Rxxx of the Day

I have been thinking (in the shower mostly) about General Motors and Delphi and the United Auto Workers, and about Wal-Mart, and about what all of this change means.  For whatever it’s worth ...

Runaway health care costs for current workers and retirees are a big part of General Motors running itself into a deep, muddy ditch.  No one at GM, from the board room to the UAW union hall, appears to have the courage to do what is needed.  Uncle Sam’s Towing Service, however, may not render the same emergency service that Chrysler received a generation ago.  The whole firmament of American auto making has been altered.  Chrysler is now an underperforming asset within a global German auto conglomerate.  Japanese cars made in the U.S. frequently have more American-made content than the GM and Ford.  

GM – aided and abetted by the UAW – has been abjectly stupid and irresponsible, and I believe that a majority of Congress and American taxpayers are prepared to let GM fail.

How could senior management and directors of a corporation that lost money and market share throughout most of the past three decades commit to a series of literally insane labor agreements that guaranteed no layoffs?  How could they have agreed to contract provisions that allowed use of robots only if all inactive autoworkers were maintained, at full wages and benefits, in a “job bank?”   And so on and on.  

GM blue collar workers are to be gingerly introduced to modest co-pays for health care services.  But their health care benefits will still rank in the top 1% of all U.S. job-based benefits.  Someone at GM or in the UAW needs to stand up and tell the truth.  Everyone who works for GM is in a zero-sum situation.  If there are immediate, draconian cuts in jobs, pay scales, work rules, and benefits, more jobs (which will still be good-paying jobs) can be salvaged in the long run.  If painful decisions aren’t made soon, however, there may not be any GM in not too many more years.

Some analysts have commented that GM’s agonies won’t have much or any effect on other U.S. companies, since just about every other major employer (and every small one, for that matter) undertook major surgery on health care benefits years ago.  What if the very public GM agonies, combined with the unremitting steep rise in health care coverage costs, causes employers generally to conclude that they can make further benefits reductions without jeopardizing recruitment and retention of needed employees?

I’ll have more to say about the recent news about Wal-Mart, but Wal-Mart and GM connect as follows.  While America’s original global giant corporation indulged in decades of uninterrupted insanity that brought it to its knees, America’s newest global colossus, Wal-Mart, is showing an unequivocal, hard-hearted willingness – and capability -- to do whatever is necessary to further its corporate interests.  This is what is in store for most Americans – not because corporations are heartless monsters (they must make money or cease to exist), but because we Americans can’t compete globally with mediocre public education, an out-of-control legal system, health care insanity, and tax and regulatory policies that prevent economic growth.