Car Guy
Are the Unions to Blame?
Was it the UAW that put together Chrysler’s and GM’s creaky business plans?
I am not a huge fan of the UAW.
It has been obtuse, even obstreperous. But the idea that the collapse of General Motors and Chrysler Corp. is the fault of the unions is swill of the worst sort. Because not only is it false, if accepted it will simply mean that taxpayers are made to shovel more money down the gullet of companies that won’t make the necessary changes to their business model because they haven’t been forced to confront the fact that their problems have not been caused by “the unions” — the braying mantra they’ve been falling back on for years now.
Point Number One:
While almost everyone in the media and elsewhere is talking about the failure of the industry, note that Ford is not in trouble like GM and Chrysler are in trouble. It is GM and Chrysler that are on the verge of bankruptcy. Ford itself is healthy — and only in danger of being dragged along with GM and Chrysler because the collapse of those two would have a catastrophic ripple effect across the entire industry. Toyota, Honda and all the others would be gut-shot, too.
And yet, Ford uses UAW labor just like GM and Chrysler. But Ford somehow makes money — or at any rate, loses less than GM and Chrysler have. What to make of this? Could it be that perhaps Ford’s business model is — dare it be said — more attuned to market realities and better set up than GM’s and Chrysler’s?
Point Number Two:
GM and Chrysler claim the core problem is so-called “legacy costs” — meaning the pension and health-care obligations they owe current and retired UAW workers. There is an element of truth to this; the Japanese automakers don’t have to worry about health care costs because the Japanese have national health care (which means everyone pays, instead of just the automakers).
Fair enough.
But to pin GM and Chrysler’s current debacle on “legacy costs” is at best a half-truth. A quarter-truth, really. The real problem — in Chrysler’s case — is an obsolete, unattractive product line. Not all of its cars — but enough to gum up the works very badly indeed. Chrysler failed to produce a successful successor to the formerly hot-selling Neon economy car; the PT Cruiser (also once a big seller) is now seriously dated; the Magnum and Pacifica wagons were huge belly flops — as have been the Jeep Patriot and Compass and Commander. The list goes on.…
In GM’s case, it is a divisional structure that should have been completely redone at least 20 years ago. It is absurd that an automaker whose total market share is only 20-something percent continues to try to sell cars through six full-line divisions (Chevy, Saturn, GMC, Pontiac, Buick, Cadillac — plus Hummer) and hawks often as many as three or even four rebadged versions of the same basic car.
Whose fault is this? The unions?
Please.
The UAW did not decide to keep Saturn long after it became clear that Saturn was a money-loser that also competed with Chevrolet as GM’s economy car brand.
The UAW did not decide to sell the same basic trucks and SUVs through multiple divisions — adding to the R&D and manufacturing costs of each vehicle and reducing the potential profit per vehicle by who knows how much. (Probably an amount equivalent to the $1,500 or so in “legacy costs” GM cries so much about.)
The UAW is not responsible for the Pontiac Aztek or GTO; the Chevy SSR, the slow-bleeding of Oldsmobile or the failure to update one of GM’s most successful car franchises — Camaro — allowing it to die an ignominious death and giving away the market to Ford and its super-successful Mustang.
About the Author
Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.
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Roy| 12.22.08 @ 7:05AM
Everything Eric Peters says is likely true, but he's still wrong. I know nothing about cars and he clearly does. But GM's market cap is what, $2.5 billion? That is pocket change. If GM's problems were due to things they could freely choose to undo, they would have been bought a long time ago by somebody who would make those changes.
That there are no buyers even at that price indicates that their problems are, or are perceived to be, things that they can't change - things they have to do due to government force. Union contracts are one of those things.
