The Detroit News has obtained a confidential memo from GM to federal legislators. The smoking gun reveals that the soon-to-be-taxpayer-owned (officially) automaker plans to boost US sales of vehicles built in China, Mexico, South Korea and Japan by 98 percent (to 365k units). In the face of union criticism of the plans, GM claims that the percentage of its imports will remain at 33 percent. By 2014. When its sales recover to 3.1 million vehicles per year. Providing it maintains its current market share. All things being equal. With the wind in the right direction.
At the same time, The General aims to shrink production in Canada, Australia and European countries by about 130k. For a sneak peak at the less tortuous justification for this outsourcing on Uncle Sam’s dime, we turn to veteran Detroit apologist and Washington Post car critic, Warren Brown . . .
[Fair disclosure: before TTAC was born, I sent Warren Brown one of my car reviews. He was appalled. He recommended I abandon pistonhead punditry and pursue a career in pest control. Or something like that.]
While foolish consistency is the hobgoblin of little minds, uh, you gotta admit Warren’s defense of the indefensible has been completely consistent—no matter how evasive or weak the logic deployed. These days, he believes GM is the hapless victim of bad luck. Direct quote, that. Who better to tell John Q. Public why it’s OK to give GM bailout billions when they’re planning on building abroad.
Here’s an excerpt from a highly edited online Q&A addressing this timely topic:
GM’s Plans: From this morning’s Post: “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.”
How can a UAW/US-owned company get away with this?
Warren Brown: Get real:
Had it not been for GM of Europe and Ford of Europe, had it not been for more integrated global operations, the domestic companies would have been facing bankruptcy long ago.
How can a U.S./UAW owned company get away with this? A three-word-answer, “The American Consumer.”
The American Consumer does not care about “buying American.”
The American Consumer does not bother to “look for the union label.”
The American Consumer wants the best stuff for the lowest price.
That is why notoriously anti-union Wal-Mart is the biggest retailer in the United States, including in UAW strongholds such as Michigan and Ohio.
It’s why the American car companies are struggling to hold onto 44 percent of a home market they once dominated.
Stopping U.S.-based car companies from bringing in cars The American Consumer wants will surely kill those companies and the union-repressented jobs they provide stateside and overseas.
What the UAW needs to do is organize the rivals of the American car companies. The UAW’s persistent failure in that endeavor puts the American car companies at risk.
What unions in general need to do is form a strong, truly international union to keep companies, foreign and domestic, from playing worker against worker in their endless hunt for the cheapest possible labor.
I have to agree on the American Consumer point. The US producers/consumers make all the final decisions.
The real death of GM/Chrysler is in about a year… Ford will release the new Taurus… What will GM/Chrysler have to compete with it?
About 6 months ago GM/Chrysler were forced to cut their vehicle development budgets, the process to develop / release a vehicle is 18-24 months…..
You’ll have a GM that can never get enough cash to ween itself from the Federal trough and a Chrysler that doesn’t have any high volume vehicles.
Chrysler dealers will turn into Fiat dealers that also sell Jeeps.
GM will turn into a pure welfare case that slowly disintegrates.
All my life I worked for a company that was union (Teamsters). When I started there in the early 70’s, if you came to work in a foreign car, you found your tires flat that night. When I retired a few years ago, the parking lot (exclding pickups) was 2/3’s foreign nameplates. Nobody cares anymore.
Excuse me. I have to run down to Walmart and get some Mexican produce…
The question really is this; Why is the US gov’t bailing out GM? Is it to save the company or to save jobs?
If it is to save the company, then some sending jobs to cheaper regions makes economic sense. GM needs to radically cut it’s costs, and labor is chief amongst them. By some calculations, they are already pretty close to the transplants, but that’s likely not enough. Not only do they have to cuts jobs to get more in line with what their market share and current car market conditions indicate they should be, they also have to get cheaper.
If it is to save jobs, then it doesn’t make sense. With this answer, you want to keep as many jobs here as possible.
Of course, the real answer is probably a combination of the two. You want to keep as many jobs in the US while maximizing the profit of the company. Has GM’s proposal done this? One would have to look at the calculations and figures to determine that. The UAW obviously doesn’t like it since it would dramatically cut into their membership. And if/when they take ownership, will they try running the company to maximize jobs or profit? If it is jobs, the company may not last long since it won’t be profitable. If it is profits, they will have a lot of upset workers.
We want GM to stop living on taxpayer money and if that means producing abroad because that is the profitable thing, then by all means they should do so.
