GM Wants to Dump Off Their Skilled Labor

GM's recent move to early retire their skilled labor is a great example of labor arbitrage by nation-states. The reason is so they can match labor costs to Mexico for manufacturing a new car in the United States. Remember all of that talk about fixing NAFTA?

General Motors Co (GM.N) said on Monday that it was looking to reduce its payroll by several thousand skilled trade workers at 14 U.S. plants in the first quarter of 2011.

GM has offered $60,000 to skilled trades workers who retire or leave the automaker's payroll by March, said spokesman Chris Lee. The automaker currently has a "a couple thousand" more skilled trade workers than it needs to run its U.S. factories, Lee said.

The buyouts and early retirement offers were made to United Auto Workers union-represented workers in 14 U.S. plants, including the Orion, Michigan, assembly plant.

That plant will build the new Chevrolet Sonic under a cost-cutting agreement negotiated by the UAW and intended to allow GM to build the small car in the United States rather than import it from a lower-cost market like Mexico.

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This is interesting on several accounts.

In fairness to GM, this is something that's been a long time coming.

My father was UAW skilled trades for almost 40 years at the local transmission plant. When he started in 1968, the plant was still humming. At its peak, the plant employed over 3,000 workers. A mile down the road, another transmission plant employed 5,000 UAW represented workers. The last version of the Muncie transmission plant closed in 2006, with around 700-800 workers. Same thing at the other plant in 2009, with just under a 1,000.

When Dad started on the job, there were separate trades classifications for painters, bricklayers, and carpenters like himself. By the end, all these had been collapsed into a single skills classification. They tore down the factory in January of 2008. In March of that year I was in town doing interviews for a project that I was working on. Dad and I went down to the old local hall. I remember that at that time, there were still somewhere between 10-20 skilled trades guys who reported for jobs bank. There's no place to send these guys. The unskilled guys like my brother in law all got transfers to the Fort Wayne assembly or down to the Camaro plant at Bowling Green.

So there's a reason why the company is looking for early retirements. FYI, most union locals will encourage their older members to take buyouts to preserve employment for younger workers. With retirement, these guys have a pension that they can draw from. The younger ones lack that security.

The problem is that these concentrations of skilled workers have been one of the sources of comparative advantage for American manufacturing. The shrinking of the industrial sector has taken a particularly harsh bite here. Many of these skills were picked up on the job. Typically the process of becoming a skilled tradesperson involved a combination of time spent in the classroom and learning on the floor. The loss of factories has meant that these workers aren't being replaced. There's a bulge of older workers that has limited the opportunities for younger workers to take skilled trades jobs as the workforce shrinks. There's a day of reckoning coming soon when these guys are gone, and companies begin to realize that the institutions that trained them have been eviscerated.

When it comes to things like electricians and tool and die work, this is already a limiting factory in terms of getting wind turbine plants up and running. Turbine gearboxes share a great deal in common in terms of skillsets and capital equipment need with transmission plants. The problem is two-fold. New opportunities for "green jobs" have come too late and offer too little stability to make it worth the while for these new firms to replicate what GM, Chrysler, and Ford did. Even where they exist, these types of in house programs are of limited use. Second, there was no mechanism to move skilled workers from fields where they were in surplus to those where their skills are needed.

America is at real disadvantage compared to Europe and the East Asian countries in this respect. In Japan and Korea the predominance of large interlinked firms means that these companies are able to shift skilled workers between divisions. In Japan or Korea, the mechanism that's going to allow skilled workers to move between the auto sector and wind turbine manufacturing, for example, is that single firms operate across a number of sectors. In a very real sense, the government missed the opportunity to partner GM with a wind turbine manufacturer to achieve a similar end with regard to retooling transmission plants to build turbine gearboxes. The problem is that there is little desire in the manageriat to pursue this sort of thing. Much easier just to shift production to a low income country, than to make the minimal effort required to recognize the potential of domestic innovation. But remember it's a lack of willingness for workers to stomach have their pay slashed in half that's the problem. Not a utter lack of basic managerial competence. The Germans may provide us a better model of how to achieve the type of skill transfer that we are talking about. The combination of union oversight and cooperation between firms means that a number of firms can achieve efficiencies of scale and promote innovation because they draw from common training programs. We don't have this so we have the absurdity of inter-sectoral skills disparities.

I'm inclined to give GM a bit of a break on this one, but I think that the long term consequences of this sort of thing hurt the country dearly. GM is just displaying the common stupidity of corporate managers here. Not stirring up a special kind of stupid as they have often done in the past with regard to manufacturing methods and vehicle design.

Good to see you!

Haven't seen you posting here for awhile. I hope I'm blaming global labor arbitrage more than GM, but it's a system consequence, we're getting worker squeeze over and over to save a job in the U.S.

I know what you mean

I've been busy. PhD comprehensive exams. I passed. It drained me of any desire to write for a long, long time.

On GM, I think that the 2011 contract negotiations are going to be interesting. Gettlefinger, the old UAW head, did the best that he could with a bad situation. It sometimes seems that the 2007 strike at GM has been erased from people's memories. The union held strong, and struck, when the company was in perilous financial shape. I don't think that the new UAW head, Bob King, is going to take shit from the company. If they were willing to take the risk of striking when the company was in bad shape, shouldn't we expect them to hold strong when the companies making a profit.

I haven't been around, so this may already have been pointed out. One of the things that the union is looking for is profit sharing.

General Motors, Ford and Chrysler, in advance of next year's labor contract negotiations, are exploring with the UAW changes that could give workers a bigger piece of growing profits.

"We want to find the best possible bang for all of the employees, across the board," said General Holiefield, head of the UAW's Chrysler department under President Bob King.

While formal negotiations haven't begun, union leaders and executives from the automakers have broached profit-sharing changes, said two people familiar with the efforts. High-level discussions began months ago because it was deemed a significant issue that would require more time, said one of the people, who asked not to be identified because the talks were private.

The union made mid-contract concessions last year before the Chrysler and GM bankruptcies. The UAW's four-year labor agreements with three automakers expire Sept. 14, 2011.


That's a huge deal, the "big stress/hump", so I hope you celebrated! Good for the unions, they should be getting a profit share in my view, they are heavily invested, plus making sacrifices so they should get the reward.

In Germany the printing press

In Germany the printing press is used to subsidize and encourage manufacturing. In the US, the printing press is used to subsidize the multinationals move to outsource to countries that manipulate their currencies by creating new money out of thin air faster then the US so that based on paper exchange rates foreign labor is cheaper to employ with US technology. Trade in a lot of instances today is really just a money printing out of thin air game between nations.

Yahoo firing Americans...of course

They are laying off 4% of their "workforce", what they don't say is that's people inside the United States. Yahoo Yahell.

But companies claim there's a skills shortage

GM getting rid of SKILLED tradesman. Yahoo firing hi-tech SKILLED professionals. ...
Yet, the press, corporations, and our Congress say there is a "skills shortage".
How can that be?


If Ford really wants to strengthen their identity as an AMERICAN company (yes I know it is global), let them hire those laid off by GM. FORD did not take bailout money -- and they are profitable. Brand loyalty starts at home!

Frank T.

GM sells more cars in China than the U.S.

That's another problem and GM has made inroads (but at what profit margin cost?) into China. They are after global markets and would sell their own mother to get in. This is the mythical 1.3 billion person China consumer market. There are over a billion people in India too. U.S. is 309 million and of course we're all broke now.