GM to Close Plants, Cut 25,000 Jobs.

From Associated Press:

General Motors Chairman and CEO Rick Wagoner tells shareholders that the world's largest automaker wants to close plants and cut 25,000 manufacturing jobs in the U.S. by 2008.

What it means: GM, which posted a $1.1 billion first-quarter loss and has seen its U.S. market share drop to 25.4 percent from 27 percent a year ago, says the cutbacks should save the company roughly $2.5 billion a year. About one out of six GM jobs in the U.S. would be eliminated.

One out of six GM jobs in the U.S. would be eliminated. What is good for GM is good for America. The GM executives--including Rick Wagoner--have shot themselves in the you-know-what, and it is the American worker who is going to suffer and pay for it. First, instead of offering pay increases to its United Auto Workers union employees, GM instead offered one of the most generous health insurance benefits among the Big Three Automakers in lieu of raises. Those health care benefits certainly add to the cost of each car and truck GM produces, whereas the Japanese automakers such as Toyota, Honda, and Nissan can undercut GM by selling higher-quality cars at lower prices. Second is that GM bet its future on big gas-guzzling trucks and SUVs. The trucks and SUVs were of high-demand, high profit-margin sales for GM and the executives were just as happy cranking them out as fast as they can. Never mind about the probability that gas prices could go up, or that the American public may switch their demand to high gas mileage hybrid cars. GM never bothered to introduce hybrid models into their line-up. And just as in the 1970s, when the gas prices went up, people switched from big gas-guzzling Detroit iron to the smaller fuel efficient Japanese cars. So today, as gas prices went up, the American public switched from big gas-guzzling SUVs to the small Toyota hybrid Prius, or the newly introduced hybrid Honda Accord. GM has no hybrid vehicle to effectively compete against the Japanese. Finally, I wonder if GM is just too big of a company to compete efficiently. GM is comprised of Chevrolet, Cadillac, Buick, Pontiac, Hummer, Saturn, Saab, Opel--how can a company with so many different car divisions, and each division containing their own models for SUVs, luxury, compact, and performance cars, compete with smaller car companies who can roll out newer, more improved, and restyled models faster than GM can? BusinessWeek had introduced a fascinating cover article on how GM has grown too big, and that the company must radically restructure itself in order to compete in this new market where companies have to be quick on their feet in researching for new markets, restyling new cars and models, and adapting to a quickly-changing market demand.

Is GM embarking on the right path with its chopping of 25,000 workers? I can not say. Certainly the executives are trying to stem the losses by cutting back production and laying off workers. But laying off 25,000 auto workers is not going to instill any confidence or trust between GM and the UAW employees--it may even increase UAWs hypocrisy against the GM management if the GM executives pad their own pockets with rising compensation for themselves while asking GM workers to cut back on their salaries, pensions, or health benefits. GM has to walk a tight-rope in restructuring their auto manufacturing business, while providing alternatives to its displaced auto workers in job placement, education, or job training opportunities. In a sense, General Moters has become a microcosm of the structural changes taking place within the U.S. economy.