Warren Brown does not seem to live in the 21st century yet. Like in all professions, car worker should get paid market wage for their jobs, and not longer do $40K jobs for $80K.
Well, it seems that Mr. Brown says some truthy things. Certainly, the examples of the textile and electronics industries (and others, I’m sure) point the way. But the auto industry is/was different because it represents the biggist. GM’s “too big to fail” and “what’s good for GM is good for the country” mentality. My defense of the UAW as being the cause of all this was, to be honest, selfish, though not necesarily wrong. I figured, the better off the autoworkers were, the better off all the rest of us feeders below would be.
I think that, to address the headline, one cannot make a case against helping the transplants at this point, primarily for RF’s rebuttal about foreign product under US labels (I think I got that right?). However, in my opinion, this makes less of a case for helping the transplants than it does for not bailing out the domestics.
What would have prevented this argument in the first place is to have been honest about what this bailout was/is which is to soften the blow of losing two major domestic employers at a point of considerable weakness of the US (and thus the worlds) economy.
If and when the cost of labor in the U.S. falls in line with the costs of labor outside of the U.S. the issue of foreign production will cease to be a ‘problem’. Ponder that one U.A.W….
As for the issue of foreign production, I believe that GM has every right to run its business as it sees fit, and to sink or swim on its own merit.
As for the issue of government bailouts, I believe that GM has every right to run its business as it sees fit, and to sink or swim on its own merit.
If labor is more expensive int he US that would be OK, since the market is closer and labor could be more educated and work more efficiently. It works for the Japanese and Germans to produce cars in their country and make a profit.
the problem is, that he UAW labor here is more expensive than many engineers and other people who went to school. they jsut overdid it, abused their monopoly. Before the end of communism unions had the monopoly on work… barely any production in china etc. so they could abuse their monopoly (like any other monopolist). then competition came and they went out of business (will soon, as I stop paying them)
I really wonder how people in the US can be proud to be in a union. Even in Germany it is something to keep secret that you are in a union because it has the stigma that you are lazy and spend all day complaining. no one would put a sticker on the car to show they are union.
Next union problem in the US, it is mandatory when you work in such company. no personal choice. In Germany I can be a VW assembly worker and not be in the union, and my next-car neighbor can be in the union by choice. Hers int he US the unions have stronger laws to abuse their monopoly.
I always thought the best “bailout” would to have been for the US government to just have a cash on the hood sale. Just put $3,000 of US Treasury money on ANY car assembled in the U.S.(based on the first digit of the VIN).
This would boost demand for ALL US based jobs, even those for foreign owned manufacturers, and lower demand for imports.
Of course, this only works if your main goal is to protect the US worker. Although I do shudder to think how many extra Calibers would be sold under such a program.
Its often useless to talk to some people about issues. They will run around in circles saying the same thing, never looking a solution, only expecting life to work out like they would like.
Already millions of jobs are loss. Perhaps its a good example to compare what those without jobs are going through and us as an economy, to what might happen over at GM, Chrysler, Ford. Also look at the actions Government has taken for banks.. Would they handle the big 3 the same, some more?
I have not seen much talk about how jobless Americans are doing. I have not seen people without jobs and trying to make ends meet come up. Isn’t this really about helping them? Seems like we are ignoring them.
It’s easy to think about solutions, when one is detached from emotions. I think without empathy those solutions are really just drugs/addictions. Like a billionaire with a 20 year old girlfriend.
I’m getting the feeling that is how the Government and well endowed are looking at lost, confused, naive society. Or are we the 50 year old wife?
Fair disclosure: before TTAC was born, I sent Warren Brown one of my car reviews. He was appalled. He recommended I abandon pistonhead punditry and pursue a career in pest control.
Yet one more reason why I don’t trust Brown’s opinion for where to go for lunch, let alone anything auto-related. Thanks for not listening to him, RF.
the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.”
How can a UAW/US-owned company get away with this?
If your think about this it is pretty clever. Especially if the UAW owns a significant part of GM. They are now Capital and they are looking for cheap dependable labor overseas. UAW capital exploiting overseas labor. Pretty ironic and going with rather than fighting change.
Some US plants could be kept open to produce fleet vehicles for government agencies. US workers could keep their current wages and benefits. If there is a loss at the end of the year then the other big equity partner (the US government) can just print some more money and make it all better.
Between government workers, unionized workers and the 40% of the population that pays no income taxes I don’t see much problem with implementing these plans for GM/Chrysler.
The question really is this; Why is the US gov’t bailing out GM? Is it to save the company or to save jobs?
