GM's plant closures stink of corruption on so many levels

GM's Detroit-Hamtramck plant. Credit:

Investors and top executives have used profits at GM to enrich themselves for years, while insisting mass layoffs are an unavoidable fact of economics.

GM is moving forward with plans to close its Detroit-Hamtramck, and Oshawa, Ontario plants, after closing its Lordstown, Ohio plant earlier this month. GM has also announced plans to close its Warren, Michigan and Baltimore, Maryland transmission plants in the near future.

The plant closures are in direct violation of GM's collective bargaining agreement with the United Auto Workers (UAW), an agreement in which GM promised it would not, “close, idle, nor partially or wholly sell, spin-off, split-off, consolidate or otherwise dispose of in any form, any plant.” However, in a press release last November, GM CEO Mary Barra (2017 compensation: $22 million) claimed that GM was merely “unallocating” the plants, thus not violating the agreement.

The press release from GM claimed that it was shifting its resources from the plants to invest in electric car and SUV production. Barra claimed that savings from these shifts would include, “$6 billion” in cost reductions, in addition to, “$4.5 billion and a lower capital expenditure annual run rate of almost $1.5 billion,” and that the restructuring would result in the loss of 14,700 jobs in total.

GM's stock jumped 8 percent following the announcement, and Barra in particular was singled out for praise from many in the corporate press. “Barra knows that reinventing a century-old company is painful, but it's the only option,” wrote Matt Egan in CNN Business. “Mary Barra has methodically reshaped General Motors...She's made GM sharper, lighter and more focused on the future,” said USA Today's Nathan Bomey. On March 6th of this year, the same day that the Lordstown, Ohio plant closed, Canada's The Globe and Mail ran an article entitled Female role models, such as GM’s Mary Barra, are carving the path for women in the auto sector.

Despite the praise, the moves cannot be justified as simply as many would claim. Defenders of GM claim the plants are losing money, and even though GM made $11.8 billion in profits last year, in the long-term the company cannot afford the plants if it wants to stay competitive. What these commentators, and almost every news article on the subject, fail to note is that the alleged $6 billion in savings is dwarfed by the $10.6 billion the company has spent on stock repurchasing programs since 2015. Stock repurchasing programs are very popular amongst shareholders and top executives whose pay is tied to the company's stock price, as it is a way to artifically buoy a company's stock price resulting in massive returns for shareholders. In fact, 2018 saw some $1 trillion of stock buybacks, a red flag for those who argue that mass layoffs from companies like GM are just simple economics.

Additionally, Barra and GM's decision may have been praised as forward thinking, but the move is simply an about-face from GM's move 10 years ago, when it closed its Dayton, Ohio plant because of poor SUV sales due to high gas prices. Now the situation is simply reversed; GM is closing plants to shift production to SUVs since gas prices are lower. Not exactly revolutionary thinking. This is to say nothing of the fact that the Detroit-Hamtramck plant already produces an electric car, the Chevrolet Volt.

All of this comes after the disgusting display of corruption that was GM's $50 billion taxpayer funded bailout in 2009. At the time, Obama administration official Harry Wilson helped engineer the bailout while secretly arranging a campaign of gross corporate raiding. In a display of corruption so brazen that even Forbes seemed hesitant to paint it in a positive light, Wilson colluded with hedge funds to buy shares of GM, and then pressure GM to use its bailout money to engage in mass share repurchasing programs. The stock buybacks ensured that a large chunk of the taxpayer money would be used to enrich Wilson and his hedge fund accomplices, rather than keep plants running. Wilson and his hedge fund allies made a killing from the scheme, and Wilson is now a major Republican Party fundraiser.

Every layer of the story behind these plant closures reeks of corruption. The Detroit-Hamtramck plant, which straddles the city line of the two cities, was built in 1981 after demolishing 1,500 homes and displacing 4,200 people, devastating the neighborhoods in which it was placed. At the time, the new construction was supported by many, including the UAW, who welcomed the new jobs the plant brought. Others resisted the agreement, a struggle which was immortalized in the movie Poletown Lives. Rev. Joseph Karasiewicz of the neighborhood's Immaculate Conception church refused to vacate, and Karasiewicz organized resisters to engage in a sit-in at their church. The resisters were then violently evicted by a 60-man SWAT team. In the months that followed, Karasiewicz was removed from his post by the church, and died from a heart-attack at the age of 59.

Karasiewicz said of the expansion at the time, “No one is safe except the man who has the money, to put it bluntly.”


Mar 25 2019 17:11

Not sure these decisions can be put down only to ''corruption'' . Sure the bosses have no moral scruples about fiddling the books and lining their own pockets along the way but the global motor industry is going through a major restructuring just now in response to market pressures and technological advances.
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Mar 25 2019 17:41

Fair enough, just read the articles, quite good, an interesting position and one that is worth looking at more deeply, though I am skeptical of claims that automation is a primary instrument of change in downsizing currently, as productivity growth doesn't seem to reflect this.

Also, I think GM's case is unique in terms of corruption because of the things my post mentions