As the world continues to turn, the United States continues to bailout failing companies. The next bailout on the agenda is for the United States automobile industry. General Motors, founded in the 1908 is among the most fragile companies. It is unfortunate that General Motors will not have a happy 100th birthday celebrate. The failing automaker is now asking the government to grant them 25 billion dollars to continue to operate. Executives from GM are saying 2008 the company could implode if they do not get funding by December of 2008. The next question that congress is asking is whether or not they should loan GM the money to keep it from going under.
The financial repercussions would be felt at all levels of society should General Motors fail. It is estimated that 2.5 million people could loose their jobs if any of the big three American automakers would go under. Jobs would be lost all they way from factories to car dealerships and all those that supply the automotive industry. Suppliers, like the Lear Corporation, who supplies the automotive industry with interior components would be forced to close down manufacturing plants as well as lay off some of its workforce. This would in turn hurt other industries such as transportation that move raw materials and finished goods from plant to plant. A downturn in the transportation industry would then affect other aspects of the economy who service that industry as well. Mechanics and parts manufacturers will not have as much work due to less wear and tare on fleet trucks that are not moving as much. Even the credit card industry will be effected as unemployed workers will not be able to make their monthly payments.
Unfortunately, in order for General Motors to save the company, they need to bring back the glory days when the American automobile was considered the epitome of quality. After all, was it not Henry Ford who invented the automobile? Yes, the automobile was invented in the United States. However, foreign competitors have been able to improve upon our technology and manufacture a superior product. During the 1950s, the Cadillac was considered the one of the most prestigious. Today, Mercedes Benz, which is German made, is considered to be superior over Cadillac in both quality and performance.
The other major moral dilemma affecting the automotive industry is the future of its many retirees who count on a pension from General Motors to make ends meet. From a socialistic point, this is a great way to provide for your employees who worked hard for the company. However, from a business perspective, pension plans only increase the cost of the product. It is estimated that at least $1000 of car American car sold goes to fund pension plans. Foreign auto makers are not forced with this problem. The other factor that is driving profits down is labor costs in the United States, especially in northern states like Detroit. Workers in Detroit earn an estimated $35 per hour while workers in Alabama earn far less at $17 per hour. In order for the auto makers to survive unions must come to terms with over inflated wages being paid to some of its employees.
The next dilemma is how to make General Motors a profitable and renowned company once again. Perhaps, there too many things to mention that GM needs to improve upon, among the most important are their level of quality. Other technologies, like ways to run our cars on alternative fuels to gasoline need to be developed. We need to become a world leader in the arena of alternative fuels. Honda and BMW are already working on hydrogen engines that will power some of its cars. GM needs to do the same as well as look for other ways to power our vehicles, such as solar power. Lastly, workers need to take less pay so that the company can be profitable. In turn, General Motors can issue stock to its employees.
The Fed has stated that GM will have to abide by TARP guidelines, such as restricted executive compensation should they grant monies. As citizens we need to stand behind our manufacturing industry in order to keep the economy going. After all, this nation was built because of manufacturing jobs, particularly in the automotive industry. Lastly, we need to stick together as a country during these trying times.
The financial repercussions would be felt at all levels of society should General Motors fail. It is estimated that 2.5 million people could loose their jobs if any of the big three American automakers would go under. Jobs would be lost all they way from factories to car dealerships and all those that supply the automotive industry. Suppliers, like the Lear Corporation, who supplies the automotive industry with interior components would be forced to close down manufacturing plants as well as lay off some of its workforce. This would in turn hurt other industries such as transportation that move raw materials and finished goods from plant to plant. A downturn in the transportation industry would then affect other aspects of the economy who service that industry as well. Mechanics and parts manufacturers will not have as much work due to less wear and tare on fleet trucks that are not moving as much. Even the credit card industry will be effected as unemployed workers will not be able to make their monthly payments.
Unfortunately, in order for General Motors to save the company, they need to bring back the glory days when the American automobile was considered the epitome of quality. After all, was it not Henry Ford who invented the automobile? Yes, the automobile was invented in the United States. However, foreign competitors have been able to improve upon our technology and manufacture a superior product. During the 1950s, the Cadillac was considered the one of the most prestigious. Today, Mercedes Benz, which is German made, is considered to be superior over Cadillac in both quality and performance.
The other major moral dilemma affecting the automotive industry is the future of its many retirees who count on a pension from General Motors to make ends meet. From a socialistic point, this is a great way to provide for your employees who worked hard for the company. However, from a business perspective, pension plans only increase the cost of the product. It is estimated that at least $1000 of car American car sold goes to fund pension plans. Foreign auto makers are not forced with this problem. The other factor that is driving profits down is labor costs in the United States, especially in northern states like Detroit. Workers in Detroit earn an estimated $35 per hour while workers in Alabama earn far less at $17 per hour. In order for the auto makers to survive unions must come to terms with over inflated wages being paid to some of its employees.
The next dilemma is how to make General Motors a profitable and renowned company once again. Perhaps, there too many things to mention that GM needs to improve upon, among the most important are their level of quality. Other technologies, like ways to run our cars on alternative fuels to gasoline need to be developed. We need to become a world leader in the arena of alternative fuels. Honda and BMW are already working on hydrogen engines that will power some of its cars. GM needs to do the same as well as look for other ways to power our vehicles, such as solar power. Lastly, workers need to take less pay so that the company can be profitable. In turn, General Motors can issue stock to its employees.
The Fed has stated that GM will have to abide by TARP guidelines, such as restricted executive compensation should they grant monies. As citizens we need to stand behind our manufacturing industry in order to keep the economy going. After all, this nation was built because of manufacturing jobs, particularly in the automotive industry. Lastly, we need to stick together as a country during these trying times.
Labels: Business Credit Card, credit cards, general motors, Paulson Act, TARP
Credit Card / Financial news blog post by Todd Holliday at 4:37 PM 