Monday, September 21, 2009

G.M. Invests in Flint

Tim Higgins of the Detroit Free Press reports:
General Motors Co. will invest more than $21 million in the Flint Assembly Plant to produce the 2011 Chevrolet light-duty crew cab, the company announced this morning.

The investment will include renovating the existing heavy-duty assembly process and new machinery and tooling for light-duty trucks.


18 comments:

  1. Yo, City of Flint re potential tax abatements:

    Lucy.

    Charlie Brown.

    Football.

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  2. To complete Cooley's metaphor:

    ARRRGH!

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  3. Ha! Sad but true, people.

    But, in fairness, better tax abatements and 1,767 (real) jobs than no taxes and no jobs, and the environment out there is so competitive those are basically the options. A sad commentary on the Great American Economy if ever there was one.

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  4. Yay for everyone that had a role in getting this to happen for the Truck Plant. I virtually salute you all.

    It's a newly competitive world, and winning is good.

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  5. I want to understand this. People are disgusted with GM because they go for the best deal possible. Not only do they competitively place all of their tooling business, they even locate the facility where it is least expensive to maintain. Am I correct with this take on the earlier responses? To help me further, what exactly is it that trade groups do when they travel around the world enticing companies to relocate in cities like Flint? I'm not purposly being confrontational. I'm trying to understand how GM is expected to successfully do their business, while turning a profit for the stock holders. Maybe I'm so entrenched in one line of thought I can't see the forest for the trees. Please enlighten me.

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  6. Anonymous at 5:52 -- lemme help you out here.

    There was a time when large corporations were involved in the needs of the local communities where they made their profits. These corporate entities felt some obligation for the vast amount of publically funded infrastructure that allowed them to continue their manufacturing process, day to day, year after year.

    Please see the pictures of Bassett Place on the right hand side of this page. That neighborhood -- if not the individual homes, per se -- the sewers, streets, etc. was constructed by the Modern Housing Corporation, a GM entity that was the predecessor to Civic Park, a local entity that made the initial foray into community development necessitated by extra-community corporate success.

    The stockholders were considered secondarily -- the continued output of product was primary. So over the years GM prospered. As did Flint.

    Now comes the global economy and GM feels no such sense of corporate/community responsibility but chooses instead to focus on stockholders leaving communities with unemployment and polluted sites that will cost dozens of millions to render operable again.

    Okay. So be it. Thanks to GM for the current re-investment and the perpetuation of Flint jobs.

    But let's not lose sight here of one fact: if GM can save 100 bucks per finished unit, they'll be manufacturing off-shore in a few collective heartbeats of the next stockholder's meeting. And Wall Street will applaud the move.

    And that's why I say -- no to any more tax abatements.

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  7. Sorry -- 'predecessor' should have read 'successor.'

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  8. Beautifully put, CD.

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  9. Cooley, two things:

    I think you have a very optimistic view of GM's motivation in the good 'ol days. GM was able to appear as magnanimous as they did because the good times were rolling. They were producing and selling cars by the millions to a country that needed cars by the millions (i.e. families and individuals were buying their first cars, not replacing existing ones), an immature market. But as the market matured, and as competition increased, the phenomenon you describe, moving offshore (which can even mean "down south"), occurred. We see how fast that feeling of "obligation for the vast amount of publically funded infrastructure that allowed them to continue their manufacturing process" disappeared.

    Now, your point is well-taken that if GM felt like they could save $100 per car they'd move tomorrow, but the thing is that "per car" isn't necessarily a good measure. Sure, in a vaccum a Malibu built in Mexico costs less than one built in Orion Township, but you have to figure in the costs upfront of building the new plant and the its attendant infrastructure, all of that has to be figured in to the price of the car. It's in GM's interest to invest where the infrastructure already exists, Flint in this case.

    Ultimately, I see your moral point about tax abatements, but is this the hill to die on? You keep the plant, 1,800 keep their jobs, and their homes, and paying property taxes.

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  10. Let me go further, Cooley:

    First, Shareholders understood that they were investing in the future of a company, not what they could get out of the rise in value or dividends. It's this recently developed, now constant pressure for profits (and the threat of loss of price, aka being taken over cheaply) that drives much of what happens in corporations today.

    Second, while one could argue that GM was held hostage by their investment in their plants, they DID invest in the community. Not only Civic Park, but also the General Motors Institute (now Kettering College) and, indirectly, the IMA Auditorium (never made a profit during its active life) were gifts from GM. Nowadays you'd be lucky if the company decided to show its face at the border of the community it claims to benefit.

    Third, used to be that when things got tight the management took pay cuts all the way to the top as a matter of course. Nowadays that happens mainly as a publicity stunt, and only when they've gotten enough to make the stunt workable. Sometimes it's successful (Chrysler during Iaccoca's early tenure there), other times it just looks good and hides what happens between reimbursements and stock trickery.

    Fourth, that $100 savings would include the factory and shipping costs. They'd probably make the country pay for the infrastructure under the promise that taxes received would more than cover for the investment. Pollution and safety wouldn't be near the issue as at a US factory. Community Investment would be much less than here. And they'd pay much less for their workers than what they could get away with in Flint (or Jonesboro, AK, for that matter). That's why so much of our consumables are made in China (or Vietnam...) and shipped here by boat.

    That's why Flint's 1954 parade for the 50 millionth car built was proudly attended by GM executives, while the attempted 100th anniversary party was not even acknowledged by GM.

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  11. I think it is a fallacy to say that unit production cost (savings) is the sole driver in plant location.

    Every single carmaker on the planet can and must view the globe as a more or less contiguous market. It is possible to produce products in many locations and ship them to others. The decision to place production facility in certain markets will hinge on demand for the product, image, logistics, supply chain, costs, tariffs, duties, etc.

