Now even fewer reasons to buy a GM car

[Tris]

GM has announced a buy out offer to all it's hourly workforce. Objective, get rid of as many senior workers so that they can hire cheap labor. I guess this means one can expect increased problems with GM vehicles.

I do have to wonder something. You get rid of the people who can afford to buy your product, replace them with people who don't earn enough to buy your product. Do that long enough, and who can buy your product?:P

[Rhydderch Hael]

Sounds like a voluntary measure from the news I read. And I rather a lower-paid American just starting out in the world than taking the work overseas.

[Mavfin]

I think this is a symptom of what the unions have been doing for years: pricing themselves right out of the market. Not for the first time, either.

[Maitre]

I think this is a symptom of what the unions have been doing for years: pricing themselves right out of the market. Not for the first time, either.

You got it. Economics of labor: at the enforced price of labor, the quantity of labor demanded is lower than the quantity of labor available = people in jobs make more, but fewer people have jobs. Effect of common COLA (cost of living adjustment) clauses, minimum wage, etc. Leads to either higher prices to maintain size of workforce, or smaller workforce to maintain product pricing.

Please note: oversimplification is employed in this statement.

[eppie]

I think this is a symptom of what the unions have been doing for years: pricing themselves right out of the market. Not for the first time, either.

I don't agree. The difference in wages between the US and say china/india etc. is so huge that the small influence that unions have on getting better working conditions and salary does not really make a difference for the shareholders when they have to decide if a factory has to be moved to another country.

In fact it is just pure capitalism where one seeks for the cheapest way of producing something. So Americans should be happy about this because the consumer also notices the price difference.

[Munkay]

I don't agree. The difference in wages between the US and say china/india etc. is so huge that the small influence that unions have on getting better working conditions and salary does not really make a difference for the shareholders when they have to decide if a factory has to be moved to another country.

In fact it is just pure capitalism where one seeks for the cheapest way of producing something. So Americans should be happy about this because the consumer also notices the price difference.

First off, if the issue at hand was about moving factories over seas you'd be correct. The amount of money a minimum-wage US worker makes is far greater than the working wages of other countries.

With that said, once you narrow the scope and take 'moving the factory to another country' off the table, the disparity between Union Wages and cheap minimum-wage hourly labor is nothing to laugh at. And within that issue, I agree completely with Mavfin.

The union members at domestic car makers have demanded higher wages and benefits, while at the same time domestic car companies have been losing their market share to foreign auto companies.

Unfortunately we're starting to really scrape the bottom of the barrel. The companies aren't trying to squeeze a bigger profit to pad their CEO wallets anymore - they're trying to stay afloat. And while I don't necessarily agree with the company's move to push out high-paid union workers, I'm not sure I have a better solution.

So Americans should be happy about this because the consumer also notices the price difference.

I wouldn't jump to that conclusion so quickly, Eppie. There's hundreds of thousands of US blue-collar workers at those plants, and not enough other jobs laying around in those areas to absorb the impact and keep their families' fed. I've lived in a town where a GM plant shut down. Needless to say the entire town economy was destroyed over a slow 5 year period, one that we and many other people didn't stick around for.

Lower prices are great. But lower prices doesn't mean jack if there isn't money in the pocket to buy it.

Cheers,

Munk

[eppie]

I wouldn't jump to that conclusion so quickly, Eppie. There's hundreds of thousands of US blue-collar workers at those plants, and not enough other jobs laying around in those areas to absorb the impact and keep their families' fed. I've lived in a town where a GM plant shut down. Needless to say the entire town economy was destroyed over a slow 5 year period, one that we and many other people didn't stick around for.

Lower prices are great. But lower prices doesn't mean jack if there isn't money in the pocket to buy it.

Cheers,

Munk

Hi Munkay, my last sentence was of course ironic. A global world economy with free trade and all is, I think, a good thing. It however means that there will be a more equal distribution of wealth meaning that the richest countries will get poorer. I don´t see this ending, the only hope I have is that more prosperity for the poorer countries will mean lower birth rates and a stop to the increase of the world population.

[Xame]

GM has announced a buy out offer to all it's hourly workforce. Objective, get rid of as many senior workers so that they can hire cheap labor. I guess this means one can expect increased problems with GM vehicles.

I do have to wonder something. You get rid of the people who can afford to buy your product, replace them with people who don't earn enough to buy your product. Do that long enough, and who can buy your product?:P

Some data I read about the GM press release. The senior workers are about +50 years of age and making $28/hr and benefits (grandfathered in under some old contract). The new workers that they are trying to replace them with make $14/hr. This is all part of the union contract that has been around for some time. GM is trying to offer the senior workers an early retirement package to accelerate the union contract to cheaper labor so they can take it as a one time charge on there books (a way to not pay taxes in the short term and allow them to have some free cash).

The risk/reward to the worker is that (A) the next offer from GM might not be as generous, and (B)is the cash buyout worth more to them then the risk of a plant closure. Everyone agrees (management and union) that the senor union people are getting payed well over what is the norm in the auto industry.

Now for my personal take on this, To build a car you have four items: the raw material costs, design/engineering, labor and overhead (lawyers, paperwork, taxes, shipping, etc.). Now raw material costs can only go so far until you end up with a cheap car so they are pretty much fixed in the consumer's mind of how much and what quality you need to use. Design/engineering is a basic cost that makes your product different then your competitors. This is also a very small cost of the car (about 3% at many companies goes to R&D) and GM reuses many designs in different models. Overhead is just a cost of doing business. You want to sell cars in the USA, you will pay a given amount to do so legally and pay your taxes/risk costs.

Last is labor. It is a sizable cost after materials and one of the only things left to move for management. Lately most of labor is being converted to low skill jobs by computers/robots/automation. This is a way for companies to shave the cost of the car and improve quality. Also a job that once took 10 people now just takes 1. Thus GM has a problem, in a world that most manufacturing in the US is taking less and less people to generate the same level of output; GM still has a lot of employees that it is required to have by old contracts. The alternative is to move the jobs overseas where you don't spend on automation but instead use cheap labor. In either case, GM's rivals are already in this state of having a lower base cost for producing a car (Toyota, Honda, Nissian etc) and thus are killing GM in a pricing/design war that GM has been losing over the last +20 years.

I personally blame both the greed of management and the greed of the union in where GM is today (<29% of the US market and even less of the world market). Both thought the other was the enemy and now they both lost.

[Munkay]

Hi Munkay, my last sentence was of course ironic.

That one actually went over my head. Glad we're in agreement then:)

Cheers,

Munk

[kandrathe]

Speaking for the old fellas, I find that younger workers are more productive and less prone to errors where eye/hand coordination is needed. Us older folks are better in the areas where experience is more important than speed and dexterity. It would be interesting to see a study of age's impact on the ability to perform different types of jobs.

[TaMeOlta]

.... but , who is making these computers and robots ? Do they all evolve from another Robot Overlord ? :blink:

[Munkay]

.... but , who is making these computers and robots ? Do they all evolve from another Robot Overlord ? :blink:

Robots are making the robots. Careful, don't look too close or you might just find its turtles all the way down.

:lol:

Cheers,

Munk

[Nystul]

I think this is a symptom of what the unions have been doing for years: pricing themselves right out of the market. Not for the first time, either.

You see these type of buyout/retirment things all the time with middle management at large corporations, so I don't really see where the union has anything to do with it.


Increased turnover means a less experienced and less reliable work force, increased training costs, and (in this type of case) increased payouts to retired employees. It's a numbers game, but not a simple one. I sometimes wonder if it is shrewd business, or just a shallow appeal to stockholders who judge the company by a few lines on a report.