Wednesday, November 19, 2008

The times, they are a-changin’- A GM Retiree's Perspective

I ran across this paper from my 2005 Writing class, titled "The times, they are a-changin’" in which I wrote about GM’s financial woes. Since then I have retired and the question I asked then " "Will it be too little too late to save GM?" is still being answered.

As a retiree who worked for General Motors for 30 years, my ties are not just financial but emotional as well. I remember the "hay days," when we sold a history making amount of autos. I remember working six days a week, nine hour days in order to supply America with the cars they wanted. I remember the Toronado line, Oldsmobile 98's and 88's, and Cutlasses that were produced here in Lansing.

And its from that perspective, as an insider, a former employee, a current retiree of General Motors, I believe the best interest of the company would be to go into Chapter 11. I do not say this lightly as I have a huge financial stake in the outcome, my health care is on the line and my pension could be reduced. However, with that being said, I believe Chapter 11 to be in the best interest of not only GM but Michigan and other "Union states" for several reasons.

1. The ability to make the UAW Union contract null and void

In 1984 the Supreme Court ruled that employers can unilaterally break an existing collective bargaining contract upon filing a Chapter 11 bankruptcy petition.

2. Keeps doing business and its stock and bonds may continue to trade in our securities markets. This is extremely important as almost 4% of the Gross Domestic Product is auto-related. Three million U.S. jobs ( and families) are dependent on the health of U.S. automakers, and they are not all in the Midwest.

3. Hold debt at bay while restructuring for profitability

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.

The question is, do GM Executives have the fortitude to try and entangle themselves from the chains of the Union in a Chapter 11?

In an e-mail I received from GM which asks employees to write/call their reps to encourage the "bridge loan", GM addresses the Myth of "GM’s biggest problem in North America is its union contracts" :

As The most recent GM-UAW agreement, signed in 2007, helps close fundamental competitive gaps with our import competitors, and we anticipate significant savings as we implement the key provisions of the agreement between now and 2010.

GM’s unionized North American factories compete with the best in terms of quality and productivity.

We are confident that a collaborative relationship with our unions continues to be in everyone’s best interest.

August 26, 2008

But then at this point what can they say as the UAW with its support of Barack Obama and Democrats is the best hope of a "bridge loan".

However with all the GM bashing, the fact is that GM has made significant improvements. In the last contract in 2007. GM freed itself of its obligation to pay health care benefits to its nearly 400,000 retirees and their dependents by setting up a multi-billion-dollar union-controlled trust fund—known as a Voluntary Employees’ Beneficiary Association, or VEBA, that will pay out benefits. In addition, the agreement establishes a two-tier wage system—the first ever in a national UAW contract—that will drastically reduce wages and benefits for the next generation of auto workers.

Cost-of-living increases will be diverted to help offset the cost of retiree health benefits. The four-year contract includes three lump-sum bonuses but no wage increases, The two-tier wage agreed to by the UAW will reduce labor costs (wages and benefits) for new-hires in so-called “non-assembly jobs” to an average of $27 per hour, compared with the current average of $73 per hour. The union and company will offer buyouts and early-retirements to move current workers out of their jobs, so they can be replaced with far cheaper labor

The jobs bank, which pays laid off workers while they are jobless, will be changed so that the geographical area within which workers will have to move to an open position or lose their incomes will be expanded

In addition:

GM cars and trucks have improved significantly over the past decade. Critics are taking note, and customers are responding.

In 2007, the Saturn Aura, and Chevy Silverado won North American Car and Truck of the year.

In 2008, the Chevy Malibu was named North American Car of the Year, The Cadillac CTS was Motor Trend’s 2008 Car of the Year.

Customers have responded just as enthusiastically as the critics. Although total U.S. vehicle sales are down almost 13% so far this year, a number of GM cars and crossovers have enjoyed significant sales increases:

Saturn Vue +5%
Chevy Cobalt +6%
Pontiac G6 + 8%
GMC Acadia +8%
Saturn Aura +10%
Cadillac CTS +25%
Chevy Malibu +36%
Pontiac Vibe +39%
Buick Enclave +124%

October 1, 2008

However as I have said I also have an emotional tie to GM as a large part of my life up to this time was spend as an employee and part of the GM culture. But its not just that, GM IS part of not only Michigan's heritage and culture but America's also, a great American automobile company,conceived and build by Americans.

From the 1905 song, "In My Merry Oldsmobile", to the 1950's image of Dinah Shore throwing a kiss after singing,"See the USA in Your Chevrolet". Mel Torme's "What a thrill to take the wheel of a Rocket Oldsmobile!" To Bob Seger’s "Like a Rock" Chevy Truck To Cadillac's "Breakthtrough" commercials with Led Zepplin. Great GM "muscle cars", Chevy Chevelle ss 454, Chevy Camaro Z/28, Olds 442. And GM cars and trucks in the movies

Add to that the GM cars and trucks driven by millions of Americans throughout its history. And generations of Americans who worked hard, raised their families and built their communities as GM employees.

