GM May Focus on Cheaper Imports, Cut US Jobs
| 18 May 2009 | 06:33 AM ET
General Motors is engaged in negotiating a reorganization that could
increase vehicle imports from its plants in Mexico and Asia while
closing factories and cutting the work force in the United States.
That approach drew a sharp rebuke from the United Automobile Workers
union on Friday. In a letter to each member of Congress, the U.A.W.,
which represents G.M. factory workers, argued that to qualify for more
government assistance, the auto giant should be required to maintain
the maximum number of jobs in the United States.
The administration, however, appears to accept the proposition that to
return to profitability as quickly as possible, G.M. must import a
significant percentage of cars from its plants in low-wage countries,
like Mexico and China, or low-cost countries, like Japan.
G.M. already imports a third of the vehicles that go to showrooms in
this country. That percentage would not change in the plan that G.M. is
preparing to submit to the administration to justify billions of dollars
in new loans to stave off collapse.
G.M. would emerge a smaller company, with fewer employees and less
output in this country and abroad. But imports would rise from low-cost
countries, particularly Mexico and China, and that would be offset by
fewer imports from Canada and Europe.
Some economists, like David Autor of M.I.T., say that G.M. cars made in
China, among other countries, are pretty competitive and could be sold
Others, like Harley Shaiken, at the University of California, Berkeley,
argue that if G.M. focused more intensely on technology and auto
quality, it could concentrate production in the United States and still
be competitive. The other way to go, he said, is to cut costs by
importing more vehicles from Mexico and China, and lifting the bottom
line that way.
A Treasury spokeswoman said over the weekend that G.M. and the U.A.W.
are in active and constructive deliberations around all aspects of their
plan. This is one of several issues they are focused on and the
administration is supportive of their efforts to come to a resolution.
G.M. is asking Washington for billions of dollars more in federal loans
to survive, on top of the $15.4 billion already borrowed. In a
presentation to Congress, the company laid out the plan for the shifts
in production to lower-cost countries. In the United States, G.M. would
close 16 of its remaining 47 plants and eliminate an additional 21,000
jobs. The company also announced on Friday that 1,100 dealers would be
eliminated from its American network by the fall of next year.
In the letter to Congress on Friday, Alan Reuther, the U.A.W.s
legislative director, also argued that if G.M. cut back production in
Canada, it would hurt small manufacturers in the United States that
supply parts to G.M.s Canadian assembly plants.
But the Obama administration apparently sees interference in such plans
as crossing a line into industrial policy, rather than helping a giant
multinational get back on its feet as a successful, privately managed
Insisting that G.M. preserve American jobs by shifting production to the
United States from abroad, this argument goes, would require many times
more in federal aid than the $16.3 billion in loans now anticipated.
The idea is to get G.M. off the government dole, Mr. Autor said. And
if that is the case, then one has to take the steps that a free-standing
company must take to be profitable.
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