With the news of GM to close long-time plants and lay off thousands of workers, many are upset. But this has been a long time coming, why the surprise now?
Everyone is upset that this is happening. Workers are upset because they are losing their jobs. Unions are upset because they are losing their power and income, and the government is upset because its going to be losing their tax revenue and furthermore, they look even worse because of the tax brakes and while GM is closing things down in the states, they are increasing their production out of the country.
What is amazing is that it seems everyone has forgotten how business works. Businesses are not charities. They do not exist to create jobs or to stoke car enthusiasts like myself. They exist to make a profit and will do whatever they can to increase it.
Now that we got the fundamentals of business out of the way, I’m wondering if everyone thought that when GM received a bailout way back in 2008, that they were somehow transformed into a charitable organization and forever beholden to the government? This literally seems to be the case with headlines like this “Politicians Are Real Mad at GM for Slashing Jobs After Last Year’s Massive Tax Cut” – this one from Jalopnik. With what we know about business, why is this a shock?
I recall years ago examining the issues effecting GM at the time of their 2008 bailout. Things like the union, pensions, and all of their other liabilities and poor management decision that have been haunting them since their golden era. Today, those issues are the same in addition to all of the new regulations implemented since then. All of these problems were solved long ago. The plan was simple – high costs and ancient liabilities were crippling the company, the best way to avoid those was to move overseas out of the reach of these problems. Its implementation has been happening ever since.
For a long time now, GM has been proud of how global they have become with production facilities all over the world. It only makes sense to move production from high-cost areas to low-cost ones which they can now do easily. Is it even possible for GM to stay competitive without doing what they are doing?
There is many things to learn from this whole ordeal but I fear many of the lessons are going to be lost due to political agendas.
The first lessons is on bailouts
No company should ever get one. The thought of bailouts completely disgusts me and reminds me of some of the darkest days of history. Who decides who gets a bailout and who does not? Do we want the government picking winners and losers? Also, think of the relationship that exists between the company receiving the bailout and the government? Clearly, that company had already won favor with the government before the bailout was even given. How did this happen? This is a clear indicator of corruption. Therefore bailouts are completely against the principles of a free society. Success can never be guaranteed. The bailout rewarded failure and also robbed the lessons of that failure. Finally, the unintended consequences and ripples of the bailout may never fully be accounted for or understood. For instance, if GM did go out of business back in 2008, they would have had to sell off their factories and equipment. All of the startup auto companies like Tesla, Rivian, and a host of others, probably would have been happy to snatch up GM’s leftovers. We will never know for sure.
But again, I keep hearing things form the Trump administration on the lines of “This is the thanks we get after bailing them out?”. Was it written somewhere when GM got the bailout that they would be forever bound to the will of the government? That bailout was 10 years ago, is there going to be a time when the government feels they are no longer owed something for this?
Then there is who’s at fault
The primitive response is to point fingers, but really, we are the ones to blame. We are now directly competing globally in manufacturing. Many people are quick to point out the cheep labor costs outside of the USA, as something that’s hard for us to compete with; but its so much more than just labor, its all of the regulations. I sometimes wonder why anyone would choose to do manufacturing in any western country due to the associated costs. But back to the point of that we are to blame. Last time I checked, we elected our officials to office for the most part and we created this environment that allows our companies to set themselves up over seas to completely dodge all of our laws. I don’t recall anyone complaining too loudly while this has been happening. Its certainly nothing any politician ever talks about, even now when its effects are hitting us right in the face.
On a side note, I find it ironic that so many of the special interest groups like the green movement and those for human rights are not vocal at all when it comes to our companies using slave labor and releasing their raw waste into the atmosphere or oceans over seas.
Everyone knows that whatever they buy is made overseas. Even a lot of our food is coming from China now. No one complaining about those things and now everyone is freaking out over GM. Really, it seems like GM is late to the party. Maybe its time to step back and understand the business environment we created and if this is what we want and if its sustainable in the long run. Everyone seems to know this is a bad thing, but people are too distracted with low prices to think about how this will affect us in the future.
In the mean time, kudos to GM for taking advantage of the current business environment that we created. They only did whats best for them.