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In Defense of General Motors
Our Buy American Mention of the Week!
by Roger Simmermaker
May 7, 2005

Defense, defense, defense. That’s all that General Motors, and Detroit in general, can play these days. Many American car and truck buyers, and many of those in the media who write about their buying habits, should know better than to spew their venom at GM for their recent financial troubles. It might be different if the reasons that GM continues to lose market share weren’t largely beyond their control, but they are. As an increasing number of Americans spend their money on and drive around in Toyotas and Hondas, the answer to the question "Why doesn’t GM have the money to build a car more to my liking?" seems to evade them.

As if the impending health care crisis in America was no clue at all, some even bring up the fact that GM spends over $1,500 per automobile just to provide health care to their employees, retirees and their dependents. By comparison, Toyota and Honda spend only a few hundred dollars per automobile, mainly because GM has been operating in the United States since the invention of the automobile and Toyota, for instance, only built their first plant here in 1987. Yet they still accuse that GM is "living in the past" even though Cadillac now outsells Mercedes, The Chevy Impala beat the Toyota Camry in initial quality and Consumer Reports detailed how Buick now beats BMW in reliability.

But in these times where low-wage Wal-Mart has now replaced high-wage General Motors as the number one employer in the U.S., most Americans get a pass for not having the time to dig deeply enough to understand what is really going on since a large portion of America is working longer hours for lower wages and is just trying to put in enough time at work to make ends meet.

It may seem that your car-buying decision would have no effect on your personal prosperity or that of your country, but it does. It really does matter if you buy an American-made Chevrolet instead of an American-made Toyota.
When you buy an American-made Chevy, you not only support more American workers, but also American investors, owners and stockholders. When you buy an American-made Toyota, you may help your Uncle Bob if he’s on Toyota’s payroll, but you’re hurting Uncle Sam since American companies pay about three times as many taxes to the U.S. Treasury compared to foreign-owned companies. That’s something to think about the next time you hear we have to cut benefits or raise the retirement age simply because the U.S. Treasury doesn’t have enough funds to meet its obligations to Social Security or other benefit programs.

General Motors doesn’t have enough money to meet its obligations either. And it’s for the very honorable reason that they have promised adequate health care and pensions to their workers who gave their lives to a company that has in turn supported so many American livelihoods for so long. If we stop buying GM products, we de-fund American retirees and prevent them from contributing to the American economy. Sure, you have a choice in buying a foreign car over an American one, but if you buy the foreign car, you will likely cause a retiree to make a choice between food and medicine. That very choice is a daily one for many senior citizens in this country right now.

Think it’s not possible? Think again. The Pension Benefit Guaranty Corporation (PBGC) has already taken over several pensions from failed American companies in the steel and airline industries and beyond. When these companies declare bankruptcy and a failure to meet their obligations, this government-funded agency - which is also running in the red - takes over and gives seniors roughly half of what they were promised by the now bankrupt company.

This results in a hidden cost to taxpayers since any shortfall in government revenue must be made up eventually in higher taxes or benefit cuts or both. So there you have it. Failure to find a GM (or other American) automobile you can stand will negatively affect your standard of living in one way or another. And you thought that since you didn’t work in the car industry it didn’t affect you. Think again.

The Detroit News recently published the facts, daring to go against the deceiving "foreign cars are built there and American cars are built there" rhetoric that implies it makes no difference if you buy an American-made Honda instead of an American-made Pontiac. The newspaper reported that American and foreign automakers alike were playing the "Made in USA Card" to attract buyers. And you thought consumers didn’t care. Poll after poll has shown Americans are even willing to pay more to buy American, let alone when quality and price are similar or equal. Most Americans advocate fair play and equality but eventually they will find out - possibly the hard way - that neither of these attributes apply in the automobile marketplace unless those Americans that should know better start buying American cars again. I’m not asking or expecting the die-hard import buyer crowd to stop their silly griping and buy American. GM’s future doesn’t depend on them. It depends on those Americans that really should know better.

As the Detroit News article boldly pointed out, GM has 82 major plants in the United States, while Toyota, Honda and Nissan combined have only 24. GM has more American salaried workers than Toyota has total American workers. With 194,000 employees in America, even after hard times, General Motors still employs six times as many Americans as Toyota, seven times as many as Honda, and 12 times as many as Nissan. As Business Week pointed out in 2002 (the last data I have seen on the subject), each auto-assembly job created by an American company also creates 6.9 other American jobs, where each auto-assembly job created by a foreign company creates only 5.5 other American jobs. This is true simply because American automobile companies get more of their parts from America.

