What is wrong with GM

Notice that the title to this post does not end in a question mark. The problems with General Motors boil down to something I have previously discussed and has been reported countless times in The Wall Street Journal. The major problem is the Jobs Bank. For those of you unfamiliar with the situation, major auto manufacturers created what is referred to as the “Jobs Bank” during the 1980s to curb union fears that many workers would be replaced with machines or overseas workers. The Jobs Bank essentially pays employees full wages and benefits to show up for work even when production is shut down or there is nothing for the workers to do. The program was supposed to last six years, it has lasted twenty-two.

The current problem is that GM wants many of their employees to take their recent buyout offer, but they fear that the workers will not be willing to do so when they know they can always sit in the Jobs Bank and get full wages. The New York Times reports:

Each day, workers report for duty at the plant and pass their time reading, watching television, playing dominoes or chatting. Since G.M. shut down production there last month, these workers have entered the Jobs Bank, industry’s best form of job insurance.

More:

But in factories like the one in Oklahoma City, where workers were first interviewed on a visit last month and over the next several weeks, the buyouts could be a hard sell.

At least it looks that way for Garland Pruitt, who inspected vehicles on the assembly line before they were painted at the Oklahoma City plant. “Why would I walk out the door with $2,000 less per month and have to go find a job when I can sit in the bank, get my 30 years and retire?” asked Mr. Pruitt, who at 53 has 27 years’ seniority and qualifies for a buyout that would pay him roughly half his hourly wage for three years if he leaves the company now. “It’s really to my advantage to ride the bank out as long as it goes.”

More:

While G.M. has not said it will push to eliminate the Jobs Bank when its contract with the U.A.W. expires, it is no secret that company executives think the program is a drain on its ever-tightening financial resources. With average wages for a factory worker adding up to about $65,000 a year, or $1,250 a week, G.M. is spending about $9.4 million each week to pay the salaries of its idled workers in the Jobs Bank, not including their health care and pension costs.

It is unfortunate that individuals like Mr. Pruitt are so close to retirement and are faced with a buyout or future uncertainty. However, it is also unfortunate that GM should have to supply a pension to individuals who have not actually worked for the company for 30 years. The buyout offers should be coupled with an assertion from GM that the Jobs Bank will not forever exist. General Motors cannot afford to spend $489 million per year to pay employees who contribute nothing to the company’s output. It is time to put an end to the Jobs Bank.

UPDATE:

The Detroit News reports that GM is going to cut 1.3 percent of its white-collar workforce and hopes to cut 7 percent by the end of the year. The pain is being felt by all who work for GM, not just the blue-collar workers.