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So Where Are The Jobs Going?
Posted on May 12th, 2009 9 commentsThe other morning I was watching MSNBC when a very disturbing graphic flashed onto the screen. The graphic was about domestic production percentages at GM. It seems that GM intends to shift some production of vehicles, which are intended for the domestic market, to low labor cost countries. A quick search online produced a great deal of information about this issue. One particular search result was a Washington Post article, Under Restructuring, GM To Build More Cars Overseas, which is a fair discussion of the issue. Even so, the shifting of production just does not sit well with me since the GM bailout was to save American jobs.
As a business, I could understand why a company would want to reduce costs. Why pay a U.S. autoworker $54 an hour, with benefits, when you can pay a South Korean worker $22 an hour, or a Mexican worker $10 an hour, or even a Chinese worker $3 an hour. Businesses need to remain competitive and to a consumer saving several thousand dollars might just be too attractive to pass up.
The fact that bothers me the most about the movement of production is that the rate change of foreign production increases at an alarming rate. GM expects that in 2010, the percentage of domestic production (U.S. and Canada) is 83.3%. In 2011, that percentage drops to 83.1%. This is only a .2% change, which is not so bad, but that rate of change jumps to 1.1% between 2011 and 2012. The rate then increases to 2.5% for 2012 to 2013 with a further increase to 3.0% for the 2013 to 2014 period. This means that the overall change in (U.S. and Canada) production goes from 83.3% in 2010 to 76.5% in 2014.
GM does indicate that although the percentage of U.S. sales of cars that are built in the U.S. will drop from 67% currently to about 61% in 2012 it will rebound to 66 percent by 2014. The difference between the two sets of numbers comes from a 23% reduction of production in Canada.
I am not sure what will happen in 2015. Does GM intend to stop shifting manufacturing overseas after 2014? Will they continue to shift production from Canada to the U.S.? For every 1% of U.S production moved overseas, GM would have to shift approximately 3.4% of the Canadian production to the U.S. to keep the U.S. production percentage at 66%. At some point it will not be practical to shift production from Canada to the U.S. in order to compensate for the production shift overseas. What will happen then?
Many things can, and will, affect what will eventually happen. The UAW might make significant concessions in contract negotiations. Healthcare reform could be enacted that reduces the overall benefit package cost of U.S. workers. The Canadian government might get involved with incentives to keep production in Canada.
The shifting of production just makes it more important for people to truly understand where vehicles are manufactured. Just because a vehicle was manufacture in the U.S. this year there is a chance that it will not be next year. This is even truer for Canada.
9 responses to “So Where Are The Jobs Going?”
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I think gm is gonna go out of business, at least it sure as hell looks that way.
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I like the idea. I’m giving this a thumbs up.
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Good day. I stumbled across this site by an accident but was happy that I did. My brother and I have begun a huge lot of online research regarding the hottest news trends and comments about where to find them. Anyways, thanks for the friendly advice – excited I found your site and will keep in mind.
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interesting blogpost I have just added you to my rss reader. Keep up the good work!
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I am so glad that I found your blog So Where Are The Jobs Going? @ proudlymadeinamerica.com. Congratulations on your fabulous contribution. Well, that makes sense. I have read a few of your other posts and they are all informative too – keep up the good work. Thanks for sharing these facts!
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Is there anymore you could add to this article that would people understand all spetrums of this subject?
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Howdie! Very informative post. What a fine info. Thanks a ton for sharing! I have checked over a few of your other articles and found some great information too. Judith
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