Nick Reilly, head of General Motor's international operations, is touring Europe on a mission. He's been to Poland and Belgium. Yesterday in England he met New Labour's august Lord Mandelson, the UK's First Secretary of State, Secretary of State for Business, Innovation and Skills, President of the Board of Trade and Lord President of the Council, and Tony Woodley, deputy leader of trade union Unite. Today Reilly is in Spain.
Reilly is using the big stick of closure to threaten governments and unions. With massive overcapacity globally and car scrappage schemes ending, production cannot continue without huge additional bail-outs, reduction of capacity equivalent to three of the eight plants in Europe, and up to 10,000 job losses.
Reilly's mission is to extract the best deal he can as part of the restructuring of one of the now bankrupt behemoths of the capitalist system of production and finance. GM was one of the biggest and most powerful of the global corporations that grew to dominate the world economy during the credit-induced boom of the second half of the 20th century.
Together their power grew to the extent that it changed the role of government. To keep itself afloat, the sales of GM the vehicle producer, became increasingly dependent on the success of its own finance company GMAC – a hugely complicated operation providing insurance and mortgage services in around 40 countries as well as loans for vehicles purchased via its network of dealers.
As the 2008 financial crisis swept the world, sending banks into a spiral of decline, GMAC was given permission to join their ranks as a bank holding company so that it could access funds from the US government's Troubled Assets Relief Programme, which it promptly did. In May this year GMAC was rebranded as the Ally Bank, because according to Sanjay Gupta, GMAC's chief marketing officer “it gives the sense of a trusted partner, the attributes we are trying to convey".
Really? Operating in Britain as mortgage lender GMAC-RFC, the company was fined £2.8m by the Financial Services Authority (FSA) last month for mistreating customers who fell into arrears. It has also been told to repay £7.7m, plus interest, to 46,000 of its borrowers.
After setting up as a mortgage business in the UK in 1998, GMAC-RFC grew rapidly to become one of the UK's largest mortgage lenders, but it stopped making new loans last year. The FSA's investigation of the company's lending practices between October 2004 and October 2008 found that charges for dealing with people in arrears were "excessive and unfair"; repossession proceedings were started before all other alternatives had been considered; GMAC staff were not properly trained in dealing with arrears cases and repossessions.
Workers in plants throughout Europe and the rest of the world should not be reassured by the failure of the deal to sell Opel and Vauxhall to the consortium of Canadian parts dealer Magna and Russian finance interests. Neither should they place any faith in the ability of union leaders like Woodley to secure their future.
The logic of capital is ruthless. The downward spiral into recession and slump cannot be reversed by low interest rates or injections of invented cash. GM's 25% production cuts will soon look small. GM workers should be preparing their own plans. They should discuss how to take over their industry, and convert their workplaces to production of zero-carbon vehicles as part of a massive expansion of public transport.
Gerry Gold
Economics editor
18 November 2009
http://www.aworldtowin.net/
Showing posts with label car scrapping. Show all posts
Showing posts with label car scrapping. Show all posts
Wednesday, 18 November 2009
Thursday, 9 April 2009
'Creative destruction' order of the day
Despite the G20’s attempts at confidence-boosting rhetoric, the interdependent components of the global economy remain locked in a deadly embrace, wrestling with each other as they plummet to the ground.
Ever more desperate attempts to resuscitate the fantastic but failed world of credit and debt dilute the value of currencies and further worsen the health of the global corporations as demand falls for the goods they produce, sending their share prices down.
In Britain, all talk of a “recovery” later this year has disappeared and next week’s Budget is in fact a crisis measure as public finances spiral out of control. European steel production is close to collapse and a trade war with China is looming over its dumping strategy.
The Irish government is the first to admit in practice that neither additional government borrowing, nor expanding the supply of money can help its country withstand the impact of the global crisis of dwindling production and consumption. It won’t be the last.
In measures designed to forestall the looming threat of state bankruptcy, its emergency second budget looks like the flailing autotomised arms of a threatened octopus, when a limb is severed by the endangered creature.
