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Discussion Starter · #1 ·
It's not often that I find a really good article on Salon, but this one is a real standout despite numerous typos.

General Motors is proof to the world that slashing wages isn’t the ticket to profitability

There's a lot to read in here, so I tried to pull out the meat of the article as best I could with this section:

Along with the financialization of GM, the decision to offshore manufacturing in relatively low-wage locations hasn’t helped much. Outsourcing manufacturing in this way has, paradoxically, exacerbated GM’s problems.The sedan market (where GM is experiencing a large proportion of its competitive difficulties these days) typifies this conundrum.The lower and middle ends are dominated by Asia, which operate in a market segment where GM can never get its labor costs low enough to compete against them; the high end is dominated by Audi, Mercedes and BMW, German manufacturers that have devoted considerable capital investment so as to shore up the top-of-the-line models. Here, GM is unable to match the German brands, having chosen the soft option of offshoring its labor, avoiding extensive investment that would have otherwise allowed them to upgrade their production.

As Seymour Melmanhas noted in his work "Dynamic Factors in Industrial Productivity," the unremitting focus on low-cost labor, which has been a key component of business models adopted by American corporations such as GM, creates disincentives toward capital investment decisions that would otherwise drive GM’s products further up the technology curve toward higher-margin products (which in turn yield higher profits and are less prone to competitive pressures from low-end car manufacturers, thereby alleviating the need to outsource manufacturing in the first place). It is quite likely that the historic paranoia about labor organizing in the U.S. is the underlying driverfor this monomania.

By contrast, the stress on high-quality domestic engineering capability is something that Germany extends to other forms of high-tech manufacturing goods and services.Economists Jesus Felipe and Utsav Kumar have conducted a study illustrating that countries such as Germany have used capital investment to move up the technology curve to all sorts of higher-end products.Hence, it has a market share of 18 percent in the total world exports of the top-100 most complex products, vs. France 3.6 percent, Italy 3.1 percent, and Spain 0.9 percent.

Germany’s manufacturing success, therefore, is not a function of lower wages. Germany’s manufacturing unit labor costs have declined in a relative sense (especially relative to its Eurozone competitors) over the past decade, but in absolute terms, Germany’s manufacturers, including the auto producers, did not resort to a strategy of nominal wage squeezes or extensive offshoring to cheap labor locales such as China. As the economist Servaas Storm has argued: “It was German engineering ingenuity, not nominal wage restraint or the Hartz ‘reforms,’ which reduced its unit labor costs.”Engineering ingenuity largely came about through well-targeted capital investment and enabled German labor productivity to increase some 8 percent relative to its European and American counterparts.

As a result, Germany has become stronger and more productive in high-value-added, higher-tech manufacturing.Although some manufacturing has been outsourced to adjoining Eastern European countries, its leading companies have preserved an industrial ecosystem, which has enabled Germany to conserve more high-end jobs domestically in aggregate.
 

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No mention of Tesla and how it's methods are affecting the overall picture. Seems to me that Tesla is going to change the way things are done and we should soon see if this leads to increasing and sustainable profitability.
 

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I've just read an article on Yahoo.ca that basically said the opposite (about Mercedes, not GM). Depends on your point of view I guess whether you are forward looking or backward looking. Companies are looking to cut costs on all fronts (not just wage fronts as this article suggests). Some will invariably do it better than others. Joint ventures have long been used to shore up your weaknesses, again with varying results.
 

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I normally don't like Salon, but this article nails the real problem with American manufacturing. It's not just GM but all large US manufacturing companies. Until we restructure top corporate compensation to depend on long term success of their companies this won't change.
 

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No mention of Tesla and how it's methods are affecting the overall picture. Seems to me that Tesla is going to change the way things are done and we should soon see if this leads to increasing and sustainable profitability.
Not likely. They had a production engineer go over the Model 3 and there was numerous places that the design of the car did not promote efficient assembly like a half dozen panels welded together when one would have done eliminating a lot of assembly work. They are still a technology company than a car manufacturer which doesn't mean they can't learn the tricks of the trade. It just means they don't have the experience yet.
 

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Discussion Starter · #6 ·
I normally don't like Salon, but this article nails the real problem with American manufacturing. It's not just GM but all large US manufacturing companies.
Boeing got an honorable mention.

....American manufacturers have generally taken the soft option of outsourcing and “demodularizing” production.As a result, they degraded industrial quality, increased development lead time, and increased unit costs in the process (Boeing’s 787 “Dreamliner” being a spectacular case in point). At this point, the U.S. doesn’t have what you could call a dynamic manufacturing economy. This has led to a perverse situation described last year by business journalist Jim Harger:

“Industry experts say that cadre of talented tool and die makers is growing in short supply in Michigan just as the demand is increasing.

“‘The average tool and die maker is 56 years old,’ says Baron, president and CEO of the Center for Automotive Research (CAR).