If I were a big businessman with $10 million to invest I could put together 200 buddies and buy GM if all we had to do was figure out a way to efficiently restructure our divisions. But you'd have to pay ME to get me to deal with the UAW.
linksoflondon | 12.16.09 @ 6:03AM
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TC| 12.22.08 @ 8:27AM
Ford is losing money. Toyota, Honda et al that are producing cars in the US are making money. Which one is stuck with the UAW and which one isn't? The cost per hour of a UAW car is $73.00 the cost per hour at non UAW plants is about $42.00 per hour. The idea that the least productive workers in the US are blameless in all this is, at best spurious.
frost| 12.22.08 @ 8:32AM
No disagreement with Mr. Peters, none at all. He pegged the major problems, nailed 'em, absolutely! The only possible omissions were Ford's also having some duplication, and that one is comparatively minor, and those stupid congressional "CAFE" standards pushed by the greenies; forced into making 'way too many creeepy little cars too few want.... each at a loss. Sure, the Japanese and Koreans make 'em, profitably, but - - - - -
Yes, it's the jerks at the top, the CEOs and their idiodic Boards who have made so many dismal decisions -- they're beyond stupid.
Excellent column, Eric.
Bob| 12.22.08 @ 8:34AM
Eric, you are basically right. However, the Ford financials, while better than GM and Chrysler, are only delayed by a matter of months. They are not in great condition.
While you can get some efficiencies by reducing the number of brands, the real issue is the number of dealers. You can't reduce the number of brands without invalidating the dealer contracts and closing at least half of the dealers. This can be done ONLY in bankruptcy.
That said, I agree 100% with your product analysis (I did like the Magnum, however as long as it was equipped with the hemi). Also, I thought that Chrysler was on the right track with the efficient cab forward designs that were scrapped by Daimler. While it is sheer opinion, I don't think the GM sheet metal looks that good. It needs to appeal less to the extremes and more to the middle.
Roy, the market cap has nothing to do with the money it takes to run the business. Working capital and profits are the problem.
Fred Z| 12.22.08 @ 9:00AM
Happily, the union guys are on TV all the time. Self-centered, toxic and stupid. As an aside, has any reader ever seen any MSM actually ask a UAW interviewee how they justify wages twice (or more) that of any real tradesman? Y'know, like a plumber with an apprenticeship, an education and a journeyman or master's ticket?
I'm with Roy - If you sup with the devil you need a long spoon and there is no spoon long enough to make anyone voluntarily sup with the UAW.
John| 12.22.08 @ 9:03AM
Ford is still controlled by Ford family---maybe this has something to do with it.
Smith wong| 2.26.10 @ 11:34PM
Pecos Pete has good points. You have to wonder if Obama will really want to spend federal dollars propping up old industries like Detroit, or use money for 21st Century enterprise. It should be an interesting conflict.
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Brian| 12.22.08 @ 9:40AM
Is the author certain that the UAW isn't stifling innovation?
From what I've read, the UAW won't allow a guy working on one specialized portion of the assembly line, to work a different job should one area be short and his area have plenty of help.
The UAW contract is five pounds of "work rules". Seems to me that somewhere in there, there may be rules that make it less painful to keep Buick, et al, than it is to scrap them.
Marc Jeric| 12.22.08 @ 9:57AM
Given sufficient time every association, be it of scientists, engineers, industrialists, professors, etc., will be headed by rejects of private enterprise. Why, you say? Because really useful people are busy with real work and cannot be spared to go to policy meetings.
The same fact of life applies to unions - given sufficient time they will be taken over by goons, either of criminal nature (Mafia) or communists and their various outgrowths. After the unions acquire a certain level of power they will destroy their industries no matter how capable the chiefs of those industries are. Examples abound - steel, automobiles, textile, electronics, apparel, etc. The only recourse is outsourcing and imports, except this does not work with government employees unions such as teachers. Teacher unions have destroyed education in this country to the point where 100+ millions of illiterate morons will vote for Abu Hussein from Kenya, a confirmed marxist revolutionary, and that bloviating gasbag from Delaware who promised them more handouts for less work.
Appleby| 12.22.08 @ 10:07AM
There's enough blame to be generously shared from top to bottom in the Formerly Big Three, as anyone familiar with the term Dinosaur Media and their slide into irrelevance can also attest to.
