GM Must Fail

December 4, 2008 by roland.

That must sound rather odd coming from someone who owns a couple of GM vehicles, but it is the truth none the less. GM Must fail and must be allowed to fail. No tax payer dollars must be offered up to save it. Why? GM was behind the root of our economic problems and because of that, must be allowed to fail.

Anyone who has actually read through this blog over the years will correctly agree. GM and EDS were if not the absolute root of IT off shoring, they were damned near it. The management involved at both of these companies was hallucinogenic enough to believe their would still be customers for $70,000 SUVs even after the IT jobs paying more than $100,000 per year were eliminated. There never was a shortage of IT workers, there was only a shortage of management willing to pay the actual market rate.

In their defense, GM and EDS didn’t expect _every_ big company to jump on the off shore bandwagon. It was supposed to be their little secret, until they found out just how much infrastructure had to be built off-shore to make use of that $10/day low quality labor source. Once they found out just how much it would cost, they had to turn to the industry’s largest marketing company, The Gartner Group. Yes, they want you to call them an “Industry Analyst” or “Think Tank” firm, but the only thinking they do is about what they’ve been paid to market. All you have to do is work in IT for about a decade to figure that out. The industry is used to buying what the Gartner Group is paid to sell this week, it has become a regular practice. Little wonder that when Gartner started marketing off shoring as the cure for world hunger, just like they marketed “right sizing” just in front of Y2K, the industry jumped in with both feet. The first domino fell in the economic downturn.

The mortgage fraud could have quietly been swept up as long as there were still people pulling down more than $100,000 per year playing “flip this house” and buying $70,000 SUVs. What hasn’t been widely reported is why the mortgage crisis exploded so dramatically, the group of people whose incomes made it possible were off shored. Once GEG (GM, EDS, and Gartner) took that pool of people out of the housing and car market, the train was sent down the mountain sideways. Nobody noticed the train wreck until those people who had been off shored started cashing in stocks and mutual funds so they could continue to eat and live in doors. The few remaining people in the “flip this house” game then got caught holding onto mortgages they couldn’t cover. More stock and mutual fund liquidations occurred as people tried to avoid total destruction.

Finally, the plight of the U.S. IT worker caused so much money to be pulled out of the financial markets, that it put a squeeze on the financial instruments used to bust up mortgages. With the flippers out of the market, other speculators started defaulting as home prices plateaued, then turned down. The most visible domino then fell. Mortgage backed financial instruments became near worthless and a rash of predatory mortgage practices started being exposed on the evening news.

Congress must not save GM. When you tunnel back through the carnage and feces, you find them very near the root of this problem.

Posted in Information Technology | Print | 2 Comments »