Gm to cut 30,000 and thats just the begining

[Strike For The South]

http://money.cnn.com/2005/11/21/news/fortune500/gm_cuts/index.htm?cnn=yes

This angers me greatly thoughts

[Xiahou]

With the announced closings, GM is essentially keeping its capacity of large sport utility vehicles and pickups intact, even though big SUVs sales have slumped in recent months in the face of higher gasoline prices.That, imo, shows that GM still doesnt get it. On the other hand, I heard the most of the cuts will be through attrition, with most of the others being done via buyouts, which is obviously preferable to flat out layoffs.

[Red Harvest]

It doesn't make me happy, but it is no real surprise. There is a very real chance that GM will go bankrupt. Ford and GM put their futures in the hands of full sized trucks and SUV's a decade ago. It was obvious that they would be completely vulnerable to any major gas price shock. Neither really learned how to compete with the Japanese in other traditional segments, so their money making core was all in a segment that was doomed long term.

It is fairly typical of the short range outlook that U.S. companies have. And it isn't helping them that Toyota and Nissan are aggressively attacking their last bastions now. This also illustrates the silliness of having a large tariff, lax CAFE and other standards for the segment, as it encouraged US companies to concentrate in this area to the detriment of both our energy consumption AND their own market competitiveness. This was so predictable.

[Papewaio]

So the future of western nations is
lower class: Walmart employees buying imported goods from Walmart?
middle class: moving to India to work in the call centers.
upper class: :money:

[solypsist]

/looks at camera, looks at world map, relieved that he has options beyond those of your average 40* hour workweek people.

i hope forum users see this and it reinforces the idea that the age of longtime employment by a corporation is a thing of the past.

oh, and that this is what happens when gas reaches $3 a gallon and they're still depending on the SUV to carry them through.

[Kongamato]

GM is in my family and I always wish the best for them. However, it's hard for me to feel sympathetic when they decide to build something like the SSR when they have other priorities at hand. What minds were at work when they decided to build a speed-oriented pickup truck with a retro look? Fast pickup trucks are not practical or cool, and retro style did not work for the Ford Thunderbird or the Plymouth Prowler. I only remember retro working with Chrysler's PT Cruiser, and that's only because the vehicle was cheap and practical.

So, now the Lansing Craft Centre, home of the SSR, has been axed. Perhaps the workers can find a new source of income in the methamphetamine business. Fun times are ahead.

[solypsist]

Isn't it ironic that American auto manufacturers have lobbied against mileage standards for years, yet embracing those standards or instituting their own probably would have prevented their plummeting sales at the hands of Japanese and European automobiles that get better gas mileage?

There's no reason to buy an American vehicle. It's just a shame the blue-collar folks are the ones that will be taking the hit, while the suits that can't see the writing on the wall will suffer no consequences of their business models.

[solypsist]

also, this little bit (http://www.washingtonpost.com/wp-dyn/articles/A64599-2005Apr18.html) ties in with the thread back here about national healthcare in the US:

"GM began its slide down the slippery slope in 1950, when it began picking up costs for medical insurance, pensions and retiree benefits. There was huge risk to GM in taking on these obligations -- but that didn't show up as a cost or balance-sheet liability. By 1973, the UAW says, GM was paying the entire health insurance bill for its employees, survivors and retirees, and had agreed to "30 and out" early retirement that granted workers full pensions after 30 years on the job, regardless of age.
These problems began to surface about 15 years ago because regulators changed the accounting rules. In 1992, GM says, it took a $20 billion non-cash charge to recognize pension obligations. Evolving rules then put OPEB on the balance sheet. Now, these obligations -- call it a combined $170 billion for U.S. operations -- are fully visible. And out-of-pocket costs for health care are eating GM alive.

GM spokesman Jerry Dubrowski says the company expects to pay $5.6 billion in health care costs this year for 1.1 million people covered by its plans. That's up from the $3.9 billion it shelled out in 2001 to cover 1.2 million people."

I hate the idea of outsourcing, but as long as public health care is such an issue, benefits and health care costs will continue to drive manufacturing corporations to other countries.

[Papewaio]

So if the government had regulated mileage and if government had a decent health care system... GM would be a more robust company to day?

Oh a similar note in Sydney because of government restrictions on water use... for instance you have to use a bucket not a hose to wash a car unless you have a license and the ability to recycle/minimise water usage... the amount of business car washes have increased as they can do it.

So is all regulations bad for business... apparently not.

[Redleg]

also, this little bit (http://www.washingtonpost.com/wp-dyn/articles/A64599-2005Apr18.html) ties in with the thread back here about national healthcare in the US:


I hate the idea of outsourcing, but as long as public health care is such an issue, benefits and health care costs will continue to drive manufacturing corporations to other countries.