It’s to avoid a sudden enormous shock to the economy during the present global weakness. As other aspects of the economy recover somewhat, GM can be allowed to downsize gradually without more economy-wide damage that is intolerable in its effects.
Obama has repeatedly made it clear that he’s not interested in running a car company.
If and when the cost of labor in the U.S. falls in line with the costs of labor outside of the U.S. the issue of foreign production will cease to be a ‘problem’. Ponder that one U.A.W….
Correct, but there might just be some collateral damage to everyone. At present, certain segments of our society have seen their jobs/pay decline with the off shoring of jobs, while other segments have yet to be affected. So if you’re among the unaffected, globalization is great; enjoy the increased buying power while you can. An article in the Washington Post a couple of days ago cited a recent study taken from Census and Dept. of Ag. data indicating that 17% of US kids may face hunger; over 20% in 11 states and with Louisiana coming in at just under 25%. Might be something for Bobby to focus on if he plans to run next time. As I read the article it seemed that “may face hunger” should be “are going hungry”.
Sure, we can work for low wages, but not while paying high prices.
I don’t think the govt really cares that much if GM eventaully fails honestly.
They have to do foreign production to compete with transplants because their cars “suck”.
Basically even if they were wage competitive with say honda, they still have to get even cheaper wages than that. GM HAS to price their cars lower than say honda because honda is “better”. Honda might not even make better cars (though for the most part i’d say they do) but GM has already lost the perception war so they have to price their stuff cheaper.
It is just like hyundai with the excel 20 years ago. They have to win the perception war, with 10 year warranties and lower prices etc. GM cannot be profitable if they have lower prices, to make up for the “GM SUCKS” stigma even with equal labor. they need lower costs until they can erase the gm sucks problem.
That said, I doubt the govt really cares if they suceed or not. The only reason they are doing all this is so that GM doesnt go chp 7. tommorrow and making a huge systemic shock. The govt doesn’t like to rip band aids off a wound all at once, they want to peel it off slowly so the general public doesn’t panic.
Don’t know why they just don’t start their own car company (like a man would) instead of using violence to steal from those who do…Oh, yes I do.
Obama stole an entire car company for the UAW and these MSM journalist twits still cry like babies. The UAW is now just a retiree benefit company that can sit back and collect dividend checks off the back of cheap global labor.
I think one of the “problems” is that the citizens of the U.S. actually “BELIEVE” the President and Congress have their best interests in mind.
It’s not just GM. Remember all the JOBS which were to be CREATED due to NAFTA? Ross Perot was 110% correct re. the “giant sucking sound”.
And to the elite, the giant sucking sound is music to their ears.
Oh- you think because you “vote”, that the people you put into office reciprocate the favor, huh? HAHAHA, OMG what a lie.
Obama-a “Democrat”…ie, a “man of the people”, you’d have thought he would make damn sure these jobs stayed withing CONUS. Hell no, this is the same man who extends our presence in Afghanistan and Iraq w/in 3 months of being sworn in- a BLATANT contradiction of his promises to the people.
Anything and EVERYTHING to blur the lines of nationhood and to foster in the objective of destroying the U.S.
Didn’t Hillary Clinton say when she was running for office “No women are illegal” to a crowd of illegal Mexican men and women?
http://www.homelandstupidity.us/2005/12/09/bush-constitution-just-a-goddamned-piece-of-paper/
Well, how can you expect politicians to uphold the LAW of the land when they blatantly disregard their oaths of office? Hell, the POTUS still REFUSES to provide proof in the form of a birth certificate that he is eligible to be president!!! They’ve gone to COURT to PREVENT THIS!!!
This is a “man of the people”?!?!?! Wake up and smell the coffee people.
How can you trust ANY of these people? Answer- you CAN’T. They have sold you out a long time ago. Until you are barefoot and yes, working for Indian or African wages, their job will not be complete. Until that time, they have further work to do.
They WANT to destroy your way of life. Dems, Reps, all of them.
Please watch:
http://www.obamadeception.net/
http://video.google.com/videoplay?docid=7886780711843120756&ei=rJ8FSpmzFKq4qAOTh621CQ&q=the+obama+deception
Just look to the “EU” for a living, breathing example of what their “objective” is- the elimination of national sovereignty. Entirely.
Your weakness is their STRENGTH.
I agree to a big degree. The Government cannot be trusted. Still people are responsible for themselves. People are full of ignorance, and they are signing my future away, sorta. I mean I didn’t build my current situation, and I won’t be destroying it either, others have built it, and other others will destroy it, mostly. It’s going to be an exciting future not matter what. I’m not going to like a lot of this, sad, painful, infuriating stuff. Fuck it!
kaleun :
May 9th, 2009 at 8:50 am
“Next union problem in the US, it is mandatory when you work in such company. no personal choice.”
