GM's bad decisions bearing rotten fruit
For most people over age 50, General Motors and Ford are symbols of American might. To see both in financial trouble shakes the bedrock on which people of that generation built their notion of a superior nation that rode its industrial prowess to victory in war after war and to economic greatness.
General Motors retreated this week and eventually will yield its top spot in the automotive world to Toyota of Japan.
It's sad. It hurts. It causes people to question our direction and ask who will be next to surrender to the bottom line of accounting.
The problem has been a while in the making. Years ago, General Motors and autoworkers struck a deal for high pensions and health benefits in exchange for reduced wage hikes. That meant higher GM profits and stock prices in the short run. And it meant higher executive bonuses.
Today, GM says its health expenditure per automobile is $1,525. Its obligation to health care, pensions and other benefits comes to $54 billion that the company doesn't have.
General Motors will cut some 30,000 North American hourly jobs by 2008, close 12 plants and reduce its automobile production by 1 million units. In the meantime, General Motors has 2.5 retirees for every active worker.
General Motors' plan is to regroup, cut costs and emerge as a profit-making company after losing nearly $4 billion in the first three quarters of this year.
Blame the government for some of the mess. It simply went along with creative accounting that made the balance sheet appear much better than it was.
Then, there is the quality issue. America got sloppy.
Perhaps, General Motors' plight can be the great reawakening in this country that eventually restores the Yankee need to build great things.
For General Motors, it simply needs to produce the next great automobile.