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August 6, 2008

Relocate, End Unions, and Save General Motors


This week, CNBC is running a series, culminating with a Special Report tonight on different theories that could save General Motors. I believe that General Motors should relocate, end unions, and divest its brands into subsidiaries to guarantee its survival, and bring it back as the #1 undisputed automobile manufacturer in the world.

Leave Detroit. While it may be a sad symbol of the times, General Motors needs to leave Detroit. This section of the country that General Motors sits in is not only one of the poorest, but one where labor demands the highest wages. Unions have contributed to the economic eroding of the rust belt, and to stick around would simply spell disaster.

By relocating to the southern United States, GM could use the Gulf of Mexico to replace the Great Lakes for logistical purposes. Also, labor costs would decrease by 30%. While liberals may consider this cheap labor, it should be noted that living in the south is much cheaper than any other part of the country. With 30% less, people can still maintain the same standard of living as in the north. In addition to this, cheaper labor means that General Motors can hire more, thus creating jobs for the economy. Outsourcing retirement and healthcare funds to private companies would also cut costs as these companies specialize in generating high returns (this might be done already, but if not, it should be).

End Unionization. Going hand in hand with the relocation would be the end of unions for General Motors. Unionization is like the canal system in the United States. It has served its purpose, but to keep using it now is an outdated waste of time and money. One should analyze the times in which we live to see that labor laws today are clearly sufficient to handle “worker’s rights.” These laws did not exist when unions started in the late 18th century.

In place of unions, employees could appoint small groups of workers from each plant or department who would relay the concerns of the assembly line to management. Let’s not forget that productivity would increase without a union shop, because the rights of the employer to terminate would return, and the worker would have a reason to remain productive. Say what you want about rights of the worker, but if the person who pays your paycheck does not have the right to terminate you based on poor performance, what incentive would there be to work hard?

Divest from GM into the brands. Last, and certainly the least controversial of my ideas is for General Motors to divest its assets into each of its brands and basically govern each brand as if it were its own company. General Motors would not possess any physical assets on its books, as these would all be allocated to subsidiaries established and named after the brands.

Each brand/subsidiary would have its own CEO, administrative staff, and other employees. This would allow each company to get creative with the models that it produces (no more cardboard copies across brands), but also controlling costs with their own budgets, income statements, balance sheets, sales reports, etc. This would also make it easier for GM to unload any brands (ie Hummer) that do not match the company’s long term strategic goals (not to mention they could probably sell them for 2 to 3 times as much since the organization is already set up).

The bottom line is that GM struggled even when the U.S. economy was strong, and now with a weak economy, GM’s corporate health has been downgraded to critical. No matter what the size of the company, posting quarterly losses of more than $10 billion will not keep you around much longer. GM needs to act quickly to avoid bankruptcy (or government bailout).

1 comment:

Sex Mahoney for President said...

Labor laws, when enforced, are more than enough to protect a worker's rights; however, there have been two many instances of workers getting the shaft because no one is enforcing those laws and that's where unions come in to give the little guy a little more clout.

I agree with you that labor unions are largely outdated. Most factory workers are as protected as they're going to get under the current system. When I used to work for a big corporation, our facility was half manufacturing, half office. The manufacturers were unionized, protected out the ass, and generally happy with their jobs; the office workers were always swamped, never compensated for overtime, and ever fearful for their positions.

It's time to unionize the white collar workers.

General Motors has access to a cheaper labor source if they move to the south? Do you mean illegal immigrants?

Sex Mahoney for President

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