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars -- which are built in Changwon -- to the United States for sale.

But since only about 5 percent of the car's market will be in the United States, the manufacturing will remain in South Korea.

Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency.

"If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide."

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050704336.html

Entry #1,139

Comments

1.
Comment by bambini - May 8, 2009, 2:28 pm
......as far as, I am concerned if the foreign workers are good enough to make GM cars... they can buy GM cars as well....I wonder how much car.......$10 per day buys....again how does bailing out GM help me?
2.
konaneComment by konane - May 8, 2009, 4:05 pm
Thanks Bambini!!! Wondering the same thing myself. Are US taxpayers subsidizing the world as our own standard of living goes down the tube?
3.
time*treatComment by time*treat - May 8, 2009, 10:30 pm
Those who looked before the jump were called names like racist, isolationist, xenophobe, & crazy. Nearly 20 years ago H. Ross (anti-NAFTA) Perot warned about this type of thing and he was soundly laughed at, for his trouble. Many of those who laughed at him have since seen their jobs leave the country -- and he's still rich. Many still don't get that a nation's wealth can't come entirely from "services" like landscaping, shuffling paperwork, and running websites.
4.
konaneComment by konane - May 8, 2009, 10:40 pm
Thanks Time*treat!! Remember Mr. H. Ross (anti-Nafta) Perot ..... in fact voted for him because he made sense. He was entirely correct with what he said and saw the coming demise of the nation which we're witnessing firsthand.
5.
Comment by jim695 - May 9, 2009, 9:22 am
Well, I was only going to mention that I had heard on the news that this outsourcing is supposed to be a temporary measure (kind of like our federal income tax was "temporary" in 1924). However, after reading the article, it turns out I have more to say than I had originally believed. Most of you aren't going to like it, but I'm hoping you'll take some comfort in the fact that I don't care.

      First of all, there is no way anyone can justify $54.00 an hour for unskilled labor positions; it's just plain unreasonable. Is it any wonder the auto manufacturers fail to turn a profit year after year? Funny thing is, the unions will be the first to blame the government when GM finally does collapse. No matter; they made their bed - let them lie in it. Chrysler employees are supposed to end up with 55% ownership of the company when this little comedy plays itself out and, as I've mentioned before, their new stock certificates will be suitable for framing or wrapping fish, or will be sold on Ebay as historical novelty items. Who do these people think they are - lawyers?

     The auto manufacturers moved operations overseas in an effort to survive, but they're not entirely innocent here. Do they really believe their $8.00 an hour workers will give them $20.00 an hour's worth of quality in the goods they produce for executives who obviously don't respect them? Mexican workers aren't stupid, they're just poor, (like many Americans are these days), through no fault of their own. The Big Three were instrumental in shutting down producers such as Studebaker, Tucker Industries, DeLorean Auto Works and many others throughout the years because they didn't want to face innovative competition in a fair market. This is the very reason Zap Corporation refuses to produce an electric car. Zap (for Zero Air Pollution) has made high-quality electric scooters and other recreational conveyances for decades, but they stay out of the automobile market because they don't want to be forced completely out of business by companies deemed "Too Big to Fail." Well, the bigger they are, the harder they fall, and I can't be the only person looking forward to the inevitable thud when they get their first dose of economic reality. This won't affect the average U.S. citizen as much as you might think it will, because other enterprising Americans will quickly found new, more efficient companies to fill the void.

     A living wage is one thing, but the unions have thumped their chests once too often while showing their employers who's really in charge. The audacity! Imagine how you'd feel if you started a business and needed to hire someone to work for you. Before he begins work, you tell him you can afford to pay him $7.50 per hour. He shows up Monday morning and works until lunch time, and then informs YOU that his new salary is $25.00 per hour! To make matters worse, he informs you that he won't allow you to hire anyone else to work for $7.50, and that you, the employer, the OWNER, have no choice in the matter. You can hire someone else but, if you do, you'll have to pay him twenty-five bucks an hour, too. If I were that employer, I'd burn the entire plant down around him. To be fair, I'd let him take away two hundred dollars worth of ashes for his day's work. I mean, he deserves something for his efforts, and his family should have something for their supper. As far as I'm concerned, the auto workers and their bosses are getting exactly what they deserve.

     Before anyone breaks a nail, I should mention that I was once a member of UAW local 1405 at Weatherhead Corporation (now Dana) in Syracuse. I worked there for two years after graduating from high school, and I quit because I couldn't stand the union politics, which constantly interfered with production and shipping schedules. Unions, in my opinion, are nothing more than economic cancer. There was a time (60 years ago or more) when they were necessary and served a valid purpose but, today, they're hopelessly antiquated, counter-productive and a veritable bane to American labor.

     That ought to get some keyboards smoking. Flame away, and tell me how unAmerican I am ...

     Jim
6.
konaneComment by konane - May 9, 2009, 10:09 am
ROFLMAO!!!!!!! A masterpiece, thank you!!!!!

I've watched unions for years seemingly borrowing mafioso tactics, wondering what could stop them. Think they're like the old cartoon of the vacuum cleaner consuming itself into nothing. Zap, gone!! Death by their own hands is a fitting end.
7.
ThinkComment by Think - May 9, 2009, 10:45 am
Because of stupidity by management workers unionized.
Yes, the unions got carried away.
Because of stupidity by management union workers are making vehicles that nobody wants.
Because of stupidity by management Chrysler is bankrupt and GM seems headed that way.

Look at those big fat pay checks that management is getting! They most certainly do NOT deserve that pay. Management should be outsourced to someplace cheaper too!

Preferably to China where they can be taken out and shot for screwing up.
8.
konaneComment by konane - May 9, 2009, 11:55 am
Thanks Think!!! Inhumane working conditions for an uneducated, uninformed workforce brought about unions which have long since served their purpose. We are a better educated society now, have instant communication capabilities, checks and balances. My question is if union shops are so good then why are workers flocking to Toyota plants which are non-unionized?

Our government's mistake was allowing so many mergers and takeovers years ago. Things get lost, workers fired in the big shuffle, corruption rampant tumbling out in full view.

I believe the ugly we're seeing is what's been in the works all along but hidden below the murky surface in business, banking and government.

Management like congress has been given free reign to make their own rules, siphon off as much as they want with impunity. We continue following the herd shepherded by the media to elect who they've chosen for us .... so we have only ourselves to blame. That's what happens when people follow instructions rather than thinking outside the box.
9.
ThinkComment by Think - May 9, 2009, 9:28 pm
Konane says " Inhumane working conditions for an uneducated, uninformed workforce brought about unions which have long since served their purpose. We are a better educated society now"

Hmm....so your message is that stereotyping is wrong unless you are the one doing the stereotyping?
10.
konaneComment by konane - May 10, 2009, 12:54 am
Thanks Think. Stereotyping WHAT? History books reflect what I said about society when unions came into being.

I go far back enough to have experienced television expanding our knowledge beyond hometownsville. The internet has exponentially exploded that knowledge base. Jeeze cell phones access the internet now so people can inform themselves IF they care to.

Unions are a dinosaur that hasn't fallen over yet.

Mega corporations which have eliminated competition through hostile takeovers then run into the ground by greedy management are the twin dinosaur that hasn't fallen over yet. Those corporations should be allowed to go bankrupt, sold off piecemeal to the highest bidder rather than being arbitrarily rescued by taxpayer dollars. Twin dinosaurs fighting to the death, one being fed by taxpayers the other by consumers through higher prices for union made goods.

Stereotyping ....... no just stating facts, and saying what I want to say because it's my blog.

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