June 07, 2005

Makes Sense To Me. NOT!

WILMINGTON, Del. -- General Motors Corp. plans to eliminate 25,000 jobs in the United States by 2008 and close plants as part of a strategy to revive North American business at the world's largest automaker, its chairman said today.

Sooo, in order to revive business, the sound strategy is to close plants and fire people? I only took a couple of business classes in college, but I don't remember this particular business strategy being discussed. Then again, I may have skipped that day or something.

Posted by Ryan at June 7, 2005 11:53 AM

"Chief Executive Rick Wagoner said the capacity and job cuts should generate annual savings of roughly $2.5 billion."

...decreased overhead = increased profits, especially if your sales are down. makes sense to me.

Posted by: leblanc at June 7, 2005 02:13 PM

And: increased profits = increased ceo bonus

Posted by: david at June 7, 2005 02:24 PM

That part I understand, leblanc, but why were their sales down in the first place? I was particularly struck by this bit: He noted that health-care expenses add $1,500 to the cost of each GM vehicle. This puts GM at a "significant disadvantage versus foreign-based competitors,'' Wagoner said.

Rrrrrright, and I'm sure in the wake of this round of layoffs, we'll see the price of GM vehicles drop by $1,500. Somehow, I doubt that.

Posted by: Ryan at June 7, 2005 02:29 PM

So GM's layoff strategy isn't necessarily about anything more than increasing profits to meet the growth curve required to maintain stock prices (a point raised quite prominently in Roger & Me Mr. My Evil Liberal Teacher Made Me Watch That Shitty Movie in School Once Rhodes). The thing I find curious about this strategy is that by lowering the buying power of American consumers, car manufacturers erode their own market which will have long-term repercussions on stock prices in the form of an inevitable crash. If the SEC can, as I have heard a few CEOs claim, come down on a board that isn't meeting its responsibility to increase profits, I would think they could come down on a board that's pursing profits to the long-term detriment of their stock's viability.

Posted by: Joshua at June 7, 2005 03:51 PM

Whoops – editing error. I believe that boards are actually at risk from law suits by shareholders for allegedly failing to increase profits. I'd be curious to see how a, "I don't know how much more simple I can make this: if a man don't have a job, he can't buy anything," defense would work in a case like that.

Posted by: Joshua at June 7, 2005 03:54 PM

My Evil Liberal Teacher Made Me Watch That Shitty Movie in School

Um, yeeaahhhh. I actually liked that liberal teacher. She was probably one of the better profs I had in j-school. I thought holding up Roger & Me as a example of hard-hitting journalism was questionable, and some in the class did, indeed, question it, and it led to a good discussion. But, you can translate it, and reword it, and totally mangle it as you see fit. You usually do.

Posted by: Ryan at June 7, 2005 04:07 PM
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