GM is a part of the American Landscape and Experience. There is an old saying, What’s good for GM is good for America”. Although perhaps in a smaller measure now, I still believe that’s true.

November 23, 2005

The times, they are a-changin’
Bob Dylan

September 18, 1978. To most it’s just another day without any significance To me, this date proved to be a milestone in my life.

September 18, 1978 was the day I started my career at General Motors (GM).GM had just opened a new assembly plant that summer in Lansing. I was one of 20,000 new GM employees. My staring wage was $6.50, per hour (good money then) plus benefits. GM employees build over 359,825 Oldsmobile’s that year. (Lansing Production 4 )

Fast-forward 27 years. The same plant where I started working in 1978 closed in May of 2005 and will soon be demolished. Total number of GM employees in Lansing is approximately 6,200. My hourly wage is over $27.00 plus benefits. GM build approximately 240,000 vehicles the year before the assembly plant was closed. Most astonishingly, GM’s debt rating has been downgraded to junk bond status. Immediate costs saving cuts are needed to stave off bankruptcy. As I write this paper, the United Auto Workers (UAW) has just set a precedent by opening up its contract with GM before it expires in 2007 to re-negotiate for concessions in health benefits and wages for its membership.

So who is responsible for the financial descent of one of America’s largest corporations? Some will say the culprit is management, while others contend the UAW as a whole is to blame. As a GM employee of 27 years, I feel I am in the unique position to make a qualified judgement regarding the downfall of GM. I believe that both management and the UAW share the responsibility. However, ultimately, I believe that the burden of blame rests with management.

First, let’s review the UAW’s role in GM’s current crises. Foremost is the UAW contractual costs incurred by GM. Contractual demands for higher wages and benefits have increased with each contract. These costs have made it unfeasible for GM to be competitive with other automobile companies and make a profit in a global economy. Health care costs are exponentially higher for GM than many other companies and are unaffordable. For example, “UAW workers currently pay 7 percent to 10 percent of their health-insurance costs, compared with 20 percent for GM’s white- collar workers and 40 percent for Americans generally, according to union data.” ( GM Powertrain par 33 )

In addition to unaffordable health care costs, there is another unsustainable contractual cost, the “jobs bank” This is a program that is initiated after a large layoff or plant closing. A displaced employee attends a job bank and may not do any work, yet still receive a full paycheck and benefits. In Lansing, because there is a lag between the old plants being closed and the new Delta Plant being built, some job bank employees show up at a given place and spend the entire day doing nothing. Others may do community service, while others, like me go to school as my “job".

I estimate because of my position of being in the job bank, that there about 200 people in Lansing’s job bank. The payroll, based on my weekly salary, for job bank employees is over $216,000 per week! What business could possibly survive by paying its employees full wages not to work?

Another indefensible contractual cost to GM in light of a global economy is the “30 and Out” rule. An employee who hired in at the age of 18 may retire at 48 and can collect pension plus fully paid health care for another 30 years or more. For health care alone in dollars and cents…”GM provides $5.2 billion in health care annually to 1.1 million workers, retirees and dependents. Retirees outnumber current U.S. employees 2.5 to 1. About $4 billion goes annually to retirees does not go into developing products people want to buy.” (Will, pars. 11)

GM cannot continue to incur these costs and survive in the face of manufacturing moving into and competing globally with companies that pay far less to their employees,in wages and benefits, and therefore can design and produce less expensive cars which generate the kind of profits necessary to survive, prosper and grow in a global market. Of these companies, most are non-union including those with plants in America. And because they are non-union, these companies are not forced into contracts that they can ill afford.

To illustrate the difference in union and non-union on profits, “Toyota generated the highest revenues per vehicle last year, an average $26,514, once you stripped out incentives and other discounts. By comparison, General Motors’ net was a meager $20,659 per vehicle. “That’s an alarming number,” stressed Harbour, “all the more alarming because it hasn’t changed much in seven years.”

It is clear that GM cannot continue to give in to Union contractual demands and be profitable. (Eisenstein, pars. 21)

On the other hand, although GM management has been burdened with these demands, management is not without blame.

Management has capitulated to the Union’s unrealistic demands despite the reality of the monetary bottom line needed to successful compete in the global market place. Moreover adding to the financial overtaxing to GM is the huge salaries and bonus packages given to executives and CEOs even in the face of the coming financial maelstrom.