And what about those foreign transplant factories? A 1995 United Auto Workers study concluded that these foreign automobile companies operating in the United States caused at least 500,000 Americans to lose their jobs. I would hate to think of what that total is today.

The new May 9, 2005 issue of Business Week details how GM contributes to the pockets of their assembly workers to the tune of $8.7 billion a year and either directly or indirectly supports the employment of 900,000 Americans. Business Week also claims it is "undeniable" that what is bad for GM is bad for America, pointing to a 54-day strike in 1998 that cut that quarter’s economic growth for the entire country a whole percentage point.

Many point to bad management decisions in the past to justify their reasoning for not supporting GM, claiming it is it "widely known" that they made horrible cars in the 1970’s. Its amazing people who weren’t even driving age in the 1970’s (this author wasn’t) want to penalize GM for mismanagement as they overlook any mismanagement by other car companies they anxiously spend their money with instead. I have never heard anyone vehemently refuse to buy a Nissan since they almost went bankrupt in the late 1990’s. Nor do I hear people planning to penalize Japanese car makers for the (widely known) junk they imported in the 1960’s.

In 1999, the Wall Street Journal reported Nissan lost millions of dollars in five of the last six years. Nissan’s debt stood between $22 billion and $30 billion, which dwarfed that of any other auto maker. The Wall Street Journal, which is no huge supporter of GM, claimed Nissan would be bankrupt if it happened to be American company.

The claim that GM made inferior cars in the 1970’s is suspect to me anyway, not because of my patriotic motivation, but because of my personal experience. The 1976 Riviera I owned was outstanding as far as quality and longevity was concerned, and 1976 is right in the middle of the supposed quality-challenged decade for American cars. An Auto Week magazine article even call it a "boat with no tail" in a piece they did about the history of the Riviera.

Shortly after the car passed 200,000 miles, I drove it from Florida to Illinois and back to demonstrate to some skeptical friends that the car would make it up, down and through the Smokey Mountains of Tennessee just fine, as I was getting my own share of comments about how terrible American cars supposedly were. The car had over 250,000 miles before I had it hauled off to the junkyard, but not before a co-worker bought the engine for his airboat. The engine was so quiet no one knew (by listening) that I warmed it up for 5-10 minutes before I drove home from work as my co-workers walked past it in the parking lot to get in their own cars to drive home. People would walk by my ’76 Riviera, stop for a second, and ask me "Is that car running?" The body had rusted out by the late 1990s, but the car never had the advantage of a garage to protect it from the Florida sun and Atlantic Ocean’s salty air.

General Motors spent $5.2 billion on health care for their workers and retirees in 2004. The 2005 figure will be higher. The figure for Toyota, for instance, is certainly less since they didn’t build their first American factory until 1987. The Georgetown, KY factory, which assembles the Toyota Camry, was built with Japanese steel by a Japanese steel company. Toyota was given 1,500 of free land. To attract this Japanese company to America, we even established a "special trade zone" so they could import parts duty-free from Japan. Financing was handled by Mitsui Bank of Japan. Total federal, state and local tax incentives (read giveaways) reached $100 million - courtesy of your tax dollars and mine.

These are some of the hidden costs few think about when selecting their next car. Before the first Toyota in American was ever assembled, the American steel industry, parts industry and finance industry took it on the chin. American tax obligations were also raised to boot. Today’s Camry has a 55% domestic parts content, which is down from 75% just a few years earlier. American alternatives like the Chevy Impala has a 98% domestic parts content and the aging Ford Taurus, which used to be the number one selling car in America before the Camry took the top spot, has a 95% domestic parts content.

In the end, it doesn’t matter how you slice it. General Motors pays more taxes, employs more workers, has more domestic plants, supports more families, retirees and their dependents, and has a higher overall domestic parts content than the foreign competition - hands down. American quality is on the rise. Efficiency has increased. GM kept America rolling by donating millions of dollars in cash and vehicles in the aftermath of September 11, 2001. Where was the foreign competition in America’s time of need? They were busy reaping in record profits and sending them home to reward foreign owners at the expense of an American company that built the foundation of prosperity that America as a whole enjoys.

