Behind GM’s flagging fortunes
By
Milt Neidenberg
Published Apr 6, 2005 3:26 PM
Charlie “Engine” Wilson, as he
was called by his corporate friends, told the Senate Armed Services Committee in
1952: “What’s good for the country is good for General Motors and
what’s good for Gen eral Motors is good for the country.” Wilson,
the head of General Motors, had been nominated to become secretary of defense by
President Dwight D. Eisenhower.
The country had been good to GM. It was
awarded the contracts to be the largest single maker of armaments in World War
II, making it the largest industrial corporation in the world.
The du Pont
family, for years the major owners of GM, did well on war, too. They began their
fortune selling gunpowder in 1802. By World War I, the DuPont company supplied
40 percent of all explosives used by the Allies. The price of its stock
increased by 5,000 percent during the war period. (“Merchants of
Death,” H.C. Engelbrecht) Its contracts included selling poison gas long
before the U.S. entered that terrible war, in which 10 million died and more
than 20 million were injured.
GM had been created in 1910 by Wil liam
Durant. He had bought out a number of smaller auto companies, including
Chevrolet, founded by the French car racer Louis Chevrolet. Durant’s
master plan was to create semi-autonomous divisions rang ing from the low-priced
Chevrolet to the Cadillac for the wealthy. DuPont centralized the divisions and
combined forces with banker J.P. Morgan. Together these “robber
barons” drove out Durant.
Today, 53 years after Wilson’s boast
to Congress, Wall Street pundits are questioning whether this global industrial
monster can weather a financial crisis and escape a fundamental downsizing of
the empire. Or, in the words of Barron’s, “Could the worldlargest
auto maker go bust?”
The magnitude of the fallout would be
incalculable, especially for corporations that are an integral part of the auto
industry: steel, glass, paint, rubber and aluminum. The auto industry has become
glutted from overproduction, huge inventories and sluggish sales, in spite of
attractive incentives for buyers. GM is a debt-ridden corporation. While
attempting to maintain its global empire, it was losing its share of the world
market. The General Motors Acceptance Corp., GM’s financial arm, is its
only money maker.
GM stock has tanked
March 16 was its worst
day since the great 1987 stock market crash. GM’s stock tanked when it
announced that, instead of a hoped-for cash flow of $2 billion to be distributed
to its top-shelf investors, it had a $2-billion deficit. Its stock plunged over
17 percent, deducting a huge $2.7 billion from its market value. Top bond
agencies like Standard and Poor’s cut its credit rating to a notch above
junk status, sending GM’s future borrowing costs through the roof. At the
same time, Ford and Daimler-Chrysler stock also took big hits.
GM became
the world’s largest auto maker by strong-arming smaller companies into
buyouts or mergers: Fiat, Alfa Romeo, Lancia, Subaru (with Fuji), Holden, Isuzu,
Suzuki, Maruti, Daewoo, Opel (Vauxhall in the United Kingdom), Holden
(Australia/New Zealand) and Saab. It restructured its divisions, setting up GMC
truck and Saturn under a new production structure. Each worker in the team had
to be proficient in every skill required by the production unit, making speedup
more intense than before.
To service this mammoth operation, over 11,800
outlets were set up abroad, comprising dealers and authorized sales, service and
parts divisions to compete with other transnational corporations, such as Ford
and Daimler-Chrysler, for global markets. In the U.S., GM has 7,600 dealer
outlets, made up of Cadillac, Hummer, Buick, Pontiac, GMC truck, Chevrolet,
Saturn and Saab. Then there are suppliers like Delphi, spun off from GM a number
of years ago, and Delphi’s subcontractors.
Clearly, GM is on a
collision course to extract concessions from its dealers, suppliers, investors,
the United Auto Workers, current UAW production workers and retirees.
Will its subsidiaries and outlets be ask ed to surrender a share of their
profits and reduce prices, when many of them are already financially strapped
and on the ropes?
Will the UAW bend to the pressure to reopen the
contract, even before the 2007 expiration date? There are indications that this
has already happened.
GM’s immediate plan is to slash the health
benefits of 422,000 retirees and their 260,000 dependents. It also wants to
modify the section of the contract saying that, including unemployment benefits,
laid-off workers are to receive 95 percent of their current wages for five
years. It’s a sure sign that more layoffs are coming.
