Wednesday, April 12, 2006
As GM Sows, Main Street Reeps
Today's Wall Street Journal includes an article by Yoshio Takahashi about GM's decision to sell it's stake in Isuzu to two Japanese companies with pre-existing ties to Isuzu. This follows GM's recent sale of its interest in Fuji Heavy Industries Ltd., maker of Subaru cars. Subaru has now begun working with Toyota.
I love my Subaru, by the way.
The article reports that "[s]addled with debt and losing market share in the US to Toyota Motor Corp. and other Asian rivals, GM has been trying to restructure its unprofitable North American operations."
The article also notes that, in a separate matter, GM is shifting work from its top US supplier Delphi to other suppliers, i.e. Japan's Denso Corp. and NGK Spark Plug Co., as well as Honeywell International Inc., Germany's Beru AG and Siemens AG unit Siemens VDO Automotive Corp. Delphi is exiting several business lines and is operating under the auspices of the bankruptcy courts, which necessitated GM's switch of suppliers.
So, GM is having trouble in the US market because of Asian competition. On the one hand, it is selling Asian assets to raise money. One can assume that GM is hardly in a position to demand top dollar under such circumstances -- kind of the way when you go to a pawn shop you take what they offer or walk.
On the other hand, GM is starting to buy more parts from outside the US, including in Japan. Because its primary US supplier, Delphi, can't stay in business anymore.
What I can't figure out is why anyone would call these two acts on the part of GM unrelated. GM is trying to restructure its unprofitable US business by sending both assets and business abroad. In fact, apparently, the only thing GM is not sending abroad is cars.
And liabilities. GM is leaving its liabilities right here. Specifically, it's pension and health benefits liabilities -- the press has been awash in stories about the automotive industry and its inability to meet its health and pension obligations. Delphi, which used to be owned by GM, will probably go into bankruptcy and try to get out of its employee pension and health obligations. Which used to be GM iabilities, by the way. And GM is already saying that it cannot afford its own pension and health care liabilities.
So those liabilities are not leaving the country; no, those liabilities will become the problem of the US taxpayer.
Connecting the dots Mt. Takahashi calls unrelated or just doesn't see, GM is seeking to restructure its operations by selling assets overseas to reduce its debt, sending business overseas to reduce its costs, and spinning off its pension and health obligations at its former Delphi unit, if not at GM itself, to the US taxpayer.
For you and me, that would be like selling your family heirlooms on e-bay, hiring an illegal immigrant at below market rates to watch your kids so you could get a second job, which has to be off-the-books so that your taxes don't go up.
Extending the logic here, does this mean that GM and the rest of us are all learning to compete with low-cost foreign competition? Is the same issue sweeping through corporate America and Main Street America?
Well, not exactly. GM and corporate America need cheap labor because of foreign competition. So GM and corporate America need Main Street to be sucker-punched by foreign competition, so corporate labor costs go down.
I think this can best be understood by looking at the typical Delphi employee. His job is going overseas, his pension and health benefits are going bye-bye and he now has to go out and get a new job in a market where wages are being kept artificially low by foreign competition within and without the United States.
Those are the dots WSJ cannot or will not connect.
Is this why hundreds of thousands of Americans have taken to the streets? Because this country is making it easier for GM to address foreign competition by undermining Main Street's ability to deal with foreign competition? By refusing to raise the minimum wage, by allowing undocumented workers to be denied health and pension benefits, effectively undermining wages even more?
Is this why the President's immigration plan allows for this cheap foreign labor to continue? To continue to erode the status of the American labor force?
And if so, has anyone made this connection? Does anyone have a plan?
Democrats? Republicans? Just raise your hands.
OK, anyone other than China.
Anyone have a plan?
I love my Subaru, by the way.
The article reports that "[s]addled with debt and losing market share in the US to Toyota Motor Corp. and other Asian rivals, GM has been trying to restructure its unprofitable North American operations."
The article also notes that, in a separate matter, GM is shifting work from its top US supplier Delphi to other suppliers, i.e. Japan's Denso Corp. and NGK Spark Plug Co., as well as Honeywell International Inc., Germany's Beru AG and Siemens AG unit Siemens VDO Automotive Corp. Delphi is exiting several business lines and is operating under the auspices of the bankruptcy courts, which necessitated GM's switch of suppliers.
So, GM is having trouble in the US market because of Asian competition. On the one hand, it is selling Asian assets to raise money. One can assume that GM is hardly in a position to demand top dollar under such circumstances -- kind of the way when you go to a pawn shop you take what they offer or walk.
On the other hand, GM is starting to buy more parts from outside the US, including in Japan. Because its primary US supplier, Delphi, can't stay in business anymore.
What I can't figure out is why anyone would call these two acts on the part of GM unrelated. GM is trying to restructure its unprofitable US business by sending both assets and business abroad. In fact, apparently, the only thing GM is not sending abroad is cars.
And liabilities. GM is leaving its liabilities right here. Specifically, it's pension and health benefits liabilities -- the press has been awash in stories about the automotive industry and its inability to meet its health and pension obligations. Delphi, which used to be owned by GM, will probably go into bankruptcy and try to get out of its employee pension and health obligations. Which used to be GM iabilities, by the way. And GM is already saying that it cannot afford its own pension and health care liabilities.
So those liabilities are not leaving the country; no, those liabilities will become the problem of the US taxpayer.
Connecting the dots Mt. Takahashi calls unrelated or just doesn't see, GM is seeking to restructure its operations by selling assets overseas to reduce its debt, sending business overseas to reduce its costs, and spinning off its pension and health obligations at its former Delphi unit, if not at GM itself, to the US taxpayer.
For you and me, that would be like selling your family heirlooms on e-bay, hiring an illegal immigrant at below market rates to watch your kids so you could get a second job, which has to be off-the-books so that your taxes don't go up.
Extending the logic here, does this mean that GM and the rest of us are all learning to compete with low-cost foreign competition? Is the same issue sweeping through corporate America and Main Street America?
Well, not exactly. GM and corporate America need cheap labor because of foreign competition. So GM and corporate America need Main Street to be sucker-punched by foreign competition, so corporate labor costs go down.
I think this can best be understood by looking at the typical Delphi employee. His job is going overseas, his pension and health benefits are going bye-bye and he now has to go out and get a new job in a market where wages are being kept artificially low by foreign competition within and without the United States.
Those are the dots WSJ cannot or will not connect.
Is this why hundreds of thousands of Americans have taken to the streets? Because this country is making it easier for GM to address foreign competition by undermining Main Street's ability to deal with foreign competition? By refusing to raise the minimum wage, by allowing undocumented workers to be denied health and pension benefits, effectively undermining wages even more?
Is this why the President's immigration plan allows for this cheap foreign labor to continue? To continue to erode the status of the American labor force?
And if so, has anyone made this connection? Does anyone have a plan?
Democrats? Republicans? Just raise your hands.
OK, anyone other than China.
Anyone have a plan?
