Pleading for a bailout at home, General Motors Corp. continues to expand some of the non-U.S. operations that are among the best things the crippled giant has going for it. On Wednesday GM said that Shanghai General Motors Corp., its 50-50 joint venture with SAIC Motors Corp., is
opening a new plant in Shenyang, China, able to make 150,000 units a year.
The same day, Bloomberg reported that GM is
stepping up production of small Chevvy Aveos in Mexico. Auto production in Mexico (where workers earn around $3 per hour) is up 5% this year, the article says, compared with a decrease of 30% in the U.S.
We've
commented on this dissonance before, with regard to GM and also to Bank of America Corp. and its recently increased stake in China Construction Bank. A quick way of summing up the disconnect is just to say that what's best for shareholders--or more broadly, for capital--is not necessarily what's best for the U.S. labor force (in the case of GM) or for the U.S. consumers and businesses that were supposed to enjoy more access to credit as a result of the taxpayer funds invested in BofA
But there's more going on here, and it extends to companies that aren't even in the running for Federal help. A healthy IBM Corp. is one that sells--and hires--more and more globally. If Boeing Corp. wants to sell planes in China, it has to let the Chinese help build them.
One way of viewing the U.S. financial crisis is that it's a long-delayed marking-to-market of the U.S. economy relative to other national economies. Global free trade probably is the best path to world peace and prosperity, but as a country the U.S. hasn't been honest about the way free trade creates winners and losers. Quite the contrary.
The free-market prescription for countries facing wage competition (or for that matter innovation competition) is to specialize, do what they do best, climb the value-added curve. We've done plenty of this, but it's inevitably a messy and uneven process. So we've also cut ourselves a huge amount of slack by financing our lifestyles with money borrowed from overseas, secured with our houses. Now that the slack has disappeared, the contradictions become more obvious.
Quiz time: When you look at GM 's managers over the last decade or two, would you say they have been:
a) Asleep at the wheel regarding important industry trends.
b) Giving U.S. consumers what they want in a country where cheap gas has been seen as a right and woven into living patterns.
c) Complicit with the UAW--a bulwark of middle class stability in American life--in trying to preserve an unsustainable corporate structure and culture.
d) Big players in the globalization that undermines that structure and culture.
The answer, of course, is all of the above. Which raises a few more questions. Would a pre-packaged bankruptcy enable GM to send more jobs to Mexico? Could a green-minded, labor friendly Car Czar decree that work be done in the U.S. that would be better done elsewhere? As a bailout and restructuring go forward, how these points get sorted out will matter a lot, and not just for the people who work in the auto industry.-
Kenneth Klee
UPDATE:
Lou Whiteman, writing on Dealscape this afternoon, says GM has also
halted construction at a Flint, Michigan plant that's key to production of the Volt. Wonder what the reaction will be?
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