I wonder if you realize that if they did not pay for health care the way they currently do - they would still pay a large amount if the the Federal Government puts their hand into the mix. Just take a look at Medicare taxes - you pay part - your employeer pays part.

[Red Harvest]

So if the government had regulated mileage and if government had a decent health care system... GM would be a more robust company to day?

Most likely so. The difference in CAFE standards for cars vs. trucks/SUV's and the protective tariffs created an unhealthy competitive environment, but one the Big 3 wanted (and want) to keep as is. They did need some protection against themselves. What corporate America wants is not always good for it over the long haul.

Health care is indeed a big issue. Most companies are reducing the percent they pay, shifting the burden to employees. This is behind the rise in uninsured. That is part of the move in outsourcing and contract labor. Can't blame them, it makes economic sense to do so when possible. However, the unions have been protecting the workers in regard to health care. One could argue that the union is the bad guy...until you realize someone has to pay for it and the unions are not responsible for the rise in healthcare costs nationwide. Nor did the union choose the corporate path that is backfiring.

On the other hand, one could argue that poor management reasoning could have mucked up anything. ~D Even being in a better economic position wouldn't guarranty long term success...that takes intelligent management (look, another oxymoron!)

[solypsist]

well with the gov't funding these money-pit corporations with tax payer dollars, which in turn go right into company pensions and medical benefits (sometimes even for employees that leave the workforce), why not just cut out the middle man, let the car companies fail just like the airlines, and instead invest that $ into a national healthcare?

otherwise, it's just not profitable to hire American workers anymore

[Xiahou]

or we could stop corporate welfare and not contribute more the government welfare too.

[Strike For The South]

or the ceos could make 4 million a year instead of 5 and allow blue collar men to get paid and feed there familes

[bmolsson]

The car industry need a technical revolution of some kind. The oil prices combined with environement and overcrowded roads need something innovative. And it has to be as innovative as when the car replaced the horse once...... :bow:

[solypsist]

yes, or that, too.


or we could stop corporate welfare and not contribute more the government welfare too.

[Gawain of Orkeny]

Originally Posted by strike for the south
or the ceos could make 4 million a year instead of 5 and allow blue collar men to get paid and feed there familes

Im afraid thats but a drop in the bucket in reality. Makes a nice sound bite though. Maybe you should run for office.~:joker:

[Papewaio]

1 million dollars = 35 jobs at about 30k a piece.

Employees should stop thinking that a system that is made for making money for shareholders is going to do anything other then make money for the shareholders.

If you don't think governments should be welfare orientated don't think for a nanosecond that companies are going to be more so. The few exceptions are few indeed and tend to have a single powerful family orientated shareholder in charge of the company. Most companies have a CEO who keeps rightsizing a company for a horde of faceless shareholders... who ironically will be part of the employment pool and the shares are proxied by the big mutual sharefunds/401k/superannuation/insurance companies.

Employees are to CEOs what soldiers are to tyrants.

[Strike For The South]

Employees are to CEOs what soldiers are to tyrants.

and it shouldnt be that way

[Strike For The South]

my point is if a ceo can save 35 peoples jobs instead of buying the prosce he should take the cut

[Papewaio]

What something should be and what something is are two different things.

If you want a CEO like that, your best bet is to become that CEO.

[Red Harvest]

What something should be and what something is are two different things.

If you want a CEO like that, your best bet is to become that CEO.

Not a chance, with thinking like that he won't get promoted. Sucks, but that's the way it is.

[Xiahou]

my point is if a ceo can save 35 peoples jobs instead of buying the prosce he should take the cut
But why should a company keep paying, year after year, 35 employees who arent needed? It's not a charity- its a business.

[Red Harvest]

But why should a company keep paying, year after year, 35 employees who arent needed? It's not a charity- its a business.

That's what I've been saying about execs year after year. The amount of the annual profits pulled in by the executive boards is rather high. We have terrific management welfare system in this country.

Why is he getting a dime if the company is about to fail? Seems like someone hasn't been earning his keep... The answer will be to pay him a huge severance package.

[Xiahou]

Why is he getting a dime if the company is about to fail? Seems like someone hasn't been earning his keep... The answer will be to pay him a huge severance package.Indeed. But if boards and shareholders are dumb enough to pay millions to the man who runs their company into the ground and then gives him a golden parachute... there isnt much we can do about it is there? It's a stupid business practice- one that some companies are paying the price for.

[Major Robert Dump]

Bankurptcies, defaulting on pensions and dipping into the companies 401k fund seem to be the latest craze. Look around at how much its happening lately, there is no job more security in corporations than in small businesses or being self employted. This is but the beginning

[Xiahou]

I know it was different when my grandparents were working, but if a company offered me a pension in leiu or real pay as part of a compensation package, I'd look elsewhere for work. Not unlike Social Security, they are little better than pyramid schemes. :bow:

[Papewaio]

Not a chance, with thinking like that he won't get promoted. Sucks, but that's the way it is.

