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GM mortaged the future

FiveThirtyEight.com has a simple explanation of why GM is dying:

GM was willing to cut its employees some very attractive deals in the 1950s through the 1980s — provided that they took them in the form of retirement benefits rather than salary, which wouldn’t hit GM’s books until much later and which until 1992 weren’t even required to be carried on its balance sheets all, making its financial statements (superficially) more appealing to its shareholders. That health care costs have risen so substantially in the United States have made a bad matter worse.

This issue is wrongly portrayed by both the liberal and the conservative media as one of management versus labor, when really it is a battle between General Motors past and General Motors present. In the 50s, 60s and 70s, everyone benefited: GM and its shareholders got the benefit of higher profit margins, and meanwhile, its employees benefited from GM’s willingness to cut a bad deal — for every dollar they were giving up in salary, those employees were getting a dollar and change back in retirement benefits. But now, everyone is hurting.

2 Comments

  1. Wow, imagine if the government—I don’t know—subsidized health care so individuals and companies only had to carry catastrophic health. The premiums would obviously be much lower, as fewer people would make claims.

    I imagine the lower costs of sundry and preventative healthcare would only hurt one group: the insurance companies.

    LargeCOs like GM would then be able to reduce their costs greatly. Imagine that.

  2. Another reason Gm might be dying is because when they produce a car all its owners like they stop making them.

    http://www.sonyclassics.com/whokilledtheelectriccar/electric.html?detectflash=false&

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