Follow The GM Business Model

General Motors is in the news because of its financial difficulty and the possibility that it will file for bankruptcy. In many of the reports that the mainstream media has presented, the employees and retirees have become the villain and the de facto reason for the financial difficulties. Additionally, management is criticized for having given such "luxurious" compensation packages to the employees over the course of the company’s history. These reports are wrong, and it is time that pundits stop criticizing GM for its past decisions, especially those which were supposedly beneficial for the employees.

At its height, GM management obviously believed that since it was doing so well it owed a great deal of its success to the employees and that the employees should share in the rewards that the company was banking. There is nothing wrong with this idea. In fact, more companies need to embrace the idea that its success cannot occur without the workers getting decent wages stabile health benefits and job security. The better the employees are treated, the less likely they will be to leave and the more likely that the experienced work force will ensure that quality product is built. Without a happy workforce, a company cannot succeed.

Ensuring that the employees are well compensated through wages and benefits is more important today than it has ever been. With CEO wages 450 times that of the average worker, the employees are becoming more resentful of those who are above them. This was evident when Northwest Airlines’ unions took pay cuts, which they were told were in the best interest of the company, but balked when management gave itself huge bonuses the next day. The mentality that workers do not care about the inequities in their pay verses their supervisors or upper management has to end. It is time that the rewards stop going only to the top, the workers who are the backbone of the company need to receive their just rewards.

GM’s problems are not a result of "lavish" employment agreements. The retirement packages that are discussed and the "high pay" for workers, and the health insurance for all employees has not resulted in GM facing bankruptcy. These problems are largely based upon poor marketing and product decisions made by the high paid managers. Companies should pay their workers $20.00 per hour, which is what the average GM worker makes. That is only $40,000 per year. Such an income only places a person in the 40th percentile of the average incomes in the nation. In other words, 60% of the rest of the nation’s workers make more than GM’s average worker. $20/hour is not lavish; it is merely a middle class wage, and paying someone a middle class income cannot be deemed unreasonable or lavish.

Also, it is time that companies start accepting the obligation of providing retiree health care. Federal and state government administrations are drastically cutting Medicare and Medicaid funding. Unless universal health care is established, employers are going to have to take on the obligation for retiree health insurance if for no other reason than to encourage people to retire. As employees grow older, they will be more prone to get sick and need additional medication. If they do not have access to medical health insurance, they may be unwilling or unable to retire because they know they will not be able to afford their healthcare costs. Thus, the more it appears that Medicare and Medicaid will go defunct, the more important it will become that employers take on the responsibility of providing such coverage.

GM was way ahead of the curve on all of these issues. It provided its employees middle class wages. It promised that its employees would be able to retire and have an good income and it promised that it would provide retiree health insurance. All of these commitments are necessary in order for a company to show that it is interested in the well being of the employees. The more the company looks to the employee’s well being, the more the employees will look out for the company’s best interests- thereby creating greater profits for the company. This is the synergy that is necessary to ensure a prosperous and health business.

It is time to start praising GM for understanding this necessity and praise it for standing by its obligations even as it continues to face financial difficulty.