The Three Stooges to the Tune of 25,000

EVENT

The New York Times: G.M. Will Reduce Hourly Workers in U.S. by 25,000.

The New York Times: Downsizing at General Motors Comes as No Surprise to Workers

The Flint Journal: Local GM plants have some good and bad going for them.

The Flint Journal: GM unlikely to cut in area.

The Flint Journal: It's Everybody's Problem.

* * * * *

I should have an overabundance of opinions here. This is my home court. This is my backyard. These are my friends and family. So why do I have to pick through four news articles, an editorial, and somewhat two-dimensionally accumulated anecdotes to piece together an opinion? I think it might have something to do with my high school Social Studies education... we took two years of American history, and one year of Civics and American Government, and somehow I don't remember dealing with unionization in any depth (this in the part of the world that begat the muscular union), nor do I remember dealing with economics in any context other than establishing that the American system was preferable to the Soviet system and a washed-out exploration of supply-and-demand... or was it checks-and-balances we studied? Is that why my historical perspective is, in spite of considerable effort, wack? Here I am, contemplating returning to Flint someday, and I still have to spend a morning brushing up on econ 101 to lucidly "get" the implication of recent GM headlines. It's sad.

Fortunately, The Flint Journal at least is doing their job, as they've manage to print yet another href=http://www.mlive.com/search/index.ssf?/base/news-29/1118330438189860.xml?fljournal?NEF>editorial that completely misses the point and startles me into a knowledge of my own opinion.

Here then, is what I can make out, courtesy of the New York Times, the Journal, about a half-dozen hourly family and friends, a couple salaried of the same, and a lifetime's familiarity with Flint.

BUSINESS IS BUSINESS,
or,
FLINT IS CURLY

On the most local level, that is, Flint's eight or nine GM facilities, the news is bad, but it's not that bad, or rather, it's not any worse than what we're accustomed to. For at least four decades (the 40s-70s) local GM employment was reliably in the 70,000s or higher. The 80s roughly halved this number, and the 90s and 00s cut it again by two thirds. In the last 10 years alone, local GM employment has dropped from 40,000 to 15,000.

Is this to say that further reductions would have a muted effect on Flint? Certainly not... further reductions would be devastating. The elimination of another 15,000 jobs from GM would affect the 40,000 spouses and dependents of those workers, accounting for almost 10% of Genesee county's population. Because these workers would be a reduced to a more-or-less fixed income, they'd be less economically versatile, which would further cripple Flint's ability to diversify its economy, particularly efforts to reinvigorate the downtown through the expansion of U of M and Kettering University. Massive layoffs would hugely blunt, for example, gains made by the construction of dorms downtown, and remember that U of M hasn't committed to build these dorms at all yet. And there's the question that even a stripped down and sporadically functional facility will anchor any neighborhood better than an abandoned shell of metal.

This is the Gary, Indiana argument.

All this, however, is unlikely to happen, or at least this decade. Because local employment is one-sixth of what it was, remaining operations are more robustly competitive and benefit from better facilities and technology that those which have been closed. Moreover, the age of Flint hourly workers (most local workers are well into their forties and fifties) means that layoffs are more complicated for GM in this area. And lastly, the density of GM operations in southeast Michigan is still substantial enough that, were a plant to close, many workers might be able to commute. This would at least maintain their buying power in Genesee County to some extent.

But I'm not saying that the workforce reduction won't affect Flint. The effects, rather, will be indirect, and for that reason, somewhat less severe. The age of local workers, and many local retirees means that any changes in health benefits and pensions will have a local effect, and the Union has already mouthed that it will be accommodating on these issues. This would have a negative economic impact, even if plants remain open. More abstractly, it seems that if General Motors is retooling themselves to reduce output overall (from six to five million are the figures the Flint Journal is citing), it is less likely to allow for expansion in the future. On the surface, this may make little sense (after all, it's often easier and cheaper to build a new factory than rehab an old one, and Flint has ample room for new factories); the argument has more to do with GM's priorities than the laws of physics. I'll get into this in a moment.

But on the whole, this is the "They Got Here First" argument. GM has already routed Flint for twenty years. There isn't much more damage they can do here. At least in terms of plant closings and workforce reduction. At least for now.

BUSINESS IS BUSINESS,
or,
GM IS MOE

A couple of people (I know, I know, a shaky basis for any argument) have described to me how former GM Chairman Roger Smith really injured the American auto industry, not so much through drastic outsourcing and downsizing (which both Chrysler and Ford were guilty of during the 70s) as restructuring GM to emphasize selling stock, that is, maximizing profit in the sort term, as opposed to selling cars. Now I haven't worked with GM at any point, nor have I read up on the recent history of the auto industry, either of which might enable me to commit unqualifiedly to this argument. There does seem, however, to be substantial collateral evidence.

