Citigroup vs. Big 3

Now Citigroup can layoff 10-20% of its workforce basically overnight, so why can't the Big 3 layoff 20% of their workforce overnight (even though they need to layoff at least 30%). Oh, it's because of the unions. I listened to the UAW president (Ron Gettelfinger) speak the other day and he sounded very much like President Elect Obama. When Obama was asked about pork barrel spending during the primaries he said, "It really isn't as big of an issue as people make it out to be because it is such a small part of the budget." Yes this is true, but if you cut 1% of the budget here and there all of a sudden it is balanced. Perhaps if anyone in congress ever ran a business they would understand this (there are actually a few who have run businesses, but not many).

The UAW president talked about how labor costs only make up about 10% of the cost of a car. Now for GM alone if we assume GM sales are about $170B per year, and if they break even, the labor costs are $17B; if they cut costs to be equal to the foreign automakers operating in the US, labor costs would be $8.5B; and if they right-sized the business and reduced headcount by 30%, they would be at $6B in labor costs. Wow, that is a savings of $11B per year! Now if GM had done this over the years they would not need $25B themselves from Congress. This could have been saved in a little over 2 years, but the UAW president tells me I shouldn't worry about union labor costs because it's not the problem. I know it is not the only problem, but it surely is a big problem. GM could probably cut another $4-5B in corporate overhead and now they would be saving $15-16B per year and they wouldn't need a government bailout.