However, even the good products they sell are not being properly sold. The Cadillac CTS-V for example is a race-ready consumer car that can beat an Audi A4 in a straight fight; it is a manly-man car that is nevertheless comfortable; and it has the best salesman in the world available to push it if asked: Andy Pilgrim, a long time GM race driver who owns the street version and once went from stalled on the starting line to a second place finish in a field of 35 cars.
Pecos Pete| 12.22.08 @ 10:13AM
Management is 33% part of the problem. Unions are 33% and the local, state and federal governments are the remaining 33%. All three are contributors to the demise of the "big 3" auto companies.
Ford might survive if they perform drastic surgery. However, GM and Chrysler will not survive as capitalist entities. They will be nationalized and unions will be installed as the reason for existence of these two companies.
And, as for those "non union" foreign owned car manufacturers, the 2009 Congress will fix their wagon with legislation.
The cards are stacked against large manufacturing companies. Labor rules for the foreseeable future.
frost| 12.22.08 @ 10:17AM
That other potential deal-breaker/buggaboo, the Chinese entry in another year or three? That (or, those, plural?) will be sure to cause extreme angst or gnashing of the teeth.
Am presently in Costa Rica with a little Daihatsu or something -- a small rented SUV that probably costs very little and makes a reasonable profit for its manufacturer. Nice little car. Which causes one to wonder, why didn't the creeps at GM think of this? Annnnd, is that terrible former CEO Roger Smith still collecting $9-million in his retirement? Just curious...
Howard| 12.22.08 @ 10:22AM
Pecos Pete has good points. You have to wonder if Obama will really want to spend federal dollars propping up old industries like Detroit, or use money for 21st Century enterprise. It should be an interesting conflict.
Bram| 12.22.08 @ 10:38AM
Obviously management is to blame. Big 3 upper management is lazy, greedy, and gutless. They have failed to deliver competitive products and decent profits. They have failed to properly manage their infrastructure and dealer relationships. And, they have completely failed to management their labor relationships. Ross Perot called them on all these failings. Instead of listening to him, GM management paid him to go away.
I've worked the line at a GM plant - the inmates ran that asylum right into the ground.
I look at Big 3 management as co-conspirers with the union bosses. They have cooperated in ripping off stock-owners and customers through the years. Now that that well has run dry, they have moved on the U.S. taxpayer.
James M. mulcahy| 12.22.08 @ 11:00AM
Mr. Peters has it absolutely correct. Even if the UAW didn't have a single shortcoming, GM would still be in trouble.
GM screw-ups in somewhat chronological order:
1: the Chevymobile in 1976 -putting Chevy 350 ci engines in Oldsmobiles since GM underestimated demand. Consumers didn't know until repair time. GM responded by eliminating divisional engines -good bye Rocket 88s. That would be like Kellog shutting down Tony the Tiger.
2: in 1979 settling on a new contract without getting any reworking of the health care benefits. (Even if the Japanese automakers don't pay somebody does. since UAW workers are above average in wages, it is likely that they would bear a disproportionate share of nationalized health care costs - with worse benefits. Also, who pays for Japanese auto workers health care in the US?). This at a time when the US automakers were reeling from OPEC II.
3: listening to McKinsey consultants that recommended turning the divisions into marketing arms; eliminating Fisher Body; etc. What resulted was a puree of mediocrity.
4: Deluding themselves that Smith and Wagoner led the 1992-93 turnaround. Those models were developed under Stempel and McDonald.
5: selling Detroit Diesel to Roger Penske who used the same workers, plants, engineers, etc. and printed money with it. Gm had run it into the ground. Only difference was mgt.
6: expanding the stupid jobs bank
7: ruining Oldsmobile by slapping a cutlass logo on each piece of junk they made, thus trashing that brand; further, they produced some very good cars at Olds but their advertising had to be the worst in the industry.
8: eliminating production of the rear wheel drive Caprice in order to sell more SUVs (remember diversification, guys?) GM sold 270,000 of these to cab companies each year. This was a wonderful annuity they flushed away.
9. buying 10% of fiat for $2B; Structuring the deal so Fiat can put the rest of them to GM for $10B or so. GM spends another $2B to get out of the deal: $4B for nothing. Wagoner makes one of the dumbest statements ever by a CEO: "sometimes you do the deal you can, not the one you want." This alone should have caused the Board to fire him.
