Please post 2 reply responses of 130 or more words to your classmates
Responses should be a minimum of 130 words and include direct questions
1st Student James Coats
I am going to tackle this discussion from a standpoint of an individual who has experience in large scale manufacturing in the defense space. First and foremost, I feel that GM has to be cognizant and aware of labor cost associated to the manufacturing and design of their products. In understanding the overall infrastructure and operations having almost 100 locations sounds costly. Each location has to have leader ship employees as well as the various overhead associated to each location, such as, power and water. According to discovery channel, how it’s made, the auto industry follows a just in time manufacturing model with a variety of sub manufacturers that are given orders daily as vehicles are being made. For example GM may have a location that is a subcontractor for GM that makes their seats. As a vehicle goes through the manufacturing process the area which seats need to be ordered a scan code is scanned by the operator which automatically places an order at the manufacturer for those components. Once the components are manufactured there then shipped in some cases next day to the plant, which is normally right down the road. What this infers is that the cost directly associated to manufacturing the vehicles might fluctuate on raw goods and finish goods for the final assembly but those are always echoed through to the retail price which the consumer pays. So I do not feel that the cost of goods are a major piece that needs to be observed when trying to reduce cost and increase profitability.
I sit on the Board of Directors for my local Chamber of Commerce and have an understanding through various industry reports that certain industries, such as, the auto industry receive various tax benefits to place manufacturing plants in certain states and cities to create jobs. The subsidies or tax benefits that the companies receive can include reduced or no taxes, no property taxes, reduce utilities, and subsidized employment compensation plans which are sometimes back by the federal government. However these subsidies and benefits only affect a small portion of the labor force which is mostly the major workforce being paid what they call a living wage. As cost-of-living increases then GM must raise prices to then counterbalance cost of goods and also increase the labor cost. So all that being said ways that GM can increase profit is to reduce labor cost, which will most likely affect the bottom line almost immediately based on the number of employees that each facility has. Secondly, GM can continue to work with local governments define locations that are cost neutral to run operationally. What does allows them to do is to come to a location and create jobs and have an operations budget that is almost neutral as the cost of the building, utilities and related taxes are subsidized in exchange for creating a certain number of jobs. we have seen through various documentaries that the auto industry specifically has started to implement more robotic manufacturing. What this allows them to do is to have a robot that does a single or sometimes more than one function that would normally be done by handful of workers. The Robot is a one time purchase but also can be added to the depreciation scale and has a variety of tax benefits associated owning it. By adding automation or robotics it allows GM to reduce labor cost and increase proficiencies and efficiencies in manufacturing.
In closing, these are the two areas that I think GM will be able to tweak and increase profits by decreasing or subsidizing overhead through relationships with local governments and also reevaluating labor structures and reducing labor cost. By adding automation as well as scouting proper locations GM can reduce cost without interfering with quality or production times.
2nd Student Gregory Evans
1) What do economists mean when we talk about profit? Is there anything special or different from how, say, an economist would talk about it? 2) What kind of factors go into output decisions? Is there anything economists suggest we not pay attention to?