“‘We have not been back-filling. We are running out of talent as the cadence for cars is increasing and the launch rate is increasing.’

“About 75 percent of the tool and die makers in the workforce today are expected to retire in the next five to seven years. Meanwhile, it can take up to 10 years to train a master tool and die maker.”
I had a much simpler approach to Jim Harger's points: "If you keep offshoring jobs, who's going to buy your sh*t?"

That aside, my plumber has been telling me the same thing. He can't find skilled workers who are under the age of 50. He's just coming off of a stress related medical issue because he has way more work than he can handle and he was trying to meet the demand. He's had to throttle back how much he takes on since. Thankfully he still answers the phone when I call. I think it's because unlike a general contractor, I provide him with a low-stress work environment.

Until we restructure top corporate compensation to depend on long term success of their companies this won't change.
"We" don't restructure anything. So long as Mary leads the board, don't expect any changes. It should be no surprise that she's the highest paid CEO in the auto industry.

This has to become a cultural shift from within. It will probably start with new management. Shareholders certainly can influence it, but as long as GM feeds their tills with profits from cheap labor, I don't see any motivation.
 

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"We" don't restructure anything. So long as Mary leads the board, don't expect any changes. It should be no surprise that she's the highest paid CEO in the auto industry.

This has to become a cultural shift from within. It will probably start with new management. Shareholders certainly can influence it, but as long as GM feeds their tills with profits from cheap labor, I don't see any motivation.
That's not entirely true. President Trump just signed a new, worse NAFTA deal. He had to do it at G20 because it was President Nieto's last day in office, and President Obrador never would have signed it.

We cut taxes on both the corporations and their wealthy executives. We allow companies to use profits to buy back shares. We allow companies to pay wages so low that their full-time workers are eligible for social assistance programs. We allow companies to import goods that were made with slave labor. We tie access to medical care to employment, but workers still have to pay additional copays and deductibles.

Force companies to competitive living wages and protect workers from being undercut by super cheap overseas labor, and you'd see how quickly the gap between CEO and average worker salaries narrow.

There's a lot "we" can do to "restructure" top corporate compensation.
 

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Discussion Starter · #8 ·
That's not entirely true. President Trump just signed a new, worse NAFTA deal. He had to do it at G20 because it was President Nieto's last day in office, and President Obrador never would have signed it.

We cut taxes on both the corporations and their wealthy executives. We allow companies to use profits to buy back shares. We allow companies to pay wages so low that their full-time workers are eligible for social assistance programs. We allow companies to import goods that were made with slave labor. We tie access to medical care to employment, but workers still have to pay additional copays and deductibles.

Force companies to competitive living wages and protect workers from being undercut by super cheap overseas labor, and you'd see how quickly the gap between CEO and average worker salaries narrow.

There's a lot "we" can do to "restructure" top corporate compensation.
I can't agree with one lick of this. Force is something communists and fascists do.

The only objection I get to USMCA from Obrador in a search is the name. Just to be sure I was getting the lefty view I read the WAPO version.
 

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Discussion Starter · #10 ·
Okey-dokey then.....

I recall some time back a story about Tesla overseas made parts piling up in a parking lot at a tool and die company. And we also heard about this from my friend McRat who does parts inspections as a business. So we've seen the importance of having these businesses nearby and available to fix things when they go wrong. Jim Harger's assertions highlighted in the article should be taken seriously.
 

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"We" don't restructure anything. So long as Mary leads the board, don't expect any changes. It should be no surprise that she's the highest paid CEO in the auto industry.

This has to become a cultural shift from within. It will probably start with new management. Shareholders certainly can influence it, but as long as GM feeds their tills with profits from cheap labor, I don't see any motivation.
Actually we, as a country, has a lot to say about how corporate executives are compensated. Under current SEC rules if a CEO doesn't attempt to maximize the quarterly earnings they can be found guilty of multiple regulations regarding shareholder compensation. This needs to change to a system were lifetime earnings for these CEOs are tied to their corporations - if the corporation fails then that CEO's compensation needs to be eliminated and used to pay creditors. I'm not sure how to make this work but as it stands right now the only thing that matters is the next three months.
 

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Discussion Starter · #12 ·
Actually we, as a country, has a lot to say about how corporate executives are compensated. Under current SEC rules if a CEO doesn't attempt to maximize the quarterly earnings they can be found guilty of multiple regulations regarding shareholder compensation. This needs to change to a system were lifetime earnings for these CEOs are tied to their corporations - if the corporation fails then that CEO's compensation needs to be eliminated and used to pay creditors. I'm not sure how to make this work but as it stands right now the only thing that matters is the next three months.
"We" make SEC rules? First I've heard of it.

GM is recording record profits. How can it be characterized as failing? Mary is doing everything she can think of to maximize GM margins. That's why she's closing 4 car plants.

