Friday, June 6, 2008

GM to cut production of 6 cylindar trucks

This week, GM announced the closing of (4) truck & SUV plants. The truck plant in Oshawa will be the Canadian victim of these cuts. The move comes in response to a drop in demand for gas guzzling vehicles. With the decline in the manufacturing sector there is plenty of finger pointed directed towards, the Union (CUPE), GM and the government.

The federal government is being blamed for not having a strategy to save the auto industry. The Liberals are blaming statements made by Finance Minister Jim Flaherty that Ontario was a poor place to invest. They now claim that GM took the ministers advice. GM is a multi-billion dollar company. They are capable of doing their own cost/benefit analysis to determine the most cost effective way to meet their production needs. They would not make such decisions on political statements. Flaherty has indicated that money set aside in the budget for greening the auto industry could be used to entice a more fuel efficient car produced in it's place.

In an effort to save the auto industry the Province provided financing for GM. The plan did not work as effectively as had been hoped. The government will now need to attempt to recoup the funds.

GM is being blamed for bargaining in bad faith. They just signed a contract with the union without any mention of the pending closures. Considering CUPE made concessions to try to help GM be more competitive they have a right to be upset on this point. The price of oil has been on the rise. People are being more concerned about the environment and carbon emissions. The US economy is tanking. It does not take a PhD economist to predict that the overall trend is moving towards more fuel efficient vehicles. GM slowness to react to such market changes are why they are performing so poorly in the first place.

Unions create an environment where businesses cannot respond quickly to changing market conditions. Perhaps the reluctance of the big 3 to meet marketplace demands resulted from their inability to work with the unions for the greater good of the company.

There has not been much focus on the environment impact of this move. Less gas guzzlers means less carbon emissions. This could be taken as good news for the environment.

GM has been slow to respond to the trend away from large vehicles. Instead of being leaders they chose to be passive and have left the market of the future wide open for the foreign manufacturers. Adjusting to market forces requires retooling and in some cases job loss. If they had taken a larger share of the fuel efficient job market sooner, they may not have been popular with the workers but the longer term job losses would have been minimized. This may be the first painful but necessary step to achieving a strong financial future.

Another solution not being considered is what to do with the workers. Perhaps they can be retrained to work for another automaker or take their expertise to other areas of the economy. Relying on one company to be a lifelong employer is not realistic. Perhaps this is a point that needs to be considered before making the decision to join the ever changing auto industry.

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