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Wednesday, March 23, 2005

Ramifications of German Saabs

General Motors' recent decision to produce Saabs in Germany rather than in Sweden raises a host of interesting issues:
  1. Do consumers care where cars are produced? GM, citing American-made BMW and Mercedes SUVs, doesn't think so. Saab lovers might be different, except that those (like yours truly) who really loved Saabs -- and thus might have cared -- abandoned the car after GM bought the company and changed the Saab's feel.
  2. It is an example of the kind of competition among states to attract or retain business that has gone on in the U.S. since the interstate mobility of capital increased around the 1850s -- but now it occurs on an international scale. In this case, Sweden's offer to improve transportation between the Saab facility and the local port "drew cries of foul from German officials," the New York Times reports. This kind of promotional competition is the flip side of the "race to the bottom" or "competition in laxity" that has shaped regulation by the American states since the mid-nineteenth century.
  3. It also offers a good example of the way that the ability to shift production among plants -- first gained in the wave of horizontal consolidations that culminated in the Great Merger Movement at the turn of the 20th century -- can alter the balance of power between labor and capital, if labor is not also organized on a scale that matches that of capital. In this instance, multinational GM negotiated with nationally based unions in Germany and Sweden. According to the Times, "[a] crucial ingredient [in GM's decision] was a new job contract [in the German plant] that reduced annual wage increases, or in some cases froze wages, and made labor rules more flexible." The German union "also agreed on a plan to reduce the work force by 9,500 by the end of 2007."
Mark Landler, "G.M. Picks Germany, Not Sweden, as Home of New Saabs," New York Times (natl. ed.,) 3/5/05, B3.

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