GM restructuring will deepen capitalist crisis

General Motors has announced new mass layoffs, plant closings and the closing of dealerships. If this restructuring is allowed to go through, it means a deepening of the economic crisis for the working class. It shows the need to fight against the capitalist system, which is at the root of the crisis.

The big business media are talking about “stabilization” of the economy and signs of recovery. What they mean is recovery for the profitability of Citigroup, Wells Fargo, Bank of America and other banks. In fact, six of the biggest banks have set aside more than $36 billion in the first quarter of this year for payouts in bonuses, salaries and other compensation. The lion’s share goes to executives and deal-makers.

Meanwhile, the economic downturn is breaking records for rapid increases in unemployment and a decline in industrial production. In the United States, 5.1 million workers have lost their jobs since December 2007, according to official statistics, and 25 to 30 million people are actually either unemployed or underemployed. The rise in unemployment of 4.1 percent since November 2007 is greater than at any time since the 1948-49 recession. The same holds for the 15.4 percent decline in industrial production. One week in March, first-time applications for unemployment insurance jumped from 640,000 to 667,000.

The latest reports from the Census Bureau state that more than 14 million housing units are vacant. The combined vacancy rate is almost 15 percent, which is higher than during previous recessions: 11 percent in 1991 and 9.4 percent in 1984. Meanwhile, homelessness is growing, families everywhere are doubling up and tripling up; children into their mid-thirties are living at home with their parents. Tent cities are spreading from coast to coast.

The crisis is bound to intensify for the workers, as indicated by the latest announcement on the restructuring of General Motors.

The government has already given GM $15.7 billion in bailout funds. In order to get an additional $12 billion, the company had to come up with a plan to shrink itself and become profitable again.

GM has announced its new plan: It will lay off 23,000 production workers, in addition to the 10,000 white-collar layoffs it had already announced. It will close 16 of its 47 operating plants. And it will shut down half its 6,200 dealerships by the year 2014.

In 2007 the UAW made a major concession by agreeing to take responsibility for the health care plan of the auto workers. As an incentive, the company was supposed to give a one-time payment of $20 billion to the plan. In the latest round of concessionary negotiations, GM and Washington pressured the UAW into accepting $10 billion of that payment in GM stock, which makes the health care plan of the workers subject to speculation on the stock market.

The union will take 39 percent of GM stock and the government will own 50 percent—making it the majority stockholder if the deal goes through. However, GM may go into bankruptcy if the bondholders do not agree to convert their bonds into stock. They know that the stock is next to worthless, trading at anywhere from 5 cents to 15 cents on the dollar, and they are balking at the deal being offered.

How did this situation arise?

GM, Ford, Chrysler, Toyota, Nissan, Honda, Volkswagen and other auto companies have been in a ruthless capitalist competition for a larger share of the auto market in the U.S. and worldwide. In this struggle to capture markets they have created a U.S. auto industry with a combined capacity of 18.5 million cars a year. But the workers and the middle class, staggering under low wages, credit card debt and job loss, can buy only about 9 million cars a year right now.

GM lost out in the competition and has to shrink because of capitalist overproduction. It is not the only auto company that has to cut back. Chrysler has shut down plants and laid off workers. Ford, which has shut down more than 20 plants and laid off tens of thousands of workers, will have to cut back even more. Toyota, now the largest auto producer in the world, is cutting back production and talking about shutting down factories.

So this unbridled competition for profits has led to a crisis for the working class of mass layoffs. But layoffs in the operations of the auto industry—which together with housing makes up the core of production in the U.S.—are only the beginning. More are to come. And this in the midst of a major, global economic contraction.

How does Ford Motor Co. view the crisis of GM and Chrysler? It is also restructuring. But it is all “part of a longer-term vision that would have Ford rise above its age-old competitors to form a new global Big Three with the two largest car makers, Toyota Motors and Volkswagen, AG.” (Wall Street Journal, April 25) Ford is boosting production of mid-size sedans like the Ford Fusion to “help it step up its drive to grab customers and markets from GM and Chrysler, which are slashing production.”

The GM formula for its own profitability is to destroy perfectly good factories that cost billions of dollars. However, they could be converted to produce vehicles for mass transportation like light rail, high-speed rail, buses, and other conveyances that could service cities and rural areas alike. This would reduce pollution, reduce the cost of transportation, and make it accessible to tens of millions who have no access to affordable mass transit now.

The road to profitability, as seen separately by GM, Ford and Chrysler in their struggle against each other, is the road to disaster for the workers, both in the auto industry and outside it. That is the logic of the profit system.

Unemployment in the auto industry leads to unemployment in industries such as steel and other metals, rubber, glass, plastic, paint, microchips and computers, fabric, and all the parts supplying industries. In addition, layoffs will take place in all the communities surrounding the plants where stores and services have been supported by auto workers’ wages. The layoffs at the dealerships will also affect workers in the surrounding businesses.

Roots deep in capitalism

Despite all the explanations in the big business press of the causes of this crisis, the fact is that the hardship and suffering behind these statistics is caused by capitalist exploitation and the profit system.

The housing industry built millions of units in order to cash in on the profits from the housing bubble. The housing bubble was created by the banks and mortgage lenders gouging profits by pushing adjustable rate mortgages, knowing that interest rates were bound to rise and that millions would find their increased rates unaffordable.

Under capitalism, competition among corporations results in massive overproduction of goods as the bosses fight each other to capture markets and increase sales. While production races ahead, workers’ wages crawl slowly upward, remain the same or may even go down—as has been the case for the last 30 years. Sooner or later the system comes crashing down in a crisis when the workers cannot buy what they have produced at the prices the bosses demand to make a profit.

The profits come from the unpaid labor of the workers. They receive just enough to live on, but the goods and services they produce are worth far more than their wages. In other words, much of the labor is not paid for—it is done for free. That is where the profit comes from—the unpaid labor of the workers.

Capitalists own the means of production. Workers have to sell their ability to work—labor power—to the bosses. The bosses own what the workers create and sell it for a profit. That is capitalist exploitation. This is the way the entire system runs. Nothing is produced under capitalism unless it brings a profit to some employer.

But that unpaid labor is embedded in the product. It can only be turned into money when the sales take place. That is what the race for sales is all about—the race for profit.

The crisis of overproduction arises from capitalist exploitation. It can only be resolved by getting rid of the capitalist system and replacing it with a system that operates for human need instead of for profit. The means of sustaining life, the means of production, must be socially owned and operated by the workers themselves. That is socialism.