Not if he starts his own business...

[bmolsson]

Idealogy is nice, but I'll take those 30,000 employees over those dozen people or so on the board of executives for GM. They should think of their employees first.


That is what they have done all these years and they are now seeing the result of this "ideology". Bottomline, they are in the [nope] due to ideology...... :bow:


watch the language people - Soly

[Red Harvest]

Indeed. But if boards and shareholders are dumb enough to pay millions to the man who runs their company into the ground and then gives him a golden parachute... there isnt much we can do about it is there? It's a stupid business practice- one that some companies are paying the price for.

One that shareholders and workers are paying a price for. One of the reasons I've been pulling out of the U.S. market is the lack of accountability. It is gang rape of investors by the incestuous boards and management.

[PanzerJaeger]

This has a lot more to do with the fact that GM does not build vehicles that people want to buy than some grand problem(s) with the way american corporations are run.

If GM made cool cars, or economical cars, or quality cars, those 30k would have their jobs and their benefits.

[Franconicus]

This is really sad news. In Europe GM made some bad mistakes - they lost market share and finally the workers had to pay the prize. ~:confused:

[yesdachi]

I can’t believe no one has mentioned unions.

I am going to withhold my rant but I’m sure you can imagine how it would go.

Anyway it sucks for the economy but I don’t feel bad for the proud, card carrying, UAW member employees, you reap what you sew. :cry:

[JAG]

Love that free market!

[Red Harvest]

I can’t believe no one has mentioned unions.

I am going to withhold my rant but I’m sure you can imagine how it would go.

Anyway it sucks for the economy but I don’t feel bad for the proud, card carrying, UAW member employees, you reap what you sew. :cry:

I did mention them, but I also pointed out that management chose the wrong line up...and seems more determined than ever to continue down the wrong path.

I'm not a fan of unions, but the fault here is not with the unions, it is with poor management vision.

If people truly reaped what they sewed, then cuts would start from the top down. :bow: The more you screw up at the top, the bigger the reward.

[Papewaio]

Yeap, look after your customer or lose your business.

A lot better then creating heaps of produce that no one needs or wants or not creating enough for what people need or want...

[Red Harvest]

Domestic vehicles in the same classification have typically been less expensive (read that "cheaper" too) than Japanese and German rivals. Yet Honda, Toyota, and Nissan have still been able to capture vast swaths of the market. It's a case of people being willing to pay for a superior product. When you have to keep your prices lower to sell, it says a lot about the quality of your product.

Most of the problems I've seen with domestic vehicles have not been assembly problems. They have been material choices and design choices. That's indicative of a corporate mindset problem.

[yesdachi]

I did mention them, but I also pointed out that management chose the wrong line up...and seems more determined than ever to continue down the wrong path.

I'm not a fan of unions, but the fault here is not with the unions, it is with poor management vision.

If people truly reaped what they sewed, then cuts would start from the top down. :bow: The more you screw up at the top, the bigger the reward.
I didn’t say it was only the union’s fault. But I do think they are every bit as responsible as the management. If the management hadn’t been making poor decisions and the unions hadn’t been demanding excessive pay and benefits GM would still be fine but now it’s a pile of poo and the management and workers get to share it because they made it.:bow:

[Dhepee]

Fun fact about GM's losses, they aren't really losses.

When most people hear "loss" they think that GM sold X dollars worth of cars but that it really cost them X+1, therefore they lost money; that's a loss on the disposition (sale) of property. Actually GM is running a net operating loss which is different; their section 162 and 163 deductions are greater than their income - that also means that they pay no income tax. Those deductions are for business expenses - things like the metal to build the cars, but also pension and health care costs - so technically GM did have a loss because their healthcare and pension obligations created deductions in excess of their income BUT GM's income on the disposition of property is and has been positive.
In other words in the year that GM declared to the world that they had a "loss" they actually sold X dollars worth of cars but it cost them X-1, so on the disposition of property, sales, they did in fact make a profit. In fact assuming that they pay a corprorate tax rate of around 40%, those deductions increased their net profits by 40%

Why do they want to get rid of some workers and therefore some pension and healthcare obligations, which generate these deductions? It's simple. GM's deductions are far and away greater than its profits. If a section 162 deduction isn't used up in the present tax year it carries forward to the next tax year, and does so for 20 years or until it is used up. GM will have a net operating loss every year until it the end of time, so the carried forward deductions are useless, they expire without creating value after 20 years, because the present operating year's deductions come first and offset all the profit and there's still some to carry forward. Every year GM will completely offset its income and carry forward a deduction, adding to its already carried forward deductions.

