Lawful Evil (lawful_evil) wrote,
Lawful Evil

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GM seems to be trying to fix itself so that it can compete and survive.

It faces the same challenges that all US companies, that produce things, face. It must overcome the fact that it is a US company. There are very few US companies left which actually produce things. How many factories do you see? It is expensive to produce things in the US. Why?

1. Labor Costs
2. Taxes
3. Labor Benefits
4. Raw Material Prices
5. Cost of Shipping Raw Materials

Labor Costs Why does Labor cost so much? Labor costs is directly based on the cost of living(COL) in the area. I would bet the most expensive Chinese town has a lower COL than the cheapest US town. Within the US the labor costs might be low, but you must consider the whole world. US workers expect a higher standard of living. I doubt that GM could compete even if wages were lowered to 'minimum wage'.

Taxes Vehicles produced in the US are taxed more than vehicles produced outside the US. Not much can be done about this, except lobby for a change from income taxes to sales taxes. The use of national sales tax, instead of an income tax, would allow the US to tax foreign made goods. This would raise the price of all foreign made goods and leave the price of US made goods untouched.

Labor Benefits Unions have run most US companies into the ground. The US automakers recently claimed than $1500 of the price of a new car is the health insurance costs for the employees. Companies need to stop buying insurance that covers just about everything and move towards insurance that covers catastrophes only. If health insurance was like homeowners insurance, then health insurance would be a lot cheaper. No one files a homeowners insurance claim if a dog digs up their flowers, a baseball breaks a window, or the lawn needs grub treatment. My health insurance costs just about $14,000 per year.

Raw Material Costs These costs are higher in the US because the producers of the raw materials face the same challenges as GM.

Cost of Shipping Raw Materials These costs could be lowered by locating manufacturing facilities near to the suppliers. These costs are dependent on the cost of fuel and labor. The shipping company faces the same issues that GM faces when dealing with its labor force.

The only way that GM could compete in this environment would be to produce a product which could not be imported to the US or to produce a product which could not be produced outside the US. Another option would be to change the environment it is operating in. Move overseas for example. Another valid change would be to push for tax reform(ie Fair Tax).

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