GM and Chrysler management's blew it

     Once upon a time Ford, GM and Chrysler were the only automobile companies in the United States. With no other competitor they made thoughtless business decisions that led them to file for bankruptcy. Eventually new players Japanese and European car manufacturers got into the game; the big three were rigged with high the cost of employment and legacy costs that were negotiated with the UAW (United Auto Workers). Health benefits and other negotiated benefits were over one thousand dollars greater per car than they were for their competitor (Newsweek April 2008).

     After securing the bailout of over 17 billion in 2008 from the US Government, Chrysler and GM were ordered to trim costs and debt. With virtually no big concession from the worker’s unions, GM and Chrysler filed for bankruptcy.

     I blame management for the mess, but that does not mean I am giving a free pass to the Unions. You see, management’s job is to think for the future; workers will always want more, but it is management that has the final say. These leaders made weak decisions that led their companies to file for bankruptcy. While negotiating with the Unions, GM and Chrysler made moment-in-time decisions with no regard for new models such as economies of scale and comparative advantage. If managers of GM and Chrysler were visionaries they would have been proactive in using economies of scale for cheaper labor and they would have increased their international presence prior to the arrival of foreign competition in the U.S market.