    'World cars' tend to be small and cheap and made in 'lowest cost possible' markets to make them competitive in as many nations as possible. In more localized vehicles, production gravitates to the country where demand for that vehicle is high. Look at the facilities that European and Asian manufacturers built in the US. They produce vehicles that sell mostly in north america. Americans want Mercedes SUVs so they build them in Alabama. Big Toyota Tundra pickup? US. Honda Fit? Japan. Is this to save $100 bucks? why aren't all these plants in Mexico? Why aren't all cars on the planet made in China, sub-Saharan Africa or the Phillipines?

    GM needs a light-duty truck facility in the North American market. It's not going off-shore, never was. If you are a business leader (in any industry from retail to pro sports but ESPECIALLY manufacturing) bringing investment into an American town today, you must create (at least the illusion) of competition for the location of that investment and let local governments drop their shorts to secure the opportunity for their constituents. If Flint wanted in, they had to do it, it's how the game is played. And the notion that GM is somehow in the community service business? That does not enter into ANY 21st century equation.

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  12. We'll see what happens with the liberal Dems' (and other Western countries') proposed global stock transfer tax, intended to greatly discourage quick reactions to news items and quarterly results, and encourage holding for the long run.

    Obviously it would have a theoretical negative impact on market efficiency. If OTOH it did in fact tilt markets toward identification of long term strength and value-build, and decrease the playing of communities and nations against each other for short term results, it would tend to move Western economies back toward the behaviors that resulted in their original growth in economic power.

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  13. So then the question is, why are they throwing $21 million into an existing plant in a place where workers make more than anywhere else in the world instead of moving the light duty pickup line to Mexico? Furthermore, why haven't they moved all production there, or to China for that matter? They've certainly had the time.

    I hate to be crass, but really, if you believe that the manufacture of automobiles was ever about anything other than the maximization of profit, then I've got some prime oceanfront land in Omaha that I'd love for you to take a look at. GM could invest heavily in the community and give the workers whatever they wanted because they were making cash hand over fist, in quantities most companies today could not really comprehend. Once times got tough, the beneficence well ran dry right quick.

    Now, am I saying that's right? No. Do I think Flint has a serious martyr complex vis-a-vis GM? Of course. We are as a spurned child. And it manifests itself in self-destructive ways, primarily the wailing and gnashing of teeth over GM's closure of another plant or decision to build a new one elsewhere (this was the 1990s) or reflexive "damn-'em-to-hell no more abatements!" talk.

    As you say, though, godozo, they're going to get a deal wherever they go, in the US or outside of it. So our options really are play ball just like everybody else, or watch those jobs go elsewhere. And considering those 1,800 jobs account for a yearly payroll in the high eight figures that goes straight to the Flint/Genesee County economy I just don't understand, as my dear mother says, cutting off our nose to spite our face like that.

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  14. Wow, what a great bunch of responses to my Anonymous post. I agree with 90% of them. I must fess up that I was on salary at GM for the bigger part of the 70's & 80's. I guess I'm a little like an ex-smoker; a pain in the butt on the subject of GM. I would like to leave my input on this subject with the following. I worked for a Master Mechanic who told me early on, that GM would be a great place to work. I would associate with people who genuinely cared about me and my family. The corporation would pay me well and educate me. However, I needed to remember they weren't doing this because they liked me. They wanted me ready to perform when I was at bat. I decided I could live with this.

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  15. ANONYMOUS, I read, reread and read again the discourse that your comments created in this discussion. I am certainly impressed with what was contributed by a lot of astute commentary on this particular subject. Being immersed in the auto industry from birth to death does qualify the residents to speak with knowledge of what has transpired in Flint. My family, from sweeper to plant superintendent was always a trip at holiday gatherings. An uncle, who was a member of the Original Gestapo seven at Chevrolet and a father who was a union organizer and union president for nearly forty years, made for some interesting debate at times, otherwise they were the best of friends. I remember leaning out of the window on the tenth floor of the Metropolitan building and catching a couple of the thousands of balloons that were released during the parade and celebration of the 1954 milestone of fifty million built autos. My dad had a firm grip on my belt. I was eighteen at the time and fearless.... make that witless. unclebuck

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  16. Just wanted to thank everyone for contributing to comment section. I really enjoyed reading these, and I'm grateful that so many people with experience and insight are willing to take the time to write.

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  17. PS> Meanwhile, I cast my lot with WILL. Thank you, ANONYMOUS?.....unclebuck

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  18. Why the "Damn Them To Hell?" Response amongst many Flintoids?

    My Guess is that after a while everything feels like a tease. Another end of agreement, another set of threats, another round of tax abatements, and maybe another few years after which the whole cycle begins again. In the meantime you know the corporation's looking at its options and considering whether it'd be better to move production elsewhere.

    Makes a worker feel like he's being played by a once-devoted lover, even though everyone's supposed to know that Corporations are Corporations with no love to give to the workers (unless the corporation has no choice in the matter). However, many workers have grown to love the corporation because the pay is decent, even as they hate the corporation for the effects on their bodies, minds and souls.

    That, amongst other things, leads to such things as the wildcat strike at Buick City in the late nineties. From what my father (Buick Factory/Buick City, 1963-95) said, GM was ready to make some of the necessary investments to insure Buick City's continued existence before the strike, but instead they threw up their hands and gave up.

    And as for that $100 figure thrown around, you're right about it not being the whole story. Auto workers of all stripes tend to be strongly brand-centric, making for a captive market even when everyone else is looking elsewhere. I'm sure that level of devotion goes a long way towards explaining such things as Toyota having more employees in the US than Ford.

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