GM is trying to equalize it's present year income with it's present year section 162 deductions. It's inefficient to have a deduction that you will never use, or so they theory goes. Basically people get laid off to preserve the income/deduction balance. And that is because it is an easy way to shift output capacity to countries that underwrite healthcare and pension - or don't but the worker's don't have the UAW - like Mexico. GM can't just close a plant and move to Mexico or the UAW will walkout; so theylay-off workers, because of losses, and then shift the capacity. The National Labor Relations Board would side with GM if the UAW struck over a plant closure due to a company's losses; and it therefore makes it much easier to move things overseas without a fuss from the unions. Oh yeah, and it's perfectly legal. Pretty sweet deal if you're a GM shareholder. There's a reason the US Tax Code is so darned complicated.

[Goofball]

Fun fact about GM's losses, they aren't really losses.

When most people hear "loss" they think that GM sold X dollars worth of cars but that it really cost them X+1, therefore they lost money; that's a loss on the disposition (sale) of property. Actually GM is running a net operating loss which is different; their section 162 and 163 deductions are greater than their income - that also means that they pay no income tax. Those deductions are for business expenses - things like the metal to build the cars, but also pension and health care costs - so technically GM did have a loss because their healthcare and pension obligations created deductions in excess of their income BUT GM's income on the disposition of property is and has been positive.

I haven't examined GM's statements myself, so I won't come right out and say you are wrong about them not really having losses, but it seems to me that you may be a bit confused, based on your rationalization and the information provided in the article.

The implication of what you just said is that the deductions for healthcare and pensions that GM is charging against current income are actually non-cash expenses, so they are actually cash positive, but just generating a paper loss for taxation purposes.

Again, I haven't examined GM's annual report, but it seems from the article that this is not the case. It seems that the healthcare and pension obligations are in fact real cash expenses that are causing GM to bleed huge amounts of money.

Not a very rosey picture for a business: being locked into a compounding perpetuity that sucks cash out rather than generating it, at a rate faster than their profits can keep up with.

[Dhepee]

Healthcare and pension payments are cash expenses but they are not creating a loss on the sale of property, in other words GM is cash positive.

What they create is a net-operating loss, which is when the sum total of deductible expenses is greater than taxable income. In other words if GM's costs are - and I'm clearly making up the numbers to simplify the example- 2mil to make cars and 1mil to pay pension/healthcare then GM's total operating costs are 3mil to operate, and GM has a total income of 4million, then they cleared a 1mil profit. (cost to operate minus income), but the healthcare/pension is deductible under section 162 of the IRS Code, so they can deductoin the 2mil healthcare/expense from the 1mil profit, leaving them with no taxable income and 1mil remaining deductions, which means that there is a net operating loss.

What you must remember is that the net operating loss does not mean that they did not take in a positive income, what it means is that there are business expense deductions that are not matched to income in the current tax year.

If a company has any loss, either a loss on disposition of property or a net operating loss then it is justified in downsizing under labor law and it can take cost cutting measures such as moving production to other countries without implicatinng its union contract.

If you want GM financials go to a stockwatch website and look for the 10K statements.

Also, that wasn't an article, this will be my line of work when I pass the bar.

[Red Harvest]

I haven't examined the statements but what I've gathered so far suggests the losses are real. Last I heard GM and Ford's bond ratings had descended to junk levels. That isn't going to happen if they have good cash flow and real earnings.

What it means is that they lack the cash flow and earnings going forward to sustain further lending to them. Lending to them becomes increasingly risky, so lenders want a higher return to cover the risk.

Considering GM has less than half as many workers now as it did in 1995, blaming it on employee compensation is just lame. Of course, GM spun off Delphi in 1999 which has already gone bankrupt. That is one of its liabilities.

Energy prices also hurt them in materials and manufacturing costs, but the big problem looks to be in product mix/quality in a period of inflating energy costs. You can't blame that on the workers.

[Goofball]

Healthcare and pension payments are cash expenses but they are not creating a loss on the sale of property, in other words GM is cash positive.

What they create is a net-operating loss, which is when the sum total of deductible expenses is greater than taxable income. In other words if GM's costs are - and I'm clearly making up the numbers to simplify the example- 2mil to make cars and 1mil to pay pension/healthcare then GM's total operating costs are 3mil to operate, and GM has a total income of 4million, then they cleared a 1mil profit. (cost to operate minus income), but the healthcare/pension is deductible under section 162 of the IRS Code, so they can deductoin the 2mil healthcare/expense from the 1mil profit, leaving them with no taxable income and 1mil remaining deductions, which means that there is a net operating loss.

I understand what you are saying, I just think you have your numbers wrong. To use your example, my understanding of the matter is it is actually more like this:

Revenue: $4,000,000
COGS/operating expenses: $3,000,000
Healthcare/Pension expenses: $2,000,000

NOI: -$1,000,000