10: how about lying to the investment community? In July 2008 they said they had enough cash to last through 2009. Oops! How about the $38B writeoff of deferred tax assets in the 3rd qtr. 2007. All of those didn't become worthless in one quarter.
GM has been mismanaged for 3 decades. It is a wonder it lasted this long. It goes to show that big inept companies can continue to do dumb things a lot longer than small inept companies.
jhn| 12.22.08 @ 11:01AM
Pointing out the inefficiencies of union labor relative to nonunion labor does not convince union supporters of anything, except for the need to get rid of non-union labor. They think that all the extra costs are worth it.
Paul| 12.22.08 @ 11:42AM
As an Industrial Engineer, I am obsessed with cost (cost per unit), productivity (units per man-hour of labor) and quality measurements. These measurements are often used to pinpoint problem areas. I wish someone would provide data comparing all auto manufacturers in these areas. Some measurements include cost and time just for workers, some include management costs, and others include total (overhead) costs.
The union car makers probably would never want to make this info public for fear of embarrassment and proof of management incompetence.
Glen Leinbach| 12.22.08 @ 11:59AM
Eric Peters is spot on regarding GM’s idiotic management and business plan; likewise for Chrysler.
But to address the labor relations between Detroit and the UAW: I liken the UAW to that screaming 3-year old in the Food King, with management as the Mom who buys the kid a candy bar or toy on every trip just to stop the screaming. The kid is now a spoiled slacker of an adult. Not blameless, but much of the blame lies with the Mom. Shifting metaphors, it’s been observed that generals often make the mistake of fighting the last war. I believe that the Big Three were trying to avoid the labor riots and crises of the ‘30s and ‘40s by “buying them a candy bar” every three years. I remember that when the UAW contract came up for renegotiation, the UAW would select on of the then-Big three with which to negotiate and strike if necessary. Management would then fold, give the UAW a sop, and the other Big Two would copy the contract. The UAW and organized labor isn’t THE cause of Detroit’s problems, but it is a substantial one.
megapotamus| 12.22.08 @ 12:55PM
Compelled unionism is piracy. No doubt GM and others have serious problems aside from endemic piracy inside their walls but these stupidities do not justify thuggery in place of free commerical associations. The unions are reeling; reality has finally invited herself to their party. It is time to destroy them, if possible. Let these semi-skilled laborers negotiate without a molotov cocktail in their hands and we shall see what their exertions are truly worth. The growth resulting from these parasitical relationships being dissolved will more than make up for the losses in time. Is this harsh? So what? If you are a conservative you believe certain things, one of which is that collectivism does not succeed because it cannot. As Bush declared, shall we abandon free market principles to save a free market system? You can if you want. It will just make the collapse all the worse and you know it. Everyone knows it but on we march. Pathetic. No more bailouts. Rescind every dime we can. Call every note. Auction every asset we have unwisely acquired. To do otherwise is to stick a knife in the eye of every taxpayer to benefit the parasitic class. I am aghast that even here there is no one speaking sense. Does even the AmSpec audience need reeducation in realities? Jeez.
old progrmr| 12.22.08 @ 1:44PM
A fairly good analysis and is pretty close to my conclusions. I worked for GM (in the 60's when one was proud to work for GM) and then spent over 48 years in the auto industry with suppliers. I watched this disaster unfold.
However, don't write off those legacy costs so quickly. Detroit's hourly costs are swollen by about $14.00 per hour by these costs. The direct labor and benefits are within spitting distance of transplants and NOT an issue. I also blame management for those legacy costs. The UAW had every right to try for the best deals it could negotiate; it was incompetent and fearful management in the 60's - 70's who gave away the farm to the retirees for labor peace. while caving on thse issues, these incompetents at GM also ruined the once proud brand (remember those disasters in the 70's - 80's; thanks Roger B). But, direct labor costs, even with all the appropriate burdens can probably be managed; remember the total direct labor in the final assembly of a typical, standard vehicle is about 7.5 hours. Direct labor costs are manageble by competent leadership. GM is also burdened by contracts with losers like Delphi which force them to purchase components from the most inefficient and costly of suppliers; another management failure (74% material content cost is external suppliers).
