I started to respond to Mustang’s comment on the previous post, and it started getting really long!! There is a lot that I agree with Mustang on. But there are so many things that I wanted to write about too. Thus, I thought it would be better served if it was in a post. Besides, I’m always looking for material.
When Fritz Henderson said today, “It’ll get worse before it gets better,” I almost fell out of my chair. How can it get worse? Today, GM stands for Government Motors; I do not trust the government to run American businesses because they can’t even run government correctly.
I do not want to see any of our auto industries “disappear.” But I do think that reorganization is over due; I would rather see smaller companies, managed inventories, fewer employees, and a higher quality product. I would like to see American auto industries create a demand for their products. I still want consumers to have choices, rather than have Obama decide the kinds of cars we can purchase to suit his “green” dysfunction. You already know how I feel about the UAW; they are part of the problem.
I am PO’d because I don’t see any sensible solutions coming to the fore. Government motors is not the solution.
Henderson’s comments did nothing to reassure anyone that GM (and by extension, Chrysler) will pull out of the current situation with or without government loans. Many of the pundits are stating that GM has a chance providing the Unions, bondholders, and management pull everything together. Those same pundits are stating that any money that Chrysler receives will go toward a Chapter 11 filing if not a Chapter 7. And none of this raises the morale of the auto-workers, stockholders, and the market.
There is a myth out there that the automotive companies are only recently beginning to reorganize themselves. Nothing is further from the truth. All the companies have changed over the past ten years, shedding brands, factories, and people. GM dropped the Oldsmobile label and Chrysler dropped the Plymouth brand. Several factories and plants from all the manufacturers have closed or have been sold off, and that trend is going to accelerate shortly. I know that Chrysler employed over 250,000 people worldwide in 1987. It’s now less than 50,000. I have seen my former department reduced from over 150 engineers to the 72 today.
I know that the Obama administration is pushing for “green” technology for personal transportation, and Congress has castigated the automotive companies for not moving forward with leaner, “greener” cars instead of the big, hulking, gas-guzzling SUVs. This direction and its associated smackdown shows the ignorance of those who think they know best.
“Green” technology isn’t so green when the hazardous waste of the batteries is taken into account. Some of the chemicals are corrosive, and cannot be recycled. And then there is the expense of the vehicles themselves. How many people can afford a $40,000 vehicle that would need the battery pack replaced in less than five years at considerable expense? These are considerations that are not brought to the forefront for public discussion. All we hear is that internal combustion system is bad for the environment because of the carbon dioxide it produces.
As far as SUVs are concerned, the automakers produced what the public demanded. Period. If SUVs were so bad and the foreign car companies so smart, then why has Toyota and Mercedes (among others) built plants in the United States to build SUV and pickups? The interest in hybrids and high mileage vehicles only started when gasoline prices topped $4.00 a gallon – something that government CAFE standards didn’t do, by the way.
Quality has improved tremendously as proved by Buick’s top rating in the JD Power survey. Cadillac, Mercury, and Lincoln were also in the top ten. Disappointing to see that Chrysler wasn’t there even though I know that millions of dollars have been spent across the corporation to improve quality. But that’s still not enough to undo the damage that Daimler did to the quality programs…
Consumers will still have a choice about which car they can buy. Most likely, it will be used since the new cars will be small putt-putt cars that can be purchased in any color (except black in California).
The UAW, like many organizations, is both good and bad. Much has been made of the jobs bank & SUB pay, the exorbitant benefits, and out of touch pay.
The jobs bank and SUB pay were proposed by (now get this) GM!! The purpose was to retain and retrain workers when plants were shut down for up to two years to retool for new product. What GM found was that when workers were laid off during the retool period, they tended to take other jobs and not come back. Thus, they were losing skilled labor they needed to build their vehicles. These provisions eventually made it into the contract with the UAW.
Benefits and pay also were proposed by the automotive companies to retain workers. Stop and think about it for a little bit: Would you want to work at a factory on an assembly line doing the same thing day after day, year after year? The mind becomes numb, and people would quit their job. Benefits and above average pay also were designed to retain skilled workers.
The UAW also performed one other valuable service which was to prevent the workers from being abused or unjustly treated. I know this from first-hand experience.
About five years ago, a situation came up that targeted me for management to make an example of. My wife’s business was failing, and my son came up to live with us. Between taking personal time to help my wife close her business and court dates with my son’s situation, certain people in the company felt that what I did was taking excessive time. It didn’t matter that my supervisor knew full well what was going on and gave me permission to take the time off. They were on a witch-hunt.
