 GM’s new $3 billion factory in Shanghai. Photo: Featurechina/An Tu |
On May 5, the General Motors Corporation and the Ford Motor Company had their bond ratings drop to “junk” status. The drop to “junk” status came on the heels of an announcement by GM that it would report a $1.1 billion loss in the first quarter of 2005.
To soothe its investors, GM announced it would lay off 25,000 workers over the next several years. At the same time, the corporation has demanded that the United Auto Workers, which represents the bulk of GM unionized workers, make concessions outside their contract on health care benefits. GM management has hinted at unilaterally reducing health and retirement benefits if the union fails to “cooperate.”
While GM threatens to reduce the health and pension benefits of its unionized workers, it has recently announced the completion of a new manufacturing plant in Shanghai, China. The new plant comes as a result of $3 billion in new investments and doubles Shanghai GM’s productive capacity. (Xinhua, May 30, 2005) The new plant comes at a time when the world is actually facing a surplus in car production.
How is it that GM has $3 billion for a new plant in China, but no money to pay for workers’ health care and pension benefits? Its board of directors represents the interests of its investors, not its workers. With these priorities, investing in a plant in China with the potential to make more profits is considered “wise” and paying for workers’ pensions and visits to the doctor are considered “excessive” labor costs.
For corporations, it isn’t a moral issue. They are always looking for ways to reduce the cost of production—whether that means cutting wages and benefits, or finding some new technology to take a worker’s job. The bosses need to make profits to compete with other companies, so they pay their workers as little as they can.
The wage and benefit agreements now under attack were won through the struggles of the U.S. working class, going back to the 1930s. At that time, great labor struggles unionized the auto industry. Factories were occupied and millions of workers fought to improve the wretched assembly line conditions.
Since the 1930s, and particularly in the last 25 years of the high-tech revolution, labor productivity has increased dramatically. Workers can now produce more goods in a shorter amount of time. Instead of easing the burden of work, the increased level of productivity under capitalism leads only to the elimination of millions of jobs. It has lowered the living standards of the working class as a whole. The number of autoworkers has shrunk from the hundreds of thousands to the tens of thousands.
GM must ‘expand or die’
According to industry and business analysts, GM’s recent losses are a result of three challenges confronting the corporation: a shrinking market share, declining sales due to overproduction and “excessive” health care costs.
The downgrading of GM’s credit rating highlights a decades-long trend. U.S. auto makers have seen their domination of the industry disappear like the tread on an old tire. In 1950, 80 percent of the world’s cars came off U.S.-owned assembly lines. By 1999, Japan was number one in automobile production, followed by the United States, Germany and France. By 2000, U.S.-owned companies produced only 14 percent of the world’s cars.
 For executives like GM CEO Richard Wagoner Jr. (left), making profits is the bottom line. Photo: Reuters/Peter Morgan |
Although GM has lost a significant portion of the market over the last 50 years, for the last 10 to 20 years its annual production has been about the same—somewhere between six and eight million cars annually. The problem GM faces is the “expand or die” pressure of the capitalist system.
Under capitalism, each company, no matter how big or small, constantly has to outdo its competition. Investors want to put their money where they can make the most profit. Since U.S. auto companies accounted for the vast majority of global car production in the 1950s, investors were willing to put their money into companies like GM, Ford and Chrysler, which together accounted for 90 percent of U.S. domestic car production.
As Toyota, Honda, Volkswagen and Nissan began rapidly expanding, however, the U.S. auto giants did not. From the capitalist investor’s point of view, this was unforgivable, and their dollars went elsewhere. GM could not keep up, despite the fact that it became a leaner and more efficient company. In 1990, GM owned and operated 35 assembly plants and employed 228,000 hourly workers. This year, GM will produce a similar number of vehicles with only 23 assembly plants and 85,000 workers. (New York Times, June 12)
In addition to a shrinking global market share, GM is losing ground in the United States, as well. In 2005, Toyota is expected to surpass two million car and truck sales in the United States alone.
Millions of cars, billions in profit
GM also has to deal with what the entire global automotive industry is facing: overproduction. Analysts estimate global car production is 11 million more than the market can absorb. In the United States, it is estimated that three million more cars will be produced than can be bought in 2005. (Canadian National Post, Jan. 1)
As they vie to sell their products in an increasingly competitive market, every auto manufacturer is looking to cut costs. The problem for GM is that it has a higher per unit cost of production than its competitors.
