Blog on the Run: Reloaded

Monday, January 13, 2014 6:08 pm

A $90 billion story about GM that I had not heard before

Filed under: Shooting the wounded — Lex @ 6:08 pm
Tags: , , , ,

From Ed at Gin & Tacos:

… did you know, despite this fact being absent both from Michael Moore’s ultra-liberal documentary and ten thousand mainstream media accounts of GM’s bankruptcy a few years ago, that the financial collapse of what was once the world’s largest corporation was precipitated by Roger Smith’s bright idea to replace all of the autoworkers with robots? True story. General Motors under Smith spent $90 billion on robotics and automation in nine years.

Think about that for a second. Ninety billion dollars. $90,000,000,000.00. Of course none of it worked, with factory robots breaking down constantly, painting one another, and welding car doors shut. It’s easy to say that the company got what it deserved and forget about it. But think for a second about the mindset of a group of people so committed to the concept of eliminating the workforce (and the UAW) that it would piss away ninety billion dollars trying to do it. Even if the Worker Bots worked flawlessly, how could that possibly make financial sense? How many decades and centuries of “savings” from lower wages to earn back those sunk costs? And how much money would the Robo-Factories demand in the future for maintenance, upgrades, and eventual replacement with newer and better technology? For $90 billion, GM simply could have purchased Toyota, Honda, Nissan, and most of its other foreign rivals – several times over. Of course, in that scenario they’d still have to pay people to make cars.

The fact is that General Motors didn’t go bankrupt, it committed financial suicide because its executive culture fostered a loathing for the UAW and the hourly workforce that was so extreme that it obliterated basic logic and business sense. The idea was not to replace the workers with Japanese robots (GM Robotics was acquired from Fujitsu) because it would save money; it was to replace the workers with robots because [expletive] the workers.

Phrased a little less colorfully, that mindset has put us where we are today, with the stock market, corporate profits and corporate cash on hand at all-time highs — not because of greatly increased sales, but mainly because of cost-cutting, primarily by laying people off.

Which raises a question I wish would become an integral part of the debate in any campaign for federal office: What is the purpose of the economy? Is it to make a very few individuals and large corporations fantastically wealthy? Or is it to create jobs in which people produce goods or services that other people want to buy? My bias on this question is pretty obvious, but I imagine a large majority of Americans share that bias. If so, then what role should government play and how should it go about playing that role? The GOP response for my adult lifetime has been lower taxes and fewer regulations, which not only has gotten us coming up on six lost years of economic activity but also is injuring, sickening and killing people while poisoning the planet, from Fukushima, Japan, to Charleston, West Virginia.

2 Comments »

  1. I don’t disagree with some of the larger points made in his post, but there are some real problems with the numbers and analysis.

    Looks like $90 billion was total spending during the period discussed, with a big chunk of that going for new plants and equipment, and some some fraction of that smaller amount spent on robotics…which were not themselves the problem (Honda is cited in the same article for using them effectively) in terms of productivity.

    Also, he’s citing a 22-year-old article about investments made in the ’80s. Blaming the Smith regime for the bankruptcy many years later (which certainly owed a lot to the credit bubble — GM was a lender with an automotive side business) is suspect to say the least.

    Comment by Ed Cone — Monday, January 13, 2014 6:22 pm @ 6:22 pm | Reply

  2. Well, maybe that’s why I hadn’t heard the story before, Ed. I certainly knew about GMAC and its bailout. Should’ve put two and two together. Thanks.

    Comment by Lex — Monday, January 13, 2014 9:35 pm @ 9:35 pm | Reply


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