Everybody knows that people go into business not to build a community, or to make a name for themselves, but foremost to make money.
Everybody also knows that we've outgrown the era of paternal industry kings... the Carnegies and Pulitzers (or in Flint's case, the Dorts and Durants and Motts), who would urge police to shoot on unionists, then turn around and build a concert hall or planetarium in the hopes of "improving the masses."
But just as much, I don't think people recognize how far and fast we've moved away from that all-too-flawed model into something almost as flawed.

GM's emphasis on selling stock is not belied by the stress they lay on the profit margin. Again, this sounds obvious, but there's a lot between the lines. The initial New York Times article on the reduction stated, that "plants building passenger cars could be vulnerable, because Mr. Wagoner has said that sport utility vehicles and pickup trucks were the company's top priorities," even as recent studies have suggested that Americans are buying smaller cars across the board in response to gas prices that may or may not ever go down (we still pay a fraction of anyone else; there's plenty of room for the price of gas to rise).

Why would a corporation lagging in sales emphasize the production of vehicles counter to what can be realistically read as a long-term buying trend?

Even more, setting aside GM's historic mess of unwieldy economic maneuverings, why would a corporation that is the largest in its industry, with the most physical and financial resources, and thereby capable of offereing the widest range of products to its customers, make a chain of decisions reducing the variety of products it offers? This happened a decade ago, as Oldsbombiles and Buicks increasingly became the same car, five years ago, when Saturn sacrificed the only economy mileage GM offered that wasn't in a deathtrap like the Metro, and just last week when they announced they'd cut capacity by 17% in their focus on "sports utility vehicles and pickup trucks."

The answer may lie in one simple fact: the differential between sale price and overhead (and the interest rate on financing; GM makes more money financing auto loans than selling cars these days) of an SUV as opposed a sedan supercedes the fact that more people may want to buy sedans. This is a great strategy, if you're into speculative stock. If a profit boon causes a momentary spike on the selling floor and you're prepared for the moment, you will make a lot of money. The long-term costs will be passed along to the next generation of GM employees, affiliates, and customers.

Does this look at all like a pyramid scheme? It should, because in the long run, almost everybody loses.

BUSINESS IS BUSINESS,
or,
THE UAW IS LARRY

So finally we come around to the Flint Journal Editorial Board, which 80% of the time will not look at any complex situation with the slightest degree of subtlety. I should have expected no less when they devoted their prime editorial space to school truancy.

In the "Everybody loses," the Journal shakes its finger at a Kentucky local while lamenting "why can't we all just get along?" Their argument is entirely semantic. They unambiguously write "we wish every UAW leader and worker would refrain from using words that suggest the company's difficulties are separate from their own,":

After a meeting of UAW leaders in Detroit on Thursday, in which the union, to its credit, indicated it would help GM cut health care costs, Renaud confirmed that development in a Detroit Free Press story: "I think we will probably give them some help within the contract, even though we don't think their problems are our fault." Huh? We-them, their-our. Listen up, troops: If the corporation, which includes every employee, doesn't start winning more battles with the competition, the casualty list will be all-inclusive.

I'll move past flaming them and get to the point.

My own argument is equally semantic:

The "we-them" relationship between GM and the UAW is not accidental. Before the UAW was ever recognized, GM sanctioned "we-we" unions under their own auspices that worked "cooperatively," the end result being that workers didn't have much of a voice. "A union that cannot strike has no power," and all that.

Now one might respond that this is not where the Journal takes issue; they're saying, rather, that the UAW must, for its own welfare do whatever it can to make GM more competitive. I don't deny this either. What the Journal is taking for granted is that the changes GM proposes will make GM more competitive. The UAW is taking a more skeptical stance. In light of the points I've raised above, the reasons for this caution should be conspicuous.

The changes that GM is making: reducing capacity, closing plants, decreasing health care costs and decreasing the work force all decrease overhead, and thereby increase increase profit.

Now, increasing competitiveness? That might involve making more attractive vehicles: vehicles for a public that's tiring of fifty-dollar tanks of gas, that wants not only cool SUV's and pickups, but sedans and coupes and luxury cars, and Buicks and Pontiacs and Saturns and Chevys that are colorful and interesting and different from each other.

And the UAW's skepticism should be taken seriously. If GM leadership is pandering to the sort of shareholder who will make a profit and bolt, whereas the UAW represents workers hoping their jobs hold out for the next several decades, who would you trust to watch for long-term viability?

But the UAW cannot save General Motors from itself. As they said, all a Union can do is strike, and neither striking nor striking will make GM more competitive.

That's why the UAW is Larry.

More flattering, albeit slightly, than being the battered spouse.