The comments on GM's product lines and dealer networks are right on. It is doubtful if 60% of GM dealers see a profit from GM car lines. Since its inception Saturn has cost GM in excess of $90 billion without contributing a dime of profit. The dedicated Spring Hill plant created to showcase GM/UAW partnership is now just another typical asssembly plant. And what is with GMC, just a rebranded Chevy Truck, huh? And, of course Buick, look at their customer demographics, no living customers in about 4 years. Oh, Pontiac has been totally immasculated, who knows where it fits with the competition.
GM can't be sold, it's a badly damaged brand and an awful mess of a product line. I thought better of Lutz, but he must be senile to stay around and defend this wreck of a car company.
How can those retired top managers sitting in their Florida Condos look at themselves in the mirror in the morning?
Roy| 12.22.08 @ 2:00PM
No kidding the market cap has nothing to do with how much it takes to run the business. What it does measure is how much it would cost to buy it. If the problems were what Eric Peters says, that price would be a steal. Those problems can be solved.
If, on the other hand(as is the case) the problems are due to government force then they can't be solved by anyone buying the company. Government force looks like it is not only a huge problem but going to get worse(more CAFE standards, etc, as US voters indulge their "green" sentiments). I don't know the history of how far the government was involved in forcing them into these ludicrous union contracts. Old prgmr seems to say they weren't - but I'll bet if the government did not forcibly prevent them from hiring replacements from striking workers they would have had much more leverage.
Pat| 12.22.08 @ 2:45PM
Microsoft has given its operating system software, Vista, an alias named "Mojave" to convince consumers that Vista isn't a bug ridden piece of junk. Companies do make mistakes in their product development, the Big 3 are no exception as Peters points out. In an attempt to beat the Japanese and recover market share, Detroit tried design innovation, sometimes it worked, sometimes it didn't. The Japanese let Detroit do the test marketing and then incorporated successful designs into their own product offerings (mini-vans, SUV's, etc.). Peters is one of those amateur automotive designers who thinks he knows what the Big 3 "should have done" - like some Americans, he personifies the typical "boy and his car" sub-culture.
But, the Big 3 are businesses just like any other and they couldn't control their costs. The UAW has never been a "stakeholder"; bascially, they're parasites, but unlike other parasites they never learned it isn't a good idea to kill the host. Using antiquated laws and their political connections, they were always and forever an adversary and never helped or wanted to help the "golden goose" survive - until now. If in doubt watch the squabble over the bailout money unfold, the UAW will be pursuing their own interests and only their own interests.
rw| 12.22.08 @ 2:52PM
So, let me get this straight. Point ONE says that if my competition goes under that it's bad for my business. Sounds perfectly reasonable.
In Point TWO I was glad to hear that the Japanese government is now paying for health insurance for the U. S. employees of Japanese corporations.
Both management and the UAW are responsible for the current state of the U.S. auto industry. They deserve each other. And they both deserve to end up in the trash pile of history.
old progrmr| 12.22.08 @ 3:17PM
The UAW WILL NEVER, EVER NEGOTIATE! Their past experience has taught them that they do not need to be anything but an unyielding adversary. The key to negotiation is that at some point the parties must arrive at a win/win conclusion. Successful negotiation is also based on the premise that neither side wishes to destroy the other. In the case of the UAW, they will readily destroy the Detroit auto firms if their demands are not met. They will NOT contribute anything to the restructuring required by the "bailout". The UAW knows that the government will save their butts in some fashion, either by nationalizing the industry or paying the retiree costs for the foreseeable future. It also appears the UAW cares more about the retirees than it does current employees; and they certainly care not a whit for the salary personnel who they consider their adversaries just as much as management and shareholders.
I agree that GM and Chrysler build excellent cars and can compete rather well on quality and performance with worldclass cars. They have also improved their manufacturing processes. But, the complex product lines at GM and Chrysler cause a huge cost burden and complicate their distributor networks.