The UAW
workers won these benefits through bitter strikes and sacrifices, spending years
working under hazardous conditions and speedups that produced cars at an
unprecedented rate at a time of bitter competition from Japanese transplants
Toyota and Honda as well as from Ford and Chrysler.
U.S. monopoly
capitalism’s triple crisis
The industrial base of U.S. monopoly
capitalism has been shrinking. It is due not only to the capitalist cycles of
boom and bust but also to a structural crisis that has the captains of industry
and finance shuddering as their imperialist dreams of military domination of the
globe continue unabated. The fundamental core industries of the
U.S.—steel, auto, textile, shoes, apparel and others—have
deteriorated. It should be remembered that the industrial might of these
industries was the very foundation of U.S. capitalism.
An article in the
New York Times of April 2 partly confirmed this prognosis: “Factory
employment, where most of the recent job losses have occurred, remains stagnant.
Manufacturers have restored only a small fraction of the jobs they shed from
2001 through 2003 and manufacturing employment edged down by 8,000 jobs in
March. ... The reluctance to hire has been particularly high at manufacturing
companies, which shed about 2.7 million jobs during and after the recession of
2001.”
The capitalist cyclical crisis caused by overproduction has
become intertwined with the structural crisis based on the shrinking of the
industrial base. Added to the woes of the ruling class is the geopolitical
quagmire. This development grows out of the very nature of the
military-industrial complex, which is impelled toward imperialist wars in Iraq
and Afghanistan to maintain the hegemony of U.S. monopoly
capitalism.
Perhaps GM’s management was counting on the success of
U.S. aggression in the Middle East when it opted to manufacture gas-guzzling
SUVs and the Hummer a few years ago. But the quagmire in Iraq and higher oil
prices last year turned consumers toward lighter imported vehicles, compounding
GM’s problems.
The U.S. ruling class has also been hoping that the
lighter, more sophisticated high-tech industries—electronics, the
satellite sciences, computerization, data processing—and service-oriented
industries would strengthen its position in relation to its imperialist rivals.
Not likely. The dotcom, highly leveraged companies were a major factor in the
2001 recession.
Stephen Roach, chief economist for Morgan Stanley, an
investment bank also in deep crisis, recognizes the symptoms—if not the
fundamental danger to capitalism. Known as a Wall Street pessimist, Roach
fingered March 16 “as a possible tipping point for America ... the
confluence of a record current-account deficit, a disaster from General Motors,
and yet another new high for oil prices all speak of an increasingly precarious
role for the global hegemon.” (Barron’s Online, March 21)
Roach was referring to the $667-billion current deficit in the balance of
trade, oil prices hovering over $57 a barrel, and a budget deficit of around
$400 billion. Goldman Sachs, a premier Wall Street financial institution, is
predicting that oil could reach an unprecedented $100 a barrel. It doesn’t
take an astrophysicist to know that there is more than a whiff of crisis in the
air. There is bad news for GM and Corporate America, as well as the entire
Fortune 500.
Labor at the crossroads
The danger to the labor
movement is growing under the whip of the triple capitalist crisis and intense
competition at home and abroad. It is whipsawing jobs and benefits and
Wal-martizing the workers. Right now it is the airlines that are using the
crisis to downsize the unions. Other industries are poised to follow.
The
coming period will raise the stakes, not only for the UAW workers, but for the
entire labor movement. Wall Street and Corporate America view the unions as a
hindrance to their system of exploitation. The bosses want a free hand on the
vital issues of investing capital, expanding technology to increase production,
and laying off workers here to exploit workers abroad.
The AFL-CIO, led
by President John Sweeney, can’t keep the debate on these critical issues
within the federation. A bold plan of action is needed to build solidarity among
the affiliated unions, the rank and file, the organized and the
unorganized.
May Day is coming. Celebrated by the international working
class in the struggle for the eight-hour day, it was broadened by communists and
socialists, especially, into a show of strength by workers everywhere. This year
the Million Worker Movement coalition in the U.S. has called for a day of
solidarity on May Day to energize the poor and working people. This call could
not come at a more opportune time.
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
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