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GM Outsourcing after taking dollars from the American Worker


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2009 Oct 20, 6:33am   4,413 views  14 comments

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What do you think, is this baloney that GM can outsource after we give them a 350B bailout? Personally, I think it does more for the local Indian economy than it does for any other nation.

Outsourcing Has Paved Way for GM's India Push

Posted by Paul McDougall, Dec 13, 2005 12:51 PM

General Motors' announcement this week that it intends to triple the number of cars it produces and sells in India while substantially adding to its labor force there provides another example of how outsourcing will help boost the U.S. economy. Yes, you heard that right.

With its domestic sales in a tailspin, GM desperately needs to win in emerging markets if it's to continue to grow, avoid bankruptcy and forego additional cuts to its domestic operations and workforce. And India's population of one billion-pus includes millions of potential car buyers that could seriously boost GM's fortunes.

So where does outsourcing come in? Through its own operations, and through the Indian arm of its major (at least for the moment) IT services provider, EDS, GM already has thousands of technology workers on the ground in India--workers familiar both with GM and the Indian market--that could help support any expansion the company undertakes in Asia. Indeed, if GM's offshore workers in India can build high quality systems for its U.S. operations, they should have no problem building them for the domestic Indian market.

Additionally, the whole outsourcing phenomenon has helped build a market for GM cars and other Western-made goods in India because it is helping to create an Indian consumer class with the disposable income needed to buy such goods.

So, while it's a painful fact that GM is currently cutting up to 30,000 positions in North America, in the long term a globally competitive General Motors is one that will be a job creating machine in the U.S. and abroad. A lot of current sales, marketing, engineering, and finance positions in Detroit are already directly linked to GM's global efforts. On the other hand, a GM that is not globally competitive will go the way of AMC--anyone driven a Pacer, lately?

Ironically, GM's current mess is in part due to millions of American consumers--thousands of IT workers among them, no doubt--"outsourcing" their personal transportation needs to Japanese car makers. The success of Toyota and Honda in this country proves that consumers are no different from businesses in that they want the best product, for the best price, regardless of origin. That's as true for cars as it is IT labor.

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1   Peter P   2009 Oct 20, 6:44am  

What do you think, is this baloney that GM can outsource after we give them a 350B bailout?

The bailout was a calculated political move, not an act of charity.

4x, do you happen to be a Forex trader?

2   4X   2009 Oct 20, 6:58am  

No, I am in the IT Services industry. We have been hit hardest by the offshoring of American jobs. I never said I thought it was baloney, I only asked the question to stir the pot here. My thoughts are that it goes both ways and what i foresee is that housing and other products will have to drop to match wages...but if we keep offshoring America then wages will drop to all time lows creating neighborhoods of lower economic ghettos.

Drive through the City of Compton to get a better feel for what I am talking about.

3   Peter P   2009 Oct 20, 8:47am  

If you ask me, outsourcing makes sense on paper only, at least in many cases. One of the most valuable asset of a company is its corporate culture. That takes more than a few consultants and a few years to build.

While I will strongly defend the right of a corporation to outsource labor, I believe they are not necessarily doing their shareholders a favor for the long run.

4   Malcolm   2009 Oct 20, 1:23pm  

Hate to say it but if they are going to be competitive in that market, they will need to build cars in that market. It is good overall because it does improve incomes in India, and profits will trickle back to the US.

This is different than the model where American companies make products overseas to bring back into the country, which is very destructive to our own economy.

It is international business theory that to open foreign developing markets, you use the low cost labor there to make the products you are selling in that country. We couldn't expect American made exports (at $75/hr burdened labor cost LOL) to be competitive or even feasible to the average Indian consumer.

Remember that engineers there are thrilled to make $10,000 a year.

5   4X   2009 Oct 20, 2:01pm  

Malcolm/Peter:

My thoughts on how to slow the outsourcing trend are that we should force companies to keep a workforce in America for local products and use the foreign resources to produce foreign products. This keeps our companies globally competitive and saves American jobs.

Your thoughts?

4x

6   Malcolm   2009 Oct 20, 2:12pm  

I agree, but I don't like the notion of mandating this or that. I do support policies that encourage your goal. One such idea is to treat American goods made overseas as foreign imports. So, if we have some protectionism in the form of tariffs, those products would be treated the same way as a product made by a foreign company.

