Detroit at the brink

Some eye-opening stats on General Motors:

  • More than $12 billion in losses in the past two years.
  • 73,000 workers today vs. 200,000 10 years ago, a reduction of nearly two-thirds.
  • A $50 billion retiree health care benefit liability.

Today’s New York Times Op-Ed sums up GM’s situation quite well:

The straits G.M. finds itself in are in part of its own making. Its inability to make cars that American drivers want to buy and its reliance on gas-guzzling S.U.V.’s have made it particularly vulnerable as rising gas prices have driven consumers toward more energy-efficient automobiles.

But the company and its workers are also victims of bigger forces. G.M.’s retiree benefit packages were negotiated 40 years ago when Detroit faced little competition, the future looked as good as the present and the government-provided tax breaks to pay workers with promises rather than money.

But aging and globalization made this backfire badly, leaving Detroit with an enormous burden just as a host of nimble foreign companies started setting up shop with fresh, young workers in the union-free states of the American South. The change pummeled both the car companies and the U.A.W.

This all reminds me of a story Russell told me about working at one of the Detroit automakers GM back in the day. After shutting off a water main because a burst pipe was flooding a factory area, a union supervisor asked him if he was a union plumber. Russell said no, so the supervisor told him to turn the (expletive deleted) main back on, so the union plumber could fix it.

So as they say, now the chickens have come home to roost.


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