JOIN USObama's plan is under fire after General Motors shocker
Although the White House provided aid to the firm, GM is expected to emerge from bankruptcy in a radically slimmed-down form.
Dean Baker, Director of US think-tank the Centre for Economic Policy Research, said this would mean up to 25,000 job losses at the firm itself, and many more as the shockwaves travelled through its supply and distribution network.
“You could be looking at 90,000 to 100,000 jobs,” he said. In the United Kingdom there are particular fears about the future of Vauxhall’s van plant at Luton, where 1,500 are employed by GM’s European arm.
US dependency
Analysts at the Centre for Automotive Research have estimated that as much as 1 per cent of the US economy depends directly or indirectly on the firm.
During his triumphant election campaign last autumn, President Obama addressed audiences of frustrated manufacturing workers, in rustbelt states such as Michigan and Ohio, who felt globalisation was threatening their livelihoods.
But Rob Scott, an economist at Washington-based thinktank the Economic Policy Institute, said by insisting on a radical downsizing of GM, and imposing strict new emissions targets without giving consumers incentives to buy the cleaner cars, the White House was safeguarding the “shell” of the company, but abandoning many of its workers.
Wrong preference
“I think in this case, the Barack Obama administration seems to have put its personal preferences for fixing the climate change problem above all else,” he said. “It’s going to cost hundreds of thousands of jobs.”
In Detroit city officials have offered to waive nearly all property, income and business taxes to ensure General Motors keeps its headquarters in a landmark downtown skyscraper.
Tax breaks saving it between $10m and $25m could be enough to persuade GM to stay in the Renaissance Centre, a 70-floor building by the Detroit river.
The Detroit-based carmaker’s Chief Executive, Fritz Henderson, has been studying the possibility of shifting the 4,500 head office staff to its technology centre in Warren, north of the down-at-heel motor city. Meanwhile, Professor Dennis Snower, head of the Kiel Institute for the World Economy, said the government should not waste money propping up the “geriatric” carmakers.
“If the government has spare tax euros it should invest them in a good way for the future and to help adapt to globalisation. They would better spend it helping Opel workers reskill for other jobs,” he told the Observer. “The government should not be in the business of picking winners.”