General Motors Company (NYSE:GM) is on a cost cutting campaign that will further increase its strength and profit margins. Next in the crosshairs are GM’s possible plant closings in Europe, amid a downturn in car sales due to tough economic conditions in the region. Labor chiefs are vigorously fighting GM executives to keep the plant open saying that closing the plants would be more expensive than keeping them open. They also go on to say that the plant closures will delay the company’s “return to profit”.
The proposed plan to close one or two European plants will be fought head on by Opel’s union leaders which make up half of the supervisory board of the European brand. The facts here are that GM has lost billions of dollars over the last ten years mostly due to a recessionary type environment in Europe over the majority of those ten years. GM was hit pretty hard during the 2008 financial crisis. Nicknamed “Government Motors”, the car maker was majority owned by the US government because the brand failed to adapt to a changing economic climate and consumer.
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The way someone looks at this situation is dependent upon their political opinion. A conservative would say that business is business. If a company is taking down billion of dollars in losses, then cutting costs is priority number one and you must cut the aspects of the business that are hurting you the most. In this case, it is GM’s Opel unit plants in Europe.
A liberal would say that a cost cutting that is this “ruthless” is damaging to the workers. The liberal ideology tends to be more pro-union than pro-business so you are going to be getting the pro-union side of the argument.
Regardless of your political ideology, if you rely on GM for income whether you are a worker or a shareholder, you want GM to close these plants. It is unfortunate that the workers are getting the short end of the stick but at the end of the day, if GM fails then everyone loses.
General Motors is finally returning to profitability. Cars are flying off the lots and it is obviously a great time to be associated with the Big Three American automakers. Europe, on the other hand, is a disaster financially. People are not buying cars because they have no job. They have no job because businesses can’t operate efficiently in a recessionary, crippling-debt environment. Sorry Opel workers but times are tough and it is in GM’s best interest to stop the billion dollar bleeding that is the European plants.