Profits are the lifeblood of any successful company or economy. General Motors makes only a few hundred dollars of profit per vehicle compared to over a thousand dollars for their foreign rivals because GM supports such a wide and diverse number of Americans. They’ve shown their loyalty to America by extending 0% financing for several years, and through their history they’ve done more good for America than any foreign car company ever dreamed of doing. It’s time for America to show their loyalty to an American company whose own increased prosperity will result in greater American prosperity as well.

So if you want General Motors to get more aggressive and on the offensive in terms of marketing, bolder car designs, etc., stop spewing your venom at them, which makes them constantly play defense instead. It’s unfair, unwarranted, and unproductive. GM wants to keep America rolling - as we all should - so let’s let it and make it happen.
 

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Definitely an interesting read with a lot of valid points. I bet many Americans don’t realize some of the impacts GM has on the economy that the author has eluded to.

However, I’d love to see a response article in the press, addressing some of these points from the side of an import brand owner too. Just to get both sides of the story. Such as the fact that although buying a US built Toyota may not be as good for the US as buying a GM car, it is better than buying a foreign built Toyota, which has 0% US parts content.

There would also have to be some response to the quality issue. I am not sure why he only focuses on the 1970’s, because it seems to me that the quality problems at GM grew in the 1980’s, and really hit their stride in the 1990’s when GM mandated cheaper parts from suppliers (and got lower quality parts).

He says Americans by foreign cars because of quality problems in the 1970’s, but I have a feeling they are afraid of quality problems that were far more recent.

GM execs have admitted that it takes years of high quality cars to turn around a bad quality image. There is a growing number of people who are now realizing GM quality has rebounded, but it will still take time for that rebound to be seen on the sales charts. When it does, maybe their slide will turn around.
 

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GM, Ford and Chrysler gave the unions almost everything that they wanted in the past. How many people realize that GM workers (and retirees) pay $0 toward their healthcare costs. No wonder GM spends $1,600 per car to cover healthcare costs.

Many times they are unable to respond quick enough to changing consumer interests because of a bloated, blinded corporate management and the "no change" attitude of the Unions.

What would GM and Ford do if all the "foreign" countries Mr. Simmermaker so derides decide that they not longer want to buy cars American companies build in their countries. Notice how he fails to mention the number of plants and offices both GM and Ford have around the world.

The US Auto Manufactures and Unions both sowed the seeds long ago that are the major cause of todays problems. Now that those seeds have come into full bloom, they are finding out they are actually weeds that are choking out the profits they so desperately need to survive.
 

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It is interesting how easy it is for people to try and focus only on the immediate impact - like Toyota or Nissan touting the "made in America" thing. Just heard a Hyndai commercial about how they are building a plant in America to employ more Americans... BLAH BLAH BLAH.

Follow the money. In the end, that's what really matters.

Any company that hires a worker counts on making money on that worker. If a company hires an engineer at $75,000 per year, they expect that the added value of that engineer is at least $85,000, hopefully more like they are hoping to double their money with the work from that engineer.

Same goes for a lineworker - hire someone to install suspension components or run a welder for $50,000, hope to reap a minimum of $60,000 for that person's added value.

That extra money the company makes - whether the worker is Chinese, American, Korean, Japanese, Mexican - goes back to benefit the parent company. And that parent company will spend its profit, pay its taxes, and mainly benefit the stockholders in the parent company's home country, first and foremost.

If GM and Ford do well - it is an indicator that America is doing reasonably well. If Toyota or Honda or Nissan or Daimler or BMW does well, and you live in America, who really gives a f*&k?

IF quality and appeal are roughly equal, prices are roughly equal, spend your money as close to home as possible. If you have that choice, great, then buy American - by that I mean "buy from an AMERICAN-based company". Notice I did not say "buy American" blindly.

Ever notice that if an American company hires a lineworker in Mexico or China, that American company is "exporting jobs" and "exploiting workers in that country." If a Japanese comany hires a lineworker in America, we automatically think that this is the greatest thing in the world - we consider the Japanese-engineered product to be "made in America", and we rejoice in the influx of jobs and do not feel exploited in the least.

What would be the best is if those people paid by Nissan to assemble cars in Smyrna TN turned around with their incomes and bought American products(equal/better quality). :thumbs:
 

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I don't want to start a fight, but I hope all those UAW workers also make sure that all the t-shirts, jeans and textiles as well as all their electronics, etc were not only produced in the States, but by American companies. Oh wait too late most of those are gone already. Hmm, I better stop buying bananas and stick with the oranges. Always easiest to blame someone else. I can't imagine it's a good business practice when you start blaming the consumer.
 
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