Diary

Obama's Government Motors to Outsource a Lot More Cars

Tell me again how we need to bail out GM and Chrysler to protect the American job base?

The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company’s new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.

The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.

As a result, the long-simmering argument over U.S. manufacturers expanding production overseas — normally arising between unions and private companies — is about to engage the Obama administration.

Essentially in control of the company, the president’s autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.

“It’s an almost impossible dilemma,” said former labor secretary Robert B. Reich, now a professor at the University of California-Berkeley. “GM is a global company — so for that matter is AIG and the biggest Wall Street banks. That means that bailing them out doesn’t necessarily redound to the benefit of the U.S. or American workers.

“More significantly, it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?”

Is it any surprise that there are ‘fundamental questions’ about devoting tens of billions of dollars in public money to sustain a union health plan which also manufactures cars? General Motors is uncompetitive for a number of reasons, but a fundamental problem is the additional costs imposed as a result of responding to union pressure and not market pressure. It should be no surprise that in order to improve its competitiveness, the company would look to move more of its production elsewhere.

There are competitive car manufacturers in the United States. They have demonstrated an ability to build and sell quality cars, hire and retain a skilled and well-paid workforce, and take market share from GM and Chrysler. Why should we spend tens (or hundreds) of billions of dollars to block them from producing and selling more cars, and hiring more Americans – especially when it’s not clear that spending billion will keep more Americans in jobs, anyway?

Via: SayAnything