In a so far maverick response to the shock forecast that economic activity in the Republic is forecast to shrink by 8% this year, a dramatic worsening of last year’s 3% contraction, finance minister Brian Lenihan warned of "a serious decline in national living standards: the sharpest fall on record.”
Taxes will rise, though not on corporate profits, and spending on services will be slashed. In the public sector pay will be hard hit affecting a large part of the population.
Nevertheless, with already the worst government deficit in Europe, and the entire financial sector in a state of collapse, a new Irish agency will be provided with funds to buy up the banks’ property and land-based bad debt. The catch here is that no-one knows what its real value is, nor what the price should be.
Elsewhere in Europe, rather than taking the route of printing money to add to the trillions already given or promised to the banks, Germany and France have been giving away vouchers in a new-for-old car scrapping scheme.
Demand for Germany’s €2,500 vouchers has been hugely successful. Far more people have applied than expected, and concern is rising about the public anger that will erupt when the money runs out. Angela Merkel’s surprised government has added a further €3.5bn taking the total available to €5bn.
Sales of brand new small cars have soared, but there’s a catch here too – it doesn’t seem to have increased consumption overall. The second hand market has collapsed completely and what spending there is, is transferring from other products like TVs and sofas.
As the crisis enters historically uncharted territory, governments are exhausting all the weapons they can use in their attempts to rescue the capitalist way of life. The Irish pioneers have opened the doors to a new phase.
Joseph Schumpeter, an economist high priest of capitalist business cycles, and an opponent of Keynes, described the process in his famous book, Capitalism, Socialism and Democracy, when he wrote: “This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/
Ever more desperate attempts to resuscitate the fantastic but failed world of credit and debt dilute the value of currencies and further worsen the health of the global corporations as demand falls for the goods they produce, sending their share prices down.
In Britain, all talk of a “recovery” later this year has disappeared and next week’s Budget is in fact a crisis measure as public finances spiral out of control. European steel production is close to collapse and a trade war with China is looming over its dumping strategy.
The Irish government is the first to admit in practice that neither additional government borrowing, nor expanding the supply of money can help its country withstand the impact of the global crisis of dwindling production and consumption. It won’t be the last.
In measures designed to forestall the looming threat of state bankruptcy, its emergency second budget looks like the flailing autotomised arms of a threatened octopus, when a limb is severed by the endangered creature.
In a so far maverick response to the shock forecast that economic activity in the Republic is forecast to shrink by 8% this year, a dramatic worsening of last year’s 3% contraction, finance minister Brian Lenihan warned of "a serious decline in national living standards: the sharpest fall on record.”
Taxes will rise, though not on corporate profits, and spending on services will be slashed. In the public sector pay will be hard hit affecting a large part of the population.
Nevertheless, with already the worst government deficit in Europe, and the entire financial sector in a state of collapse, a new Irish agency will be provided with funds to buy up the banks’ property and land-based bad debt. The catch here is that no-one knows what its real value is, nor what the price should be.
Elsewhere in Europe, rather than taking the route of printing money to add to the trillions already given or promised to the banks, Germany and France have been giving away vouchers in a new-for-old car scrapping scheme.
Demand for Germany’s €2,500 vouchers has been hugely successful. Far more people have applied than expected, and concern is rising about the public anger that will erupt when the money runs out. Angela Merkel’s surprised government has added a further €3.5bn taking the total available to €5bn.
Sales of brand new small cars have soared, but there’s a catch here too – it doesn’t seem to have increased consumption overall. The second hand market has collapsed completely and what spending there is, is transferring from other products like TVs and sofas.
As the crisis enters historically uncharted territory, governments are exhausting all the weapons they can use in their attempts to rescue the capitalist way of life. The Irish pioneers have opened the doors to a new phase.
Joseph Schumpeter, an economist high priest of capitalist business cycles, and an opponent of Keynes, described the process in his famous book, Capitalism, Socialism and Democracy, when he wrote: “This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/
Subscribe to:
Posts (Atom)