Monday, May 11, 2009

To Bite The Helping Hand?

General Motors contemplates just that:

The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.

The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.

As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.

Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.

Robert Reich points out that this example should make us do some serious thinking about the value of bailing out American companies if they then take their production (and often even their profits) abroad, leaving American workers worse off and the government with less tax revenues.

On the other hand:

Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency.

"If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.

Hmm. But this means that the auto industry shouldn't be bailed out in the first place.