The problem seen here as outlined is how GM is slowly diluting its own abilities. Its not quantifiable, so it won't run into SEC or FTC issues.
 

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The compensation level of most corporate CEOs and other executives is obscene. They may work 2x or 3x as much as other employees but not 100x. They may also have impressive skill in what they do but you can say that for many in an organization from assembly workers on the line to engineers to marketing people. Doesn't justify the multi-millions in executive compensation. But, government control or taxation is not the answer either as it just shifts power from business to government and we've seen historically in other parts of the world that things don't end well in that environment either. Truly the power is (or can be) with the people. If there was more public shaming of these overpaid CEOs, I think things could change for the better.

At one time "Look for the union label" improved the lot of a great many workers, until the unions got too big and powerful themselves (and became short-sighted and self-serving). If it became politically correct to have a more balanced distribution of wages throughout an organization and politically incorrect to have the highest paid CEO in the industry, imagine how that might change buying patterns of the public and even shape advertising campaigns. This scenario has the most winners in the end. While the CEOs won't be getting filthy rich they'll still live comfortably, and everyone else will be doing a good deal better than under the old system. Political correctness has had a tremendous impact on race and gender issues. Why not on corporate greed as well?
 

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Well, that's some creative logic. Slashing wages isn't a solution to profitability. Look at the sedan market, which is dominated by Asians because their labor rate is far below GM's.

(I don't think slashing wages is an appropriate response to this or most other problems - but the logic presented is contradictory.)
 

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"We" make SEC rules? First I've heard of it.

GM is recording record profits. How can it be characterized as failing? Mary is doing everything she can think of to maximize GM margins. That's why she's closing 4 car plants.

The problem seen here as outlined is how GM is slowly diluting its own abilities. Its not quantifiable, so it won't run into SEC or FTC issues.
That was the royal "we". But your point that GM is diluting its own capabilities is accurate. It's not quantifiable and won't be noticed until long after Mary Barra is gone.
 

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Discussion Starter · #16 ·
That was the royal "we". But your point that GM is diluting its own capabilities is accurate. It's not quantifiable and won't be noticed until long after Mary Barra is gone.
Yeah I know how you meant it but people translate in terms they want to believe (others just read article titles and argue with that without reading the article). Some really do think they have that kind of control over Wall Street, or at least have a strong wish for it.

I think it's fair to be concerned about people pushing for government force. That rarely turns out well. Look what they did to the field of science. I don't remember who coined the term "scientocracy" but it's absolutely what we have now. It's somewhat chilling to see how well this was foreseen decades ago by Ayn Rand. The worst part of it all IMO is how it stemmed from WWII.

That aside Mary is complicit, but it started a while back. On that subject I found this to be interesting:

General Motors Races Ahead in the China Market

Some history there and as you'd expect it's very pro-China. One bit hit me like a barb though:

GM’s largest national market is China, followed by the United States.
Rhut Roh :rolleyes:

Check out Dan Akerson in this video:


Building Chinese cars in China is good business. Don't try to sell me one though.
 

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Well, that's some creative logic. Slashing wages isn't a solution to profitability. Look at the sedan market, which is dominated by Asians because their labor rate is far below GM's.

(I don't think slashing wages is an appropriate response to this or most other problems - but the logic presented is contradictory.)
The Canadian worker building Honda's in Canada (most of which go to the United States) is about the sane as the Canadian worker building GM cars in Canada (most of which go to the United States).
 

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Building Chinese cars in China is good business. Don't try to sell me one though.
Reminds me of a number of decades back when the head of British Leyland (or was it BMC depending on timing) when commenting on Japanese cars coming into the country, "Who would buy one of those pieces of junk" (after all they made toys that came in boxes of Cracker Jack). Look what happened. Some things to consider. The Chinese have landed a rover on the moon. They've built an air craft carrier, put satellites in orbit, made a stealth fighter, make some of our highest quality gadgets. All the things being said about China have been said about Japan decades ago. Write them off at your peril.
 

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Discussion Starter · #19 ·
They've built an air craft carrier, put satellites in orbit, made a stealth fighter, make some of our highest quality gadgets. All the things being said about China have been said about Japan decades ago. Write them off at your peril.
After stealing our intellectual property.

I don't see any peril in refusing to buy cars made there. I have yet to buy a Japanese car. A couple of London-made BMW/Minis, yes.
 

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After stealing our intellectual property.

I don't see any peril in refusing to buy cars made there. I have yet to buy a Japanese car. A couple of London-made BMW/Minis, yes.
Not that they couldn't have done it, they just couldn't have done it as soon. We've been down this road many times before, with the Japanese as mentioned. With the Koreans when they introduced the Pony (they can build ships but they sure can't build cars). Now with the Chinese. What's next, the Vietnamese (they can sew clothes but they sure can't build cars)?
 
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