La Michigan qui tombe
The November '05 issue of Bloomberg Markets has an article on the approaching end-game for troubled auto-parts manufacturer Delphi, which was spun off from GM in 1999. It is a typical review of the options that face a company clearly headed for bankruptcy, yet this tidbit was interesting:
"Job cuts at GM, Delphi and other automakers and suppliers could saddle Michigan with unemployment as high as 9 percent for the foreseeable future, says Sean McAlinden, a labor economist at the Center for Automotive Research in Ann Arbor, Michigan. The August unemployment rate in Michigan was 6.7%, the highest among U.S. states."
Clearly this is a speculation, but the problems in the domestic auto industry are indeed real and deep and getting worse. Major jobcuts in Michigan are a distinct possibility. If McAlinden's prediction comes true, we won't have to look across the Atlantic to see what has happened to France. We will have a little piece of France right here in the USA - a crumbling economy, depopulation, reduced political influence and a burgeoning Arab minority (this is in no way to suggest that this ethnic group is a cause of MI's malaise), and a clueless head of state.
At least Michigan produces some excellent wines, although I hear that the Aussie's are putting out some excellent reds that are giving Michigan's top names a run for their money.
UPDATE: OK, that last bit is a wine geek joke and the title is a reference to this best-seller.
"Job cuts at GM, Delphi and other automakers and suppliers could saddle Michigan with unemployment as high as 9 percent for the foreseeable future, says Sean McAlinden, a labor economist at the Center for Automotive Research in Ann Arbor, Michigan. The August unemployment rate in Michigan was 6.7%, the highest among U.S. states."
Clearly this is a speculation, but the problems in the domestic auto industry are indeed real and deep and getting worse. Major jobcuts in Michigan are a distinct possibility. If McAlinden's prediction comes true, we won't have to look across the Atlantic to see what has happened to France. We will have a little piece of France right here in the USA - a crumbling economy, depopulation, reduced political influence and a burgeoning Arab minority (this is in no way to suggest that this ethnic group is a cause of MI's malaise), and a clueless head of state.
At least Michigan produces some excellent wines, although I hear that the Aussie's are putting out some excellent reds that are giving Michigan's top names a run for their money.
UPDATE: OK, that last bit is a wine geek joke and the title is a reference to this best-seller.
posted by Donny Baseball at 3:04 PM
1 Comments:
You are on target, although I have seen estimates that up to $5000 of the cost of every car GM makes is healthcare/retirement benefits. Beyond the issue of just basic wages and benefits, the union contracts ensure that GM must pay workers that don't work. GM can't even get any traction with the UAW on fixing what would seem to be a reasonable request - no work, no pay.
And yes, GM has made mistake after mistake on product decisions. The gas-guzzling SUVs have actually saved their bacon for the last 10 years, but they never paid attention to anything else and now high gas prices are killing SUV sales.
If they could build their mediocre cars alot cheaper, they could still be successful, people buy mediocre cars all the time, they just don't like to pay alot for them. But GM simply cannot make the cars cheaply anough with their union contracts. They have tried every trick in the book, like shifting more of the work to less unionized parts makers, but none of it moves the needle. There is only one real solution, tear up the union contracts and renegotiate, but GM can't do it if Ford and Chrysler don't do it too.
I think the auto industry will play out like the airline industry - some pensions will be fobbed off on the gov't; some companies will go into bankruptcy (parts suppliers most likely); and maybe others will try to ditch the union like Northwest did with its mechanics.
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