By the way, the only guy who made out on the Chrysler/Daimler deal was Robert Eaton. I know that Lutz understands the problems with GM's product lines, but maybe it is the dealership agreements that prevent restructuring; i.e. drop Buick, GMC, Saturn, etc. There is something that prevents current management from doing the very obvious, logical thing!
Brian Decker| 12.22.08 @ 4:09PM
Maybe paying health benefits to a million people while only employing 96,000 left GM with little money to develop the cars it should have and equip the ones they do make well enough to compete in the market. The UAW is not totally to blame, but 50% of GM's fault is agreeing to the UAW contracts over the years.
Stephen | 12.22.08 @ 4:40PM
1. Totally agree with Bob. Dealer network is a nightmare.
2. Management is way overpaid compared to others in the industry, and not paid on performance.
3. Unions diminish efficiency. A robot doesn't pay union dues, for instance.
4. Credit market dried up the market for those people who willingly overpay.
bruce| 12.22.08 @ 4:48PM
Get rid of Buick? Hey, old progrmr, I love my old Buick LeSabre and I plan to replace it with a new one next year. Its design may be a yawner to many, but its V6 engine that has essentially been around since the '80's will run hundreds of thousands of miles without failure, and mine blesses me with 30 mpg hwy fuel economy. What a bargain for such a roomy car that's cheap to buy and cheap to operate. One more benefit that car buffs and drivers like Mr. Peters can appreciate: ho-hum colors on the LeSabre's granola sheet metal help make the car all but invisible to the eyes of state troopers. Oh, and in 4 years I certainly hope I remain among the living as I will still be in my 40's.
old progrmr| 12.22.08 @ 4:51PM
Hey, James M. you forgot about those diesel engines sold by GM. That fiasco turned America off to diesels in passenger cars. Now Europe has 60% diesel passenger cars and diesels offer a great high economy future with bio-fuels. But, American consumers think diesels are only for trucks.
Never has any corporation so easily trashed valuable brands as easily and stupidly as the product planners and marketers at GM. It's not just Camaro, think of all of those nameplates that caused excitement in the 50's and 60's.
And, then remember CPC (Common People's Cars) and BOC (Big Old Cars) the brain child of McKinsey and Roger B. Yep, I worked for Fisher Body (tool & die maker and engineer). Stempel tried to correct things and the old Roger B. guard kicked him out. And, can we ever forget Gonzales who ruined the GM supply chain, he then tried to destroy Volkswagen (he may still be in jail).
Man, somebody should write a book, "How to Destroy the World's Largest Corporation".
I-Colorado| 12.22.08 @ 6:41PM
All you have to do is go back and review Ross Perot's sale of all his GM stock in 1986 shortly after they bought EDS. He effectively identified the management team and the unions for what they were. They had a distorted sense of entitlement and ignored reality. Everyone wrote Perot off as being excentric--but in reality he was prophetic.
He was also prophetic about how the Dems and the Repub's would ruin this country with their deficit spending and entitlement programs. So what do we do--we elect a new President who promises a $1 trillion deficit in his first year in office.
Perot will prove to be prophetic again--only this time it will take only 4 years.
I-Colorado| 12.22.08 @ 6:48PM
Franchise laws in each state prohibit the auto manufacturers from revoking a dealership. These laws were passed 20+ years ago when the auto dealers had tremendous lobbying strength in the state capitols. GM would have to buy out about 80% of their dealers and who knows what that would cost even if they could get it done. And you know Congress would never, ever pass federal legislation that would override the state franchise laws protecting the dealers--that would be in violation of the U.S. Constitution (notwithstanding the fact the Congress has usurped state laws in education, health care, environmental issues....ad infinitum.)
Frabj| 12.22.08 @ 7:54PM
I bought a 1981 Olds diesel, with an extended warranty. When the controller went out, GM refused to honor the warranty, saying that it covered "control units" but not "controllers." I paid $1,2oo for a rebuilt gas engine, at a time when I had little money, and vowed never to cross the threshold of a GM dealership again. Now Bush is forcing me to hand over my money to that corrupt outfit. They all -- management, union goons and those who elect them, political apologists -- need to be flushed down the economic toilet.
