Huge labor costs blamed for GM's filing for bankruptcy 2009-06-02 08:05:08   Print

    DETROIT, June 1 (Xinhua) -- Writer of A Savage Factory: An Eyewitness Account of the Auto Industry's Self-Destruction Robert Dewar said here on Monday that the most important reason for GM's bankruptcy should be the high labor costs.

    And almost all the interviewees in Detroit shared the same opinion that labor costs should be blamed for the 100-year-old GM's collapse.

    According to Dewar, it wasn't poor fuel efficiency, bad design, or foreign cars that rocked the nation's auto industry. It was poor management which resulted in higher and higher labor costs in the auto plants that spawned the beginning of the end of the American car.

    How high on earth the labor cost is in GM plants? Well, you may find answers among the numbers mentioned below.

    On its website GM released the total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately 73.26 U.S. dollars per active hour worked, including39.68 dollars in cash compensation and 33.58 dollars in benefit or government required programs, such as pensions, group life insurance, disability benefits, and supplemental unemployment benefits and so on. However, the costs used to make a Toyota car in the U.S. plants were only 48 dollars per hour.

    According to a report released by Harbor-Felax, a famous auto consulting company based in Detroit, health care is the biggest chunk of labor cost. For instance, to make a vehicle needs 1,635 dollars on health care for active and retired workers in the United States, while Toyota pays only 215 dollars for active ones.

    So huge a cost for labor in GM not only eroded the earnings, but also made the vehicle produced by GM much less competitive than Japanese car.

    "It is all because of the union. UAW (United Auto Workers) is so strong in the auto industry that they have the ability to ask for higher and higher salaries for its members, or there will be a strike," said Wenyu Lian, a Chinese staff project engineer who has worked in GM for many years.

    "The hostility between union and carmakers made the situation worse," Dewar told Xinhua.

    In 1998 and 2007, the UAW organized two strikes, which made about 6 billion dollars lost because of nationwide phase-out production.

    Fortunately, both GM and the union have realized the severity of huge labor costs.

    In 2007, GM negotiated the 4-year labor deal with UAW, which is supposed to expire in September 2011, shifts the obligation for about 46.7 billion dollars in retired UAW worker health care from the company to the union, with the company pouring about 26.5 billion dollars into a trust fund with the name of Voluntary Employees Beneficiary Association run by the union.

    With the agreement executed, GM former CEO Wagoner said the total hourly labor costs dropped 6 percent in 2007, from 73.26 dollars in 2006 to around 69 dollars per hour.

    After last November, GM's suffering bankruptcy threats forced UAW to make further concession. On May 21, GM and UAW reached a tentative agreement to lower more labor costs, which was ratified by the members of UAW on Friday, just three days ahead of GM's deadline of Monday for bankruptcy.

    The latest agreement entitles GM to lay off workers and eliminates a couple of medicare and subsidies. It is estimated that will reduce the labor costs for about 1.2 billion dollars per year.

    Diana Tremblay, GM vice president of GM's Labor Relations pointed out that the innovative agreement "will enable GM to be fully competitive and has eliminated the gap with our competitors."

Obama says U.S. gov't to invest additional $30 bln to help GM

    WASHINGTON, June 1 (Xinhua) -- U.S. President Barack Obama promised on Monday that the U.S. government will invest additional30 billion dollars in GM, which he was confident will emerge from the bankruptcy protection process quickly.

    "I recognized the importance of a viable auto industry to the well-being of families and communities across our industrial Midwest and across the United States," Obama said hours after GM filed for bankruptcy protection.Full story 

Republicans, business lobby attack Obama's GM plan

    WASHINGTON, June 1 (Xinhua) -- U.S. Republicans and a leading U.S. business lobby on Monday assaulted President Barack Obama's plan to take a 60 percent ownership stake in General Motors (GM).

    Republican National Committee (RNC) Chairman Michael Steele, said in a statement that the plan "is nothing more than another government grab of a private company and another handout to the union cronies who helped bankroll his presidential campaign." Full story

GM to cut 14 plants by 2012, reaffirming to build small car in U.S. 

    DETROIT, June 1 (Xinhua) -- General Motors Corp. announced on Monday that it will close or idle 14 plants in more than two years, just several hours after the troubled carmaker filed for bankruptcy in New York. GM also reaffirmed it will build a small car at one of its U.S. assembly plants as it announced on last Friday.

    The manufacturing plan reduces GM's total number of assembly, power train and stamping facilities in the U.S. from 47 to 33 by 2012. GM indicates the new company emerging from the bankruptcy in about 90 days will achieve full capacity utilization of its assembly operations in 2011, two years ahead of what was scheduled in its Feb. 17 viability plan submission. This will result in lower fixed costs and lower and more efficient capital investment. Full story

Toyota to continue joint venture with GM

    TOKYO, June 1 (Xinhua) -- Toyota Motor Corp. said Monday the company will continue its car manufacturing joint venture with General Motors Corp. in California even after the bankruptcy filing by the ailing U.S. auto giant.

