GM: Firing 7,500 More Taxpayers To Save Taxpayer Money

GM’s July sales fell 19%, more than any of the other major car companies, to 188,156. The number is down so much that without the Pontiac and Saturn brands that it plans to phase out, GM might not have outsold Toyota (TM), which sold 174,872, and Ford (F) which sold 164,795. America’s largest car company, which has held that position for decades, may not be many months away from being the third largest auto firm based on domestic sales .

GM was saved by the government, which put $50 billion in taxpayer money into the company, money that US citizens will probably never see again. The bargain for getting that money was to slash the size the company’s debt, it employee benefit obligations, and its work force.

GM has been cutting its blue collar head count for the better part of a decade. It recently began more aggressive cuts among managers. One of the details of the plan that got GM federal dollars was an agreement to get its factory work force to 40,500 by the end of this year. About 6,000 GM workers took a recent buyout offer, but that leaves the car company 7,500 jobs short of its goal. The firm said it does not plan another buyout package. Those workers will simply have to go to the unemployment line without any special severance package.

Consensus estimates are that 275,000 people lost jobs in July. GM is planning to layoff about 3% of that many people. Each time a large American company cuts a few thousand more people. the odds that joblessness will stabilize suffers.

The perverse part of the GM “downsizing” is that each worker who losses a job is a taxpayer who is likely to become a ward of the state, an unemployed person who costs money to support. GM has been firing taxpayers at an alarming rate for the several quarters.

GM workers are not as likely as many others to find jobs. The average time that it takes an unemployed person  to get a job in the US is now six months. For an auto worker, especially in Michigan or another state where employment is dominated by manufacturing companies, it could take much longer to find work, if there is any work at all.

The government’s investment in GM has actually become much greater than the $50 billion that shows up on the Treasury’s books. In a recession where the deficit is being driven up by a falling tax base just as much as it is by government spending pushing a person onto the unemployment line is expensive.

Douglas A. McIntyre