Trying to Buy G.M.'s Friendship

The New York Times has a story today illustrating one of life's lessons that Flint learned long ago...just because a city is nice to a corporation like G.M. doesn't mean G.M. is going to return the favor.

Louise Story reports:

In the end, the money that towns across America gave General Motors did not matter.

When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.

For years, mayors and governors anxious about local jobs had agreed to G.M.’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. As late as 2007, the company was telling local officials that these sorts of incentives would “further G.M.’s strong relationship” with them and be a “win/win situation,” according to town council notes from one Michigan community.

Yet at least 50 properties on the 2009 liquidation list were in towns and states that had awarded incentives, adding up to billions in taxpayer dollars, according to data compiled by The New York Times.

The Hardest Job of All

Can someone help out a UM-Flint grad answer the question so many are asking these days...How do I find a job?

A not-so-simple question

After reading about G.M.'s dismal second quarter earnings report, redgirl asks:

"What was CEO Rick Wagoner's salary in 2006? In 2007? What will it be in 2008? Hmmm — I wonder if GM will cancel all of his health insurance when he reaches the age of 65...which is what the company did to my 79-year-old mother and God only knows how many other retirees and their spouses ... Angry? You bet I am."

Such a simple question. What is Rick Wagoner's reward for posting huge losses while slashing jobs, wages and benefits?

Turns out it's not so simple, but let's try and get a handle on it.

Effective March 1, 2006, Wagoner agreed to cut his $2.2 million annual salary in half. That meant his new salary was around $1.1 million a year.

Then, in 2007, G.M. announced Wagoner would “continue” to draw a "reduced" salary. Here’s where it gets a little tricky. The new salary was not based on the $1.1 million he’d earned the previous 12 months. Instead, it was based on what he made before the March 2006 reduction.

That worked out to a 2007 salary of $1.65 million a year. In other words, he got a raise, despite claiming he was drawing a "reduced" salary.

Mark Stein at portfolio.com does an excellent job of showing that Wagoner's pay "cut" didn't necessarily mean less money. He also points out that salary only accounted for 17 percent of Wagoner's total compensation:

“The remaining 83 percent of his $10.1 million annual pay package comes in the form of stock awards, option awards, pension sweeteners, and $769,566 in ‘other’ compensation (life insurance, financial planning, personal travel on the corporate jet, bodyguards, and dividends on restricted stock).

Then, in March of this year, G.M. announced that Wagoner “will earn a salary of $2.2 million in 2008, restoring his base pay to the level it was before he took a 2006 pay cut as part of the company's turnaround plan,” according to the Associated Press.

“Wagoner is eligible for up to $3.5 million in incentive payments and a grant of 165,563 shares of GM stock if he meets the internal targets,” according to the AP. “He will also receive 500,000 stock options that will vest over three years and 75,000 restricted stock options that will vest in three to five years.”

Third-World American Workers

Jobs returning to the United States from overseas is a good thing, right? Except when the companies come back because certain states like Idaho and Georgia are "less advanced" than foreign countries like India. Translation: some Americans are so desperate for any work at any wage, they're more attractive than workers in developing nations. This trend reveals just how bad the employment prospects are for many Americans. Salon.com's Andrew Leonard looks at the pattern:

In 2006, AAA executive vice president David Hughes told NPR that roadside assistance was too sensitive to outsource to India. Does that include the über-operators who connect you to the local operators? I don't know. But it doesn't really matter, because according to an article in Time Magazine this week, the era of the India-accented call center operator may be coming to a close. India's economy is growing so fast that those who once might have seen a call center job as desirable now have other options available to them.

The industry is... facing "intense competition" for workers from the retail and airline and hospitality sectors, where wages are now closer to what call centers pay, said Kiran Karnik, president of NASSCOM. As India expands its share of more sophisticated outsourcing like financial analysis and product research and development, Karnik said competition for choice employees is also growing. "As recently as four years back, the choice was pretty clear," Karnik said. "Either you got a high-paying, good job at a call center or no job at all. Today, not only are there other options, but they are pretty close to the call centers [in terms of salaries]."

The Time article dovetails nicely with a related piece published in the Guardian over the weekend, "India Outsources Outsourcing," which documents a growing trend in which the big Indian infotech companies are moving portions of their outsourcing operations overseas, often to nations that are conventionally considered more economically "advanced" than India. Again, the drivers are rising wages and competition for skilled employees. (Thanks to the New Economist for the link.)

Wipro, another hi-tech titan, has been on a spending spree, buying up companies in America, Finland, Portugal and Europe for hundreds of millions of dollars. Azim Premji, Wipro's chairman, raised eyebrows on Wall Street when he talked this year of setting up divisions in Idaho, Virginia and Georgia -- U.S. states he said were attractive because they were "less developed."

GM losses and buyouts continue

After losing $722 million in the fourth quarter, General Motors announces buyouts for all 74,000 union workers.

“Despite progress and buoyant markets outside the U.S., falling volumes and competitive pressures in the U.S. will continue to pressure G.M. North America and hence overall G.M. operational results,” Brian A. Johnson, an analyst with Lehman Brothers, wrote in a note to clients Tuesday.

The Wall Street Journal has details of the UAW-approved buyout offer:

This new buyout offer is different in that it is designed to open the door for a flood of new workers that GM has said it will hire following its recently inked contract with the UAW. Currently, workers at GM plants typically make $73 an hour, including wages and benefits, no matter what role they fill. The UAW is allowing GM to reclassify about 16,000 of these jobs, such as janitorial jobs, as "non-core" assignments with wages and benefits equaling $25.65 an hour.

Chrysler Job Cuts

Photo via www.nytimes.com

Chrysler announced today that it's cutting 11,000 jobs and dropping the PT Cruiser, the Chrysler Pacifica, a crossover vehicle dissed for being too big and too pricey for family buyers, and the Dodge Magnum, which looks a bit like a stylish hearse. It's not a direct blow to Flint, but it's not good news for Michigan.

GM WORKER'S VIEW

"We thought we were living the American Dream."
Claire McClinton, third generation GM autoworker, Flint, Michigan

The BBC takes a depressing look at the impact of globalization on cities like Flint with the help of Claire McClinton.

In the 1950s the Detroit area had the highest median income, and highest rate of home ownership, of any major US city. But times are very different now.

GM, under pressure from its competitors, is no longer making money in the American car market - and it has been closing plants all across Flint.

Now there are only 6,000 GM workers in Flint, compared to 100,000 at the peak, and the town and workers are suffering.