GM also has many more retired workers entitled to pensions and health benefits. GM has simply been in existence longer. In fact, GM is the country’s largest private provider of health care, spending six billion dollars a year on 1.1 million hourly workers, retirees and family members. (New York Times, June 15) It costs GM about $1,700 more in health care costs for each vehicle it manufactures than its Japanese competitors.
The health benefits for unionized autoworkers at GM are some of the best available today. GM workers do not pay a monthly premium and make very modest co-payments for prescriptions and services. These “excessive” health care costs pose a problem for GM’s board of directors and investors, who are personally so rich that they never have to think twice about health care coverage. The investment houses have, in effect, punished GM for having agreed to the union’s demands to provide decent health care benefits by dropping their bond rating to “junk” status. As a result, GM has to pay higher interest rates on all money it borrows.
This illustrates one of the contradictions in capitalist society. Over the decades, hundreds of thousands of workers at GM have built millions of cars, making investors billions of dollars in profit. The workers have created all of GM’s value, yet they have no say in how the company is managed or how its resources are used.
When GM reports a massive loss like it did for the first quarter of 2005, the owners immediately look to cut costs. At the same time, the investment firms make it more expensive for GM to operate by lowering the company’s credit status.
This is the logic of capitalism. All production is organized to make profits—and not to meet human needs.
The capitalists react
 Rebecca Cook/Reuters |
The capitalist media reports that GM’s problem is that it spends too much on health care. Capitalists don’t want GM workers to have better health care than the workers at Toyota, Honda and other GM competitors. Uwe Reinhardt, an economics professor at Princeton University, explains the bosses view. “In fairness, it’s not clear why an autoworker should have a better deal than someone who makes washing machines.” (USA Today, June 23)
Professor Reinhardt’s candid statement exemplifies how the capitalist class views the cost of health care, pensions, vacation and sick time and pay. The cost of human labor, like all other costs, is something they hope to find as cheaply as possible.
The financial media doesn’t report on the negative human impact of GM’s layoffs or proposed benefit cuts. Instead, it reports that the decrease in GM’s credit rating will not significantly affect GM’s ability to secure capital.
They point out that GM is quite cash rich, possessing $52 billion in cash and other securities. While GM recently reported a huge loss, the company still plans to pay a two-dollar annual dividend on every share of GM stock. With 565 million shares of stock, GM will pay $1.13 billion in dividends this year, a little more than the 2005 first quarter loss. (CNNmoney.com, June 22)
While GM demands that the UAW reopen the contract, the company never came to the union in 2003 or 2004 when GM made $3.7 billion and $3.8 billion in profits, respectively. They didn’t come then to renegotiate the contract accordingly, and improve workers’ benefits. This is no surprise. Workers and capitalist bosses have diametrically opposed class interests.
Build class militancy and solidarity
UAW spokespersons have made moderate statements on the projected layoffs and GM’s threat to unilaterally cut benefits. Union leaders have appealed to GM to be “fair” and “equitable.” The statements reflect an inclination towards collaboration with GM, as part of the “stakeholder” community. (UAW.com, June 16)
But appealing to fairness will not save workers’ benefits at GM. The autoworkers will have to act in their own interests and demand “no cutbacks, no givebacks.” Relying on the whims of “good investors” or friendly politicians will only lead to disappointment and, ultimately, defeat.
Labor, not capital, enables GM to produce cars. Labor is what workers have to withhold. In March 1996, a strike of 3,000 workers at two GM brake factories in Dayton, Ohio, brought GM’s production to a halt throughout North and South America. By striking, the GM workers altered the relationship of forces between the workers and bosses. But in this period, when unions are on the defensive, withholding labor in one factory or in one corporation alone is not enough. Workers need to be mobilized to take action beyond GM and the auto industry.
The entrance of other workers into the struggle to defend workers’ benefits, and to expand them, could make the difference. Contrary to Professor Reinhardt’s assertion, workers don’t see the benefits of GM employees and think, “They deserve less.” Rather, they think, “What can I do to get those benefits?”
What’s happening at GM should concern all workers. If bosses can cut tens of thousands of jobs and hard-won benefits at GM, then it only encourages bosses elsewhere to do the same. Enhancing working class solidarity and taking action to defend workers’ gains is more necessary now than ever before.
