As Goes GM ...
Wednesday June 8, 2005
.... so goes the nation. That was the old adage ... when the economy was good, people bought cars. GM's stock (quote) tended to move with the nation's economy. So what to make of this week's news?
General Motors lost $1.1 billion in one quarter alone. By 2008, it plans to cut 25,000 jobs (it employs 150,000 in the US and that many more abroad) and close an undetermined number of domestic manufacturing plants. The layoff news, of course, boosted the stock price, although some analysts note that this is a short-term response to a short-term fix.
The company says that the cost of every new car includes $1,500 for employee and retiree health care costs; no mention of the cost per vehicle for pensions. Look to GM to be the next company to abdicate its pension plan to the feds.
Although GM has only 300,000 employees, it pays health care for 1.1 million workers, dependents and retirees. Unionized employees pay only 7 percent of their health care costs but non-union workers (white collar) pay 27 percent, the company said. The company did not release data showing relative wage rates for the two categories of employees.
The announced cuts affect one-in-five plant floor workers; the company employs about 109,000 hourly workers in the US. GM cut its workforce by 22,000 from 2000-2003; the company says it cut salaried positions by a third in the past five years.
A union spokesman said, "The UAW is not convinced that GM can simply shrink its way out of its current problems. What's needed is an intense focus on rebuilding GM's U.S. market share, and the way to get there is by offering the right product mix of vehicles with world-class design and quality."
GM still builds about 1-in-4 of the cars sold in the US; in the 70s, before the Japanese invasion, it built 1-in-2. Both Standard and Poor's and Fitch services reduced GM's bond rating to "junk" status last month.
See Motley Food for quotation and correlation lesson (requires registration).
General Motors lost $1.1 billion in one quarter alone. By 2008, it plans to cut 25,000 jobs (it employs 150,000 in the US and that many more abroad) and close an undetermined number of domestic manufacturing plants. The layoff news, of course, boosted the stock price, although some analysts note that this is a short-term response to a short-term fix.
The company says that the cost of every new car includes $1,500 for employee and retiree health care costs; no mention of the cost per vehicle for pensions. Look to GM to be the next company to abdicate its pension plan to the feds.
Although GM has only 300,000 employees, it pays health care for 1.1 million workers, dependents and retirees. Unionized employees pay only 7 percent of their health care costs but non-union workers (white collar) pay 27 percent, the company said. The company did not release data showing relative wage rates for the two categories of employees.
The announced cuts affect one-in-five plant floor workers; the company employs about 109,000 hourly workers in the US. GM cut its workforce by 22,000 from 2000-2003; the company says it cut salaried positions by a third in the past five years.
A union spokesman said, "The UAW is not convinced that GM can simply shrink its way out of its current problems. What's needed is an intense focus on rebuilding GM's U.S. market share, and the way to get there is by offering the right product mix of vehicles with world-class design and quality."
GM still builds about 1-in-4 of the cars sold in the US; in the 70s, before the Japanese invasion, it built 1-in-2. Both Standard and Poor's and Fitch services reduced GM's bond rating to "junk" status last month.
See Motley Food for quotation and correlation lesson (requires registration).