One case in point, according to Richard Freedman, for Executive Intelligence Review,Counting some other benefits, GM CEO Rick Wagoner’s total compensation came to over $10 million; this does not count an additional lavish pension benefit. GM’s Chairman Bob Lutz, and its chief financial officer, John Devine, each received total compensation packages of $6.4 million in 2004. It is estimated that the GM top management team took in more than $50 million in compensation for the year. (Freeman, pars.17)

In the final analysis, both management and the UAW are responsible for the GM’s current financial woes.

I believe that at one time the union was necessary to fight for the working conditions and wages of the “Average Joe” However, the UAW has become what they have fought against, a bureaucratic organization that has lost focus of what is good for the company is good for its employees.

I acknowledge I have benefited from many of the UAW benefits, good wages, health care, benefits such as tuition assistance and I am grateful. But at what cost to GM, my employer of 27 years and to my post retirement life?

In summary, the UAW shortsighted and prohibitive costly contractual demands in the face of a changing business economy has contributed to its membership not just losing pension and health benefits, but also perhaps their jobs as well.

Conversely GM management’s own self-created bureaucratic management hierarchy has contributed to highly paid executives, whom in turn, capitulated to UAW’s demands of higher wages and costly benefits in spite of the changing market in the automobile industry. Such demands have made it impossible for GM to compete with other automobile companies and make a profit.

To GM’s credit some changes have been made. GM has consolidated its divisions at the RenCen in Detroit to facilitate communications, implementing new assembly technology, cutting salaried and blue-collar jobs and closing aging plants and cutting benefits.

But will it be too little too late to save GM?

Nevertheless, the ultimate responsibility and blame for GM’s current financial position must lie with GM management. Management is the final arbitrator of all company decisions and as such carries sole responsible for acquiescing to the unworkable, and unrealistic UAW financial demands, in addition to paying huge salaries and bonuses to non-producing executives.

Of course I cannot view these events dispassionately. Not just because I face a monetary loss but in view of the fact that a large portion of my adult life was spend as a GM employee. But also in a much larger sense because General Motors is a part of Americana. Cultural and historically, GM, is a part of our American heritage, a great American automobile company, conceived and build by Americans.

There is an old saying, What’s good for GM is good for America”. Although perhaps in a smaller measure now, I still believe that’s true. So then it is my hope and prayer that like the mythical Phoenix General Motors will rise from the ashes to a new prominence.


Dylan, Bob, “The Times They Are A-Changin’” The Times They Are A-Changin’
Atlantic, 1964.
Eisenstein, Paul A. “Detroit’s productivity gains aren’t enough to outclass Japan.” The 6 June 2005. 23 Oct. 2005 21 pars .
Freeman, Richard. “Corruption in America:Big Three Execs Get Huge Pay To Ruin Auto Sector .” Executive Intelligence Review 2 Sep. 2005. 23 Oct. 2005 17 pars .
GM Powertrain. 23 Oct. 2005 (
Lansing Production. 2004. Lansing: GM Heritage Center, n.d.
Will, George. “GM Makes Turn Toward Fiscal Sanity .” The Grand Rapids Press 20 Oct. 2005. 11 pars. InfoWeb. NewsBank. Lansing Community College. 23 Oct. 2005

1 comment:

apackof2 said...

48% Say Failure of GM Best for the Economy

Nearly half of U.S. voters (48%) say it is better for the economy to let companies like General Motors fail rather than providing government subsidies to keep them in business.
Thirty-five percent (35%) believe it’s better to subsidize their continued existence, according to a new Rasmussen Reports national telephone survey. Seventeen percent (17%) are undecided.

Sixty-four percent (64%) of Republicans and 60% of unaffiliated voters say it’s better to let troubled companies like GM fail, compared to 26% of Democrats. Fifty percent (50%) of Democrats think it’s better to subsidize them, but just one-quarter of GOP and unaffiliated voters agree.

Fifty-three percent (53%) of investors say it is better to let companies like GM fail, compared to 38% of non-investors.

In a survey last week, 46% of Americans opposed a government bailout for the Big Three automakers.

Just 28% say the best course for the U.S. economy is for Congress now to pass a new economic stimulus plan that includes money for the financially stumbling Big Three automakers. The House and Senate came back into session this week to consider such a plan, but additional aid for the automakers appears unlikely.

Another 27% say Congress should wait on any economic stimulus plan until Barack Obama becomes president on January 20. At that time, the Democrats, who generally support an auto bailout, also will have larger majorities in both bodies of Congress.

But a plurality (39%) think it would be best for the economy if Congress didn’t pass any more economic stimulus plans at all. Six percent (6%) aren’t sure which course is best for Congress to follow.

Sixty-one percent (61%) of Republicans – and 51% of unaffiliateds - oppose any further stimulus plans, but only 13% of Democrats agree. Forty percent (40%) of Democratic voters say Congress should pass one now, while 41% want to wait until Obama is in the White House.

The Rasmussen Consumer and Investor Indexes both rose slightly on Thursday, after hitting record lows last week.