Actually that’s not true. Many states are “right to work” states unfortunately Michigan, Indiana, Ohio and most of the coastal states are not. Here in Indiana we are hoping to change that.
More info here. http://www.nrtw.org/rtws.htm
volvo :
May 9th, 2009 at 9:35 am
“If your think about this it is pretty clever. Especially if the UAW owns a significant part of GM.”
Thier stake would be worth about as much as Chryslers UAW stake. It’s worthless paper unless GM turns a profit and in Chyrslers case the UAW has no say what so ever on the board which is probably how it will go with GM meaning they will not be in any position to make decisions about how the company is run.
“the 40% of the population that pays no income taxes”
I get so tired of hearing this line. The only people working who don’t pay federal income tax are illegal aliens and that makes up about 12 million people in the US. Anyone else who holds a job or draws unemployment pays federal income tax, maybe not as much as the higher end earners but they pay it all the same.
Are you Kidding Me?
I had a quick skim of that Q&A – What a Joke.
Seriously, this guy has a job?
“The Equinox finally is a no-excuses, compact suv/crossover. Overall buil quality and presentation are excellent, world-class. Powertrains much improved…and varied. There even are experimental hydrogen fuel-cell models running around the U.S.–proof that GM and Chevrolet are taking the future of the Equinox seriously.”
Just because a chassis has an experimental drive train doesn’t make it a candidate to receive said drive-train in 12+ years.
It makes it a test mule.
High volume fuel cells won’t be produced until long after the current Equinox has been put out to pasture…
“Kensington: PT Cruiser: I have one and love it. The one I got as a rental in Madison, WI was bottom of the barrel skimpy spartan. Why on earth do they do this?
Warren Brown: I don’t know, Kensington. It defies a basic rule of common sense, which is that you try to make your first impression the best impression. You might not get another chance.”
Chrysler makes cars for many types of buyers. Ones who want to pay 22k for a PT Cruiser and Ones who want to pay 10k [each] for a fleet of PT Cruisers.
Would it make sense for Chrysler to deny sale of an econobox car to a buyer (if said car is available to purchase)?
tony:
While I may agree with your sentiments, check the facts;
you write: “Anyone else who holds a job or draws unemployment pays federal income tax, maybe not as much as the higher end earners but they pay it all the same.”
Go look at the federal income tax table.
take a family of 4, single income, 2 parents, 2 kids.
Right off the top, you have ~ 4 exemptions: 14k and 10.9k for your ‘standard’ deduction.
So, no income tax on your first 24.9k.
Then, start thinking about other deductions, etc…
It’s easy to see that a significant percentage (maybe not 40%, but probably more than 5%) of the working population don’t pay any FEDERAL income tax (not to be confused with payroll taxes)…
In my example, if said family had an income of 45k (approximately median), their FEDERAL income tax burden would be extremely low.
There’s nothing wrong with this.
However, please don’t propagate your myths…
improvement_needed :
May 9th, 2009 at 11:58 am
I appreciate the reply, I’m not sure what you mean by asking “please don’t propagate your myths…” it wasn’t my claim that 40% of the people here don’t pay federal income tax.
I don’t necessarily agree with the idea that a family of 4 with one income should get back more than they put in but I would like to see a more complete break down of the statistics used to make the claims that 40% or more don’t pay federal income tax. I can tell you for a fact that as a single father with one teenager and a low income that I do not get back more than I pay out in federal income taxes hell I’m lucky to get anything back from the feds let alone the state.
What the UAW needs to do is organize the rivals of the American car companies. The UAW’s persistent failure in that endeavor puts the American car companies at risk.
I had to laugh at this. The Big Three planned to use unionization of the competition to maintain their ‘competitive advantage’. Not improve their own products and processes, but count on a labor cartel dragging their competition down to their level. Who cares about the end-item consumer, after all? They’re just a mark to be fleeced…
Such a shame we aren’t going to be allowed to see GM, Chrysler and the UAW to go down the drain like they deserve.
“By 2014. When its sales recover to 3.1m vehicles per year. Providing it maintains its current market share.”
I’ll take the under on that.
There are myriad reasons domestic cars are past their best before date including horrible products and mistreating customers. Their demise was overdue. If and when they produce desirable, high quality, good performing cars and look after their customers some might return.