    "We hope to continue for our part," President Katsuaki Watanabe told reporters in Tokyo. "The GM side also wants to continue since it is a good factory."Full story

GM bankruptcy filing to have no impact on China business

    SHANGHAI, June 1 (Xinhua) -- The bankruptcy of General Motors Corp. in the United States will have no impact on GM's operation in China, GM China Group said here Monday.

   "Our operations across China will operate normally," said Kevin Wale, president and managing director of GM China Group.Full story 

GM CEO: China will continue to be GM's key partner of business

    NEW YORK, June 1 (Xinhua) -- General Motors CEO Fritz Henderson said Monday that China will continue to be a key partner of business of GM.

    Speaking at a press conference in GM's New York building, Henderson said that GM's venture in China is a critical part of GM, saying its business in China in "growing very fast."Full story

GM decides not to abandon its headquarters in Detroit

    DETROIT, June 1 (Xinhua) -- The largest U.S. automaker General Motors which has filed Chapter 11 bankruptcy will not abandon its headquarters in Detroit's Renaissance Center as part of its restructuring, the Detriot News reported Monday.

    President Barack Obama told Michigan's senior members of Congress during a call Sunday night that GM will remain in the RenCen, despite enticements from the city of Warren to move there, a congressional aide briefed on the matter said. Full story

Brown says British carmaking jobs be saved after GM filing for bankruptcy protection

    LONDON, June 1 (Xinhua) -- British Prime Minister Gordon Brown said on Monday that he is confident that many jobs at British carmaker Vauxhall can be saved after its parent company General Motors Corp (GM) filed for bankruptcy protection.

    "We are determined to save as many of the Vauxhall jobs as possible," Brown told Sky News in an interview. "We are confident that we can save a large number of jobs."Full story

80-year-old Canadian retiree saddened by GM's bankruptcy 

   TORONTO, June 1 (Xinhua) -- Beverly Belosky has been fighting for her equal rights for the entire 34 years she worked at General Motors's plant in Oshawa, about 60 kms east of Toronto.

    At age 80, the GM retiree is still fighting to protect the pensions she once thought was secured. Full story

GM kicked out of Dow auto classified index 

    NEW YORK, June 1 (Xinhua) -- General Motors Corp. will be removed from the Dow Jones Automobiles & Parts Titans 30 Index after the automaker filed for bankruptcy on Monday.

    GM will be replaced by Japanese Sumitomo Electric Industries Ltd. in the classified index. And the change will be effective before the opening of trading on Thursday. Full story

Cisco, Travelers to become new members of Dow, replacing GM, Citigroup 

    NEW YORK, June 1 (Xinhua) -- Networking company Cisco Systems will replace General Motors Corp. (GM) in the Dow Jones industrials index, while insurance giant Travelers Companies will take the berth of ailing bank Citigroup in the index, Dow Jones announced on Monday.

    The announcement of the changes of the 30 stocks that make up the best-known benchmark of Wall Street comes as GM, the world largest automaker, filed bankruptcy protection. Full story

Iconic U.S. auto giant GM declares bankruptcy 

 NEW YORK/DETROIT, June 1 (Xinhua) -- In the largest industrial bankruptcy ever seen in U.S. history, General Motors Corp., the top U.S. automaker and once the world's largest corporation, filed for bankruptcy protection on Monday.

    The Detroit-based company, for decades a symbol of American manufacturing supremacy, corporate culture and even lifestyle, filed a Chapter 11 petition to the U.S. Bankruptcy Court for the Southern District of New York early Monday morning. Full story

GM bankruptcy filing confirmed 

    DETROIT, June 1 (Xinhua) -- Board of Directors of General Motors Corp. confirmed its authorization of the top U.S. automaker's filing for Chapter 11 on Monday, according to a company statement.

    Kent Kresa, chairman of GM Board of Directors, said the decision was made "with regret that this path proved necessary despite the best efforts of so many." Full story

U.S. automaker giant poised for bankruptcy protection

    BEIJING, June 1 (Xinhua) -- The No. 1 U.S. auto maker, General Motors Corp., is poised for bankruptcy protection on Monday as a way to seek a rebirth in the wake of a similar move by its rival Chrysler about one month ago.

    The GM, with a history of more than 100 years, is set to deliver paperwork for its bankruptcy protection at 8 a.m. EDT (1200 GMT), the largest bankruptcy protection case in the U.S. industrial history, said informed sources who asked not to be named.  Full story

Backgrounder: Burning questions about GM's bankruptcy 

    DETROIT, June 1 (Xinhua) -- The largest U.S. automaker General Motors Corp. filed for Chapter 11 bankruptcy on Monday, and a Dtroit News report on gave some questions and answers on the automakers' bankruptcy on the same day.Full story

Special Report:  Global Financial Crisis


Editor: Fang Yang
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