Somewhat lost in the (justified) fervor surrounding Rick Wagoner's announcement of job cuts was another component of the dreaded "cost reduction" pillar. Wagoner said was "the emergence of excellent supply capability in lower cost markets provide[s] us with some real cost savings opportunities", and stated that GM will be "restructuring [our] purchasing model." Translated to English, this means that North American suppliers can soon expect to watch as their business moves to low-labor-cost markets such as China. Considering that GM purchases somewhere in the neighborhood of $80 billion in parts annually, it's easy to see that the loss of even a small percentage of that work will have drastic effects; effects that are perhaps more significant than the planned direct-labor cuts. Things may get especially tough in the Midwest where the Big Three still enjoy relative popularity due to a Buy American attitude, and where automotive component suppliers form the foundation of local economies. It might be difficult for many buyers to convince themselves that purchasing a GM vehicle is best for their financial well-being when GM moves more work off-shore as the "transplant" OEMs such as Honda, Toyota, and even Hyundai continue to increase their domestic content.

Share This Photo X