Brown’s third point is slightly off the mark. The American Consumer wants the lowest price, period. The American Consumer is less concerned about whether it is the best stuff. Otherwise, China would still be predominantly an agrarian economy.
Everyone repeat after me… “GMs problems are the result of bad management” – we all know its true so repeat it about ten times. See that wasn’t so hard.
The UAW and labor costs are soooo much less important than the arrogance and incompetence of the big 3s management of the last 25 years that they are barely worth commenting on.
Where did national pride in domestic production (of any and all products not just cars) run by domestically held companies fall apart? I mean shit, we’ve even lost Budweiser to the foreigners.
King Bojack:
We are all General Motors… The entire USA is/was intoxicated with our own success. We became so smart we learned that we didn’t actually have to do anything…
We just flip homes to each other to pay off our credit cards!
We are no better than General Motors… They OWNED the domestic car market… It is inconceivable that they would ever need anything from anyone. They had infinite money and a license to print more.
Now they have been given $15+ billion and what do they have to show for it? They are dead broke and paid off ZERO debt.. They just owe another $15+ Billion….
How the mighty have fallen…
How long can we sustain a high standard of living if every one is either a doctor or a janitor? Doesn’t it bother people that our markets are SO open (despite hardly any one else’s markets being open) that other countries are making our businesses their bitches? This goes for far more than the car biz but the electronics/textiles/appliance etc. industries. I wish that I could still buy an RCA tv from an RCA headquartered and independent in America from a factory in America. Am I the only one saddened by this? What happened to the US wanting to be the biggest and best in everything?
This is my first comment after reading these pages for several months after the first “Cassandra” warnings. What I’ve learned is that there are multitudes of missiles firing at American auto manufacturing all at once. It’s a dizzying War Games of poultry coming home to roost. Those of you who cling to a theory because you are comforted by its elegance are deluding yourselves. We’re already into territory that is post 30’s Socialism, post 50’s Capitalism, post-union, post-peak oil, post-mass-market marketing, post-Morning in America for the middle class, car-buying public. We need some new theories, you smarty-pants people. Get on it.
@MarvMagnus: the new theory is “Clusterf$%k to the Poorhouse”, then “Race To The Bottom”, and after that, “Carousel” from “Logan’s Run”, with a brief stopover at “The Long Tail” beforehand.
I’d start an Off Track Betting house in China, as long as you pay off the right tongs.
They love to gamble, but don’t ask them to walk in the front door of a hotel that’s made to look like a giant lion; it’s bad luck.
—
+Re post: -there’s a “Rage Against The Machine” song in there somewhere, I just know it.
tony:
re: myth; I was refering to you stating that everybody with a paycheque pays Federal Income Tax.
As for people getting back more than they pay in (Federal income taxes) – I’m under the impression that all your deductions and credits can only lower your tax burden to ZERO, not get you back money that you didn’t already pay…
(not including special gifts like the stimulus package from a year ago)
“We just want nice looking, well equipped, affordable, fuel efficient, quality cars.”
“Uh…pick one of those.”
“Quality?”
“Uh, no.”
“Fuel efficiency?”
“Uh, no.”
“Affordable?”
“Uh…um…no.”
FYI
The US has a program called the Earned Income Tax Credit (EITC) at a cost of $48 Billion to the Treasury in 2007.
It is a refundable tax credit (if you work, owe no tax and file a return) which will give a “refund” (ie. check from the US government above and beyond any tax liability) of up to $4824 for a single parent with one child.
Best simple explanation I could find for this program is here
http://www.results.org/website/article.asp?id=359
but there are many other links.
Interestingly at the IRS and Wikipedia sites you have to analyze the description very carefully to realize that if you work, owe no tax and file a return the IRS will cut you a check on April 15th if you meet the criteria.
In one sense I feel this is a good program since it attempts to raise working families at least to the currently defined poverty level but there is the problem with voters voting themselves largess from the treasury which eventually will come to a bad end.
I almost never agree with Brown but in this exerpt, I do. GM is hoping that by bolstering it’s sales in growing markets or in areas that actually make a profit, they will be able to keep the lights on for the American employees to build cars for the American market.
China is GM’s future. China’s sales went up something like 48% last month. I think it’s GM’s only chance at success.
What’s awesome about the EIC, is that I got money from the government (ie, taxpayers) while I worked part time, while living with my parents. I surfed and played WoW most of the time, while living in the most beautiful part of the country (IMO). Oddly, I showed up on all those awful statistics of wealth distribution as being ‘below the poverty line’. My quality of life was better than probably 99.99% of the world’s population, but apparently I was entitled to free money! Score!