GM Announces Factory Closures

Closures Announced

This past November, General Motors announced that it would be closing 5 plants in North America to shift focus to electric and autonomous vehicles. The announcement came as a shock to many, including employees of the plants now scheduled to close, and the union that supports those employees. Such an announcement can be extremely hard on those employees who were expecting to put in the time required to earn a full pension and retire with a great income and full benefits. Now, many of those employees must face the reality that they will need to find another job and that they will most likely see a substantial cut in pay and benefits. The auto sector pays their employees very well; often considerably more than other employers with similar education and skill requirements.

Business Needs

When General Motors announced their decision to close 5 plants, they provided also provided reasoning for the closures. Along with the shift in focus to electric and autonomous vehicles, the closures are part of a restructuring plan that will save the company $6 billion and help bring it into line with competitors. Currently, too many of its factories are set up to make older vehicles and General Motors wants to focus on lower emission vehicles going forward. The savings made with the plant closures will necessary to ensure General Motors will be able to invest in the future. Such changes are necessary given how quickly the auto industry is changing and evolving to hybrid and electric vehicles. Those companies that don't change and move ahead with changing technologies, will certainly get left behind.

Angry Employees and Union Officials

Understandably, employees are angry that they will no longer have a job once the plant closures take effect, and many of those employees think General Motors does not have the right to shut down plants in Canada and the United States. There have been union officials who have also made statements that General Motors is violating an agreement that was made with employees. I believe this dates back to 2009 when General Motors filed for bankruptcy and to avoid the mass layoffs that would have occurred had that gone through, several branches of government stepped in to help the automaker during its financial hardship. Here in Canada, the federal government along with the provincial government of Ontario bought about 175 million shares of stock. The two governments also bought and owned some preferred stock in the company. Owning shares in General Motors helped both the company and the governments involved. General Motors was able to keep making cars and the governments were able to avoid having over 21,000 employees out of a job. Keeping these employees in a job provided indirect benefits to the governments. The U.S. government provided $49.5 billion towards the General Motors bailout and lost about $11.2 billion after all its shares were sold. The Canadian federal government lost about $800 million while the Ontario provincial government had a gain of about $1.35 billion.

Accountability

No matter what the employees and the unions believe, General Motors is still a business, albeit, a very large one. Every business operates with one primary goal, to make money and be profitable. A business that keeps losing money isn't viable and won't be around forever. For a business to be profitable, they must also be competitive and provide a product that consumers will want. It doesn't take a scholar to look at the roads and highways in both Canada and the United States to see that there are many alternative products on our roads and that it's no longer the “big three” that dominate in North America. I remember when I started driving back in the 1970's, you rarely saw an imported car on the roads, and when you did, it was most likely to be a Datsun or Toyota. What you mostly saw on the road were cars made by General Motors, Ford, and Chrysler. There was a time when General Motors had a few other divisions, like Pontiac, Buick, and Oldsmobile. There were also the truck brands, like GMC. Ford also had their other divisions like the Lincoln and the Mercury. Over the years, the “big three” were having problems competing with the imports on not only price, but on quality and reliability. It got to be that if you wanted a car that wasn't going to be in the garage every few weeks, you bought an import like a Toyota or a Mazda. The same went with fuel economy, the imports often had smaller engines that burned considerably less gas and were cheaper to run and maintain. I'm sure most will remember when the “big three” had to make changes to quality so they could be on the same playing field as the imports, and more importantly, if they wanted to survive. Even television commercials from the “big three” today emphasize quality, which was an area that they really had to improve on.

At the End of the Day

Whether the employees or unions realize it or not, General Motors is a business, and their business is manufacturing automobiles. Technology in automobiles is changing and improving at breakneck speeds. General Motors has indicated that the current plants they have cannot be used to build the vehicles they need to now build and that the consumer is willing to buy. General Motors has an obligation to its shareholders to be profitable and to earn them money in the form of dividends and increasing stock prices. The company needs to build vehicles that are both reliable and with greatly improved emissions standards. No doubt there has been consideration into making the current plants viable to produce the new vehicles, but if the costs to retrofit those old plants is not viable, then the company may have no choice but to build new manufacturing facilities. All businesses must take costs into account when forecasting future operations and ensuring profitability. Certainly, labor costs are a major consideration in any business plan. Labor costs typically are the highest expenses of any business and play a significant role in planning. If General Motors must build plants elsewhere and utilize a different labor force to remain competitive, that's what they will have to do. At the end of the day, General Motors does not owe a life to the current employees it now has or to the unions those employees are now paying dues to. Many of us have been laid off due to corporate restructuring which saw our jobs go to other countries where labor costs were a fraction of what they are here in Canada or the United States. I still remember my father saying almost 50 years ago that the unions in Canada and the United States and their demands for more and more money and benefits will cost them in the end when they price themselves out of the market. We now live in those times where wages are several times what they are in other countries where most of the manufacturing jobs now exist. It will be some time before those other countries come into the wage category we are now in and where countries like Canada and the United States can be competitive in most manufacturing sectors.

Get Over It

General Motors owes its current employees nothing. They provided a good income and excellent benefits for many years and are now another manufacturer that is faced with the realities of staying in business. I may seem cold when I say that the company owes nothing to those who work there, but that is the reality of business. There are many people who have been laid off from good paying jobs due to corporate restructuring and now must work at low paying jobs because they don't have the education or the training to work at the higher skills required ones. Many manufacturers like the “big three” in the auto sector provided excellent salary for jobs that required a minimum of education or specialized skills. For many, they left high school and went straight to work on the assembly line and may have worked their entire lives there. These days, most employers require a college or university degree for an entry position and those positions pay considerably less than what the starting rate at a plant like General Motors will be. Times are changing and businesses must be on the cutting edge of technology and remain competitive or they will perish. The days of getting out of high school and going straight to the manufacturing plant and retiring with a full pension 30 years later are for the most part over. People will now have to get used to the reality that you may be changing jobs every few years and that you may have to train for multiple careers instead of just one.

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G-Man

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