The Auto Industry's woes are "a canary in the coal mine"
A big economic news story recently is General Motors’ largest loss in the history of the United States auto industry. This loss comes as no surprise to me and we all should watch this “canary in the mineshaft” of our economic viability struggle for survival as it will enlighten us all as to the deep rooted problems of the heart of our economy.
Even in today’s report, GM is taking actions to save itself from extinction. It is offering long time employees lump sum payments for early retirement so it can replace their $28 per hour salaries with those half of that in the non-assembly line sector of its company. It didn’t dare approach the assembly line workers as the labor union that represents them would have had a heart attack. Certainly the non-assembly line cuts were hammered out in some back room deal already.
But, the writing is on the wall my friends. These actual assembly jobs are next. The wages of our auto workers throughout the industry precludes profit in any foreseeable future which I am sure cannot last long. The business will fail. The unions will dig in their heels (so the leaders can keep their cushy jobs), and threaten strikes and the usual. So the battle for survival will ensue.
The problem really is that this wage adjustment is essential and inevitable and the unions may as well go pound sand. The ultimate choice to the workers will be: Do you want to work cheap to compete on the world market or not work at all?. This choice will also include major benefit and retirement concessions such as: Do you want a fraction of your retirement and health benefits or none when we shut the doors?.
Same with the retirement benefits of those already retired. These retirement costs add so much (thousands) to each vehicle’s cost that to continue to pay them is guaranteed destruction of our auto industry as there is no way we can compete with the Chinese or Indians in producing these same vehicles. And certainly, we have seen that our Wall Street leaders will move their operations to that country that makes more money for their company, and that our politicians will support their moves. But, I am not saying that these leaders are wrong in their actions. I believe that it is the nature of the world economy beast that has unleashed itself upon the current world. It’s just that now we must suffer for real the chickens coming home to roost.
Sadly, These retiree’s benefits are not tucked away in some safe little retirement nest egg account in some bank. These companies were allowed by our government to simply keep a small portion of these monies in such a way, and use the rest for their operations and expansions, including the ludicrous salaries and bonuses we have all heard about. These benefit packages are not insured by the government in any way. All of these retirees benefits are one Chapter 13 away from disappearing. The choice here to these retirees will be: Do you want just a fraction of what you thought you were going to get or none when we close shop?. Quite a choice---like “would you like the Gas Chamber or the Electric Chair”.
A very popular idea being employed by this industry and others in the same shape is to shed health benefits from their obligations in their negotiations with the unions, there-by putting these folks on the Medicare system which is already in worse shape than these companies and not possible especially if and when the Saudis and other wealthy people decide not to keep us in business any longer by subsidizing our trillions in debt. And certainly, this is just around the corner as no one is so imprudent as to continue lending to one who has no apparent means to pay them back.