Tuesday, May 10, 2011

Auto Industry Taking HUGE First Step to Recovery

I am responding to this article: GM to add or keep 4,000 jobs in US.Link
The article's title pretty much shapes this conversation. GM will be adding (or simply keeping) a lot of jobs here in the US.

That news sounds GREAT. Is this because the company is doing better? I want to take a closer look at this.

GM certainly has a less-than-stellar reputation for knowing when to add or subtract jobs. GM has historically put a lot of outward energy into celebrating tiny achievements, making them seem bigger than they are.

For example, the CEO Bob Akerson said, "Our cars are selling well," he said. "We seem to have hit a sweet spot."

He does not explain WHICH cars are selling. With gas prices at the $4.00-plus range, I doubt it is the highly profitable trucks that are selling well.

In fact, it is probably more likely that the small, not-so-profitable cars are selling really well right now. Unless GM suddenly found a way to make these more profitable for the company, this might not be the time to celebrate, yet.

In response to GM adding jobs said, "Those jobs impact and reverberate in our economy."

While this might be a true statement, I doubt that it explains the reason they are hiring. There is only one sensible reason for a company to pay someone money. That person MAKES the business money. It is true that it helps the economy, and it is nice, too. However, don't be fooled into thinking that GM is trying to be charitable about this. They should not be charitable right now, and they are not.

The way I see it, his statement was political without there being any meat to it.

What is this HUGE step toward recovery?

As much as I still see a lot of the "Old GM" within statements made by key players, there really is something to celebrate.

Joe Ashton, UAW Vice President said, "We're willing to discuss anything that creates jobs." This surrounded a statement that the union is slowly warming to the idea of hiring more people for a smaller wage.

Why is this good news?

The Detroit Area and other manufacturing areas supported largely by the auto industry will continue to suffer until enough people see that there is NOT very many companies making excuses to come to these beat-up areas (manufacturing does not do good things to surrounding environments) so that they can pay MORE for the same labor.

Detroit--and many other places--are full of people who feel entitled to make a certain wage.

I am not in favor of abusing people, and I feel that people should get paid a fair wage. A fair wage is MARKET VALUE--not an inflated value. Wages in the auto industry kept jumping upward, because of the closed negotiations.

The threat of worker strikes were valuable when it meant the owner would LOSE money without their labor. However, the plants began to lose money, even when it was operating. The threat of work refusal no longer carried weight.

Their wages were inflated through unintelligent negotiations--on both sides--union and management.

Both sides ignored the facts from the open market. The open market was paying people 50% or less than they were making. If you are getting paid just a little more, then the cost to move the plant is too high. It is cheaper to pay a little extra to keep the workers happy and have them make money for the business.

Eventually, it became cheaper to move the plants.

Many workers still demanded more money, even though the demand for them dropped.

So...You gave me background, but why is this good news?

Because the statement, "We're willing to discuss anything that creates jobs," indicates that people are willing to work for less. This came from the UAW. That is HUGE!

Expecting people to work for less than market value is not a good idea.

However, most people will make more from this lower wage than they will without any job.

This lower wage allows the plants to stay open or re-open. The businesses win, because they do not have to move to another plant or build a new one. The workers win, because they can return to being productive and earn money for a business that is more likely to remain open.

We still have big problems in manufacturing. Our wages are a lot more expensive than China's or many other nations.

However, there are a few things going for us. Shipping is getting really expensive, especially with oil prices going through the roof. The biggest thing, though, is that the world suffers when the US economy suffers. Most other nations know that they will enjoy a better economy for themselves if the US economy does alright. I get the feeling that other countries want to compete against the US, but they do not want to compete too hard.

The Detroit Area, in particular, will rebound ONLY when enough workers are willing to work for a wage that is closer to the open market.

It seems like we're getting closer to that than many of us ever thought possible.

As a group, this is GREAT news, because a recovery will NEVER happen without this step. The quicker we learn it, the quicker our recovery will be.

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