Higher Gas Prices Are Killing GM

Megam McArdle is discussing GM's woes.

GM has declared a stunning loss--over $15 billion dollars. Their cash position has fallen by about 10% since last year. That cash cushion used to comfort analysts, the notion being that GM had the reserves to ride out a long rough spell. Now liquidity fears are firming up. I'd put the probability of a GM bankruptcy in the next 10 years at 50%.

The company is scrambling to retool for small cars, and I'm sure we'll hear a loud chorus of voices saying that GM did this to themselves by becoming so dependent on light trucks. Well, they did, but I'm not sure it's fair to blame management.

The Unions want to maximize employment and the Wagner Act gives them lots of clout. What union is going to allow labor saving machinery in a plant that replaces workers? They are after all Labor Unions. They don't collect dues from robots.

And then we have the Democrats - those great supporters of unions - preventing the drilling for American oil making the prices sky rocket. Now where do American car companies make their profits? Big vehicles which use a lot of fuel. Americans want those vehicles if the price of fuel is not too high.

What is the Democrat response? Well they are no longer the party of labor. Their support from labor is an anachronism. They are now the party of Ultimate Greens. You know that party. The one that says that there are too many humans consuming too much stuff and it has to stop. Right now.

And you know, in the whole comment section at Megan's post every one is saying it is labor or it is management. No one (except me) has said anything about higher oil prices.

Let me add that the American auto industry is booming. Just look at who and where. It is foreign companies locating in right to work states. American auto companies are unable to take advantage of the laws in those states because the union will not let them. Where is the profit in that for them?

Cross Posted at Power and Control

posted by Simon on 08.03.08 at 09:57 AM





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I grew up 4 miles north of Detroit and am familiar with this situation. IMO, the union is overwhelmingly responsible the mess the auto workers, GM and the state of Michigan is in now. Of course, I think there will be a number of people who do not agree with me but that is fine.

Orlin   ·  August 3, 2008 01:00 PM

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