Human resources called me in with my supervisor, the department manager, and my Union Steward, and proceeded to rip me apart and threaten suspension. After they were done ranting, the Union steward asked my supervisor if he had given me permission to take the time off (he did), if my work had suffered (it hadn’t), and what were my last two performance ratings (both above average or excellent). He then proceeded to state that if I were given time off for this perceived violation, then he would file several grievances on the basis of harassment, lack of evidence, and a few other things that I don’t remember. HR backed off.
If I had gone in there alone, I would have been suspended for 30 days without pay, and the suspension noted in my work file. As it is, nothing happened, the charges dropped, and nothing was added to my file. Unions may be demonized, but they do serve a purpose.
Unions do need to change their structure in order to serve the worker’s needs and provide competent labor to the companies for everyone to benefit. Unfortunately, that has not happened fast enough for today’s global economy.
Sensible solutions will not be offered by the government – I think anyone with half a brain knows this. Calling for the resignation of Wagner was a pure power play, although the head of AIG was also removed for the first installment of bailout money to AIG.
Chrysler and GM are in deep trouble, even with government help via loans. What is scary is that there are government people telling which direction the automotive companies are to take. That does not bode well for the industry as a whole, nor for the country.
Mustang, being the gentleman that he is, sent me the following via email because he didn’t want to take up space on the blog. So with his permission, here is his letter, and please feel free to list your thoughts in the comments.
I am honored that so few words inspired you to write an eloquent and timely piece, and I wish to respond to your thoughts, but would rather not clutter up your blog in the process of doing that. I don’t think we disagree on much at all, but I do think we have a different perspective. To say that I hate what is going on in Washington is a profound understatement. I’m very worried about our country, Tom . . . and I think that, as a percentage of population, those of us who are worried is minuscule.
In any case . . . I simply feel that government is not the solution; it is the problem. When presented with a wonderful opportunity to demonstrate the effectiveness of a capitalist system, Marxists decided to trump the process with the vestiges of a Stalinist era command economy. Whether we are talking about GM or AIG (or any other troubled company), bankruptcy was the appropriate consequence to poor or inadequate management. What might have happened through bankruptcy is that AIG and GM could have reorganized themselves into smaller, more efficient companies. Forced to give up some market share and reduce labor and inventories, time and good management would solve both of those set backs. Importantly, management and labor could have resolved important issues without any government interference whatsoever. The NLRB does not require agreement; it only calls for a good faith effort to find solutions.
Notice that GM produces a limited number of Corvettes every year. By limiting production, they create demand. That division does not experience an accordion effect in labor because their operations are consistent. It is an efficient operation. The strategy helps to maintain the vehicle’s value. Compare that to the tens of thousands of unsold inventory of all models and makes sitting idly on car lots. Excessive production decreased demand and value. So whether companies are horribly mismanaged or union demands cowed corporate executives into making unfortunate decisions, the bottom line is that GM is an unprofitable company.
Worse still, none of Obama’s promises appears to be taking shape. People continue to lose their jobs, companies are scrambling around for diminished capital, and Fritz Henderson has no more clue about where to go from here than Wagoner did. Again, corporate management is for stockholders to decide, not the White House. Meanwhile, even now there is no guarantee that GM (or AIG) will succeed after tremendous expense to taxpayers, and of even greater concern, the cost of government tyranny.
But my only sticking point with unions is that they bear some (not all) responsibility for what has happened to American industries. On the one hand, they bemoan the fact that foreign workers now perform jobs once performed by Americans; on the other hand, their unrestrained demand for high wages and benefits force companies to look around for cheaper resources. Should anyone in the UAW be surprised when consumers begin purchasing cars made in Korea? What I think is missing here is common sense leadership, by both corporate executives and labor leaders. Let’s take good care of our people (workers), but let us also understand that 125,000 fully employed, highly motivated, well-compensated workers may be more efficient than 250,000 “entitlement generation” workers.
Alvin Toffler warned us long ago about the likely consequences of an unplanned-for post-Industrial era. Few workers and executives even know who Toffler is, let alone what he had to say; so here we are now at an important junction. If our response to these challenges is a command economy, then we have given up an important part of Americana, and it is unlikely that we’ll ever get it back again. It is likely that matters will only get worse. And herein lies my concerns; I want to see successful companies, a healthy work force, and a resulting strong American economy. I don’t see this happening with incompetent Marxists in charge of government, an AWOL political opposition, executives who are willing to roll over and play dead, or labor unions who are incapable of looking beyond the end of their noses.
Well, anyway . . . thank you for allowing me to have this discussion with you. My best wishes to you and yours . . .