Owen

General Motors: The Next Delisting from the Dow?

The demise of GM has nothing to do with lack of sleek design, reliability, or fuel efficiency. In fact, other than a dip in 2007, their sales have been consistently increasing over the past ten years. The reason they can't turn this growth in revenue into bottom line profit is that they've lost the ability to reign in the unions. A look at their expenses will show you that the company is no longer run for the benefit of shareholders, but for the benefit of its workers.

The problem isn't the fact that GM spends more on employee healthcare than on steel, or that a GM welder makes three times as much as his Hyundai counterpart. It's the fact that if the Hyundai welder doesn't do his job satisfactorily, he'll be replaced; if the GM welder starts slacking, management will be forced to bring in an additional welder to get the job done, while the slacker sits and watches. And during layoffs, the employees taking the offered package are the ones who know they can find a job elsewhere; those enjoying their on-the-job-retirement will stay there until GM is closed.

When a company loses the ability to retain productive employees and replace the ones who don't perform, it's only a matter of time before they go under. If not for outsourcing, both GM and Ford would have had to shut down years ago.

The only piece of good news here is that due to the whacky price-weighting method used to calculate the DJIA, GM has only a 0.78% weight in the index.