7   4X   2009 Oct 20, 3:45pm  

nice point.

8   4X   2009 Oct 20, 3:45pm  

take your personal pic down, you dont want employers reading your viewpoints.

9   Peter P   2009 Oct 20, 5:22pm  

My thoughts on how to slow the outsourcing trend are that we should force companies to keep a workforce in America for local products and use the foreign resources to produce foreign products. This keeps our companies globally competitive and saves American jobs.

What if an American company outsources a SaaS implementation that serves customers in the US? When does the importation occur?

In this day and age, national boundaries are disappearing fast. I think these should happen:

1. Health care reform - this lowers the cost of retaining employees and running small/medium businesses
2. Lower corporate tax and payroll tax rates
3. More resources for start-up companies

Instead of actively protecting jobs, we can prepare the population for changes in the global business environment. Moreover, people should be encouraged into starting their own businesses. I think the enterprising spirit is what separates us from the rest of the world.

Remember, globalization will be very hard on the labor class in the developed world. Unfortunately, stopping or slowing globalization is next to impossible, as it is gaining steam every day. We should really try to benefit from this trend as a society.

10   nope   2009 Oct 20, 7:16pm  

I don't understand the GM bailout at all, to be honest. Why do we give a shit about the automobile industry? As a society, we need to be moving away from automobiles anyway and towards mass transit systems. GM is a large employer, but not THAT large.

Imagine a world where GM (or Chrysler) didn't exist. We'd still have plenty of healthy competition in the auto market, and plenty of people in the US would be employed by auto manufacturers.

So, who cares if they fail?

As much as I abhor it, at least the bank bailouts made some sense (notwithstanding AIG, which was nothing but a hand out to GS). If the banks go under lots of other systems unwind and the final impact is much larger than the company itself (along with the tax payer burdens as we cover the FDIC shortfalls). The GM thing strikes me as the kind of thinking that someone still stuck in the 70s would come up with.

11   Peter P   2009 Oct 21, 3:59am  

Policy decisions are made to create a better future for the politicians, not the necessarily country.

BTW, why should be move away from automobiles and towards mass transit systems. Remember, Europe is a bad example to follow, its downfall is nigh.

GM is a large employer, but not THAT large.

What about the suppliers? It is a connected industry. (I am not saying that bailout out failed companies make sense at all.)

As much as I abhor it, at least the bank bailouts made some sense (notwithstanding AIG, which was nothing but a hand out to GS).

Everything in the financial industry is very connected. You cannot disapprove of a single bailout simply because one participant could profit from the situation. More power to GS if they got a handout!!!

12   4X   2009 Oct 21, 10:00am  

@peter

In this day and age, national boundaries are disappearing fast. I think these should happen:

1. Health care reform - this lowers the cost of retaining employees and running small/medium businesses
2. Lower corporate tax and payroll tax rates
3. More resources for start-up companies

I agree with the above, but we also must enforce polices that keep jobs local.

13   Peter P   2009 Oct 21, 10:05am  

I agree with the above, but we also must enforce polices that keep jobs local.

That I am not very comfortable with. Perhaps it is better to create economic conditions that encourages keeping jobs local?

14   4X   2009 Oct 21, 10:06am  

@Kevin

I don’t understand the GM bailout at all, to be honest. Why do we give a shit about the automobile industry? As a society, we need to be moving away from automobiles anyway and towards mass transit systems. GM is a large employer, but not THAT large. Imagine a world where GM (or Chrysler) didn’t exist. We’d still have plenty of healthy competition in the auto market, and plenty of people in the US would be employed by auto manufacturers. So, who cares if they fail?

Actually, prior to downsizing GM employed 68,000 American Workers and Toyota employs 70,000 Japanese nationals and 7,000 American Workers. Now, GM employs 34,000 American Workers...so now America has 26,000 less middle class citizens where as Japan has a thriving industry that can service the population demand for wage paying jobs. America needs to be #1 or a close #2 in every industry so that we can continue to thrive. Letting GM fail would be akin to sending 70,000 more jobs overseas....plus their suppliers.

Not that GM is concerned with making vehicles in the US anymore....so I say all this with a grain of salt.

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