http://money.cnn.com/2008/02/12/news/companies/gm/index.htm?cnn=yes
How does one company lose so much frickin money? And where’s the outrage? Some people get outraged when companies like Exxon Mobil earn record profits. I get outraged when companies have record losses. Why? Because thousands, if not millions of families are severely hurt by incompetent management and operation.
I won’t say that this is all to blame on unions, but they deserve a whole bunch of it. I’m all for labor unions ensuring that workers are not abused by their employees and that they receive market-rate wages. However, a lot of people don’t seem to realize that unions actually hurt the people they are trying to help when they fight for long term retirement benefits and above-market wages. These moves make employees uncompetitive, unmarketable and prevent companies from taking the actions necessary to recover from a difficult period.
Compare the American auto industry to the American software industry. Software was flying high in the late 90s, but went completely bust in 2001. Millions of tech workers were laid off, hundreds of companies completely folded and disappeared. Yes, those times were difficult for tech workers. Fast forward to 2005/2006. The tech sector was back in full swing. Definitely not where it was in the late 90s where anyone who could use a computer could get a job making tons of money, but to the point where there is a labor shortage of people with technical skills. It only took 4-5 years for the software industry to go from complete bust to boom again.
In contrast, it started to become apparent in the 90s that American auto was simply uncompetitive with the Japanese and even the Koreans. It’s more than ten years later and American auto is still in decline. Sadly, there is no end in sight to the decline. GM has no idea when they’ll start making money again.
What’s the difference between the software and auto industries? I would argue that software was able to recover so quickly because of the lack of unionization in the software industry. There were no long term contracts or pension benefits tying down software companies from being able to make the layoffs and adjustments needed to become competitive again. As difficult as it is, companies need to be able to make whatever adjustments they need to be competitive again. Restructuring and reorganization are not self-preservation techniques for rich CEOs. Forcing companies to limit layoffs doesn’t help anyone in the long run.
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