NCPA - National Center for Policy Analysis


July 16, 2008

General Motors (GM) announced this week that it will reduce truck production, shed jobs, cut executive salaries, freeze base salaries, eliminate health care benefits for retirees over 65 and sell assets.  The reason GM is clawing just to hold on is more complicated than high gasoline prices hurting GM's truck and SUV sales.  This is the story of a company so weighed down by a labor union that it's desperately trying to avoid extinction, says Investor's Business Daily (IBD).


  • It's a business that, by contract, once had to pay 2,300 workers at its shuttered Oklahoma City plant their full salaries and benefits for doing nothing.
  • The New York Times reported two years ago that workers in the Jobs Bank still showed up at the plant, then spent their days reading, watching television, playing dominoes or chatting.
  • The Oklahoma City shakedown was not an isolated incident; more than 12,000 union workers from all three domestic car makers have entered into the easy-chair, featherbed world of the Jobs Bank since 2005 and have been paid for not working.

The United Auto Workers have long been a millstone bolted around the necks of GM, Ford and Chrysler, says IBD:

  • Bloated deals have provided unionized auto workers with an average wage of nearly $65 an hour while Toyota gets by paying its workers about $45 an hour.
  • These union contracts -- not poor quality, inferior design, or mismanagement -- cost GM an additional $2,500 for each car it builds.

GM can either pass the costs on to consumers or absorb the losses.  But no matter which decision GM makes, the company finds itself in a death spiral.  At higher prices, GM cannot compete; if it eats the costs, it loses money, says IBD.

Source: Editorial, "GM Needs To Lose Its Heavy Load," Investor's Business Daily, July 15, 2008.


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