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Friday, May 08, 2009

Where will the government stand on GM's plans to move jobs overseas?

Here's one of the conundrums that Obama's government will face as it tries to run General Motors. GM has detailed plans that involve moving more jobs overseas in order to make and sell more cars in foreign countries.
The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.

The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.

As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.

Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.
So what should predominate? What the company determines is in its best interests to strengthen its bottom line? Or what is better for the American workers there at the factory? Obama's union supporters and fellow Democrats won't be pleased that the federal government is pouring billions into the company and will be the majority stakeholder in a company that has plans to move jobs overseas.
But the union and some legislators object that the company's U.S.-funded revival should not help pay for expanding foreign operations. Moreover, they believe that planned cuts in Canadian production -- down 23 percent -- will have direct effects on U.S. jobs because the U.S. and Canadian auto industries are so intertwined.

"If you are shutting down plants in this country, U.S. tax dollars should not go for building plants in other countries," said Sen. Sherrod Brown (D-Ohio), who was among those who met with Henderson.
But what if that is in the best interests of the company's bottom line?
But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States.

Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars -- which are built in Changwon -- to the United States for sale.

But since only about 5 percent of the car's market will be in the United States, the manufacturing will remain in South Korea.

Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency.

"If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.
What are the chances that the government can act as a disinterested stakeholder in GM in these circumstances and support what is, in the final count, best for the company?

1 comments:

Bachbone said...

"What are the chances..."? That question has already been answered by what occurred in the Chrysler "negotiations:" nil, zip, zilch, zero, nada! Congress can't even keep its nose out of the college bowl games, or worry about social security going bankrupt rather than MLB steroid use, and Magic Mouth Obama is on TV every day with a new "crisis" to waste a few more billions on.