James M. Mulcahy| 12.22.08 @ 9:41PM
old progrmr: I think you mean Jose Ignacio Lopez de Arriortua. I overlooked him here. however, I have co-authored a white paper on Supplier Equity which does discuss him. Send me your email address and I'll send you a copy.
jmulcahy@chicagogsb.edu
Urs Hugi| 12.22.08 @ 10:32PM
Several years ago the host of a national radio show had the VP of sales for GM on and told him that he got hundreds of calls from listeners who said that they would gladly buy a GM car if they looked as good as some of the German and Japanese cars.
The answer of the VP was: "Those people don't know what they are talking about; our cars look a lot better that those foreign cars".
Well, "those people" were potential customers. And the response from a totally ignorant and clueless VP told me that GM was in a heap of trouble.
Ted| 12.23.08 @ 12:06AM
Peters' principle is principally flawed. The UAW is a government-coerced monopoly that no management could overcome. Generations of innovation through automation and continuous improvement (kaizen) are forever lost. Without the UAW, products would have been made with a profit motive, including fuel-efficient cars. For decades, "market share" was artificially maintained to utilize capacity. Often, that meant producing under-performing vehicles to avoid sending workers to the UAW jobs bank under the union contract (see: http://hamptonroads.com/node/131341).
Michael L. Hauschild| 12.23.08 @ 5:28AM
It is fascinating to read all of the very knowledgeable people posting on this subject. Some point fingers, some are pro Peters, some are con. But this all is relegated to post mortem banter. For whatever reasons the systems of banking, mortgage finance, and the automobile industry have failed. My take is their demise is due to the greed exhibited by the various management structures and the outright purchase of our elected officials through influence peddling. I also feel there is a threshold we have passed and a catastrophic failure of our infrastructure is eminent. You have to believe in something in order for it to work.
Do you believe what the media reports? Do you believe that UAW guy on the TV? Do you believe those banks will honestly and fairly loan all that bailout money to the average citizen in need? Do you think the judiciary functions with the restraint of constitutional guidelines? And finally the main reason for my despair, do you believe your government functions efficiently, timely, and with the citizen’s best interest in mind?
The only humor I find in all this is my laughter when some phony politician makes a speech and promises something.
James M. Mulcahy| 12.23.08 @ 7:04AM
Michael L. Hauschild
Re: "do you believe your government functions efficiently, timely, and with the citizen’s best interest in mind?"
We are fortunate that our govt. is inefficient. Consider the damage they could do if they actually enforced all of the laws and rules. They control close to 40% of GDP -state, local, & Feds.
Last of the Michiganders| 12.23.08 @ 11:56AM
Enough of the "Blame Game" trap. Anyone who wanted to see it saw the Detroit based automakers sliding down the slippery slope two decades ago (Chevette, Reliant, Fiesta, Vega, Festiva, Prowler, and on, and on). That's history.
What are those who have a dependant interest in the "big 3's" survival doing to speed their rebirth as job providing profit makers? Pointing with one hand, and begging with the other! When asked for concessions, the UNION offered a reduction in unemployment benefits (screw our less fortunate brothers) and defered retirement payments (screw our fixed income brothers). No solidarity, no solutions, no sacrifice for the common good, no team effort to shoulder the burden and do more with less. NO HELP AT ALL!
The most troubling part is I don't forsee any change (especially in my state) until labor expresses a willingness to be part of the solution, instead of the millstone about corporate automotives neck. Now's the time to get public sympathy back, not spit in the faces of those baby boomers who want you to see the survival of Corvette, Mustang, and Charger!
Bryan St. James | 12.24.08 @ 10:29AM
On the point that the Big 3 managment are to blame for not offering enough economy cars: Only partially right.
Why is there a dearth of Big 3 economy or 'green' cars? If you have $1600-2000 of additional cost per vehicle, the only cars you can make a profit on are big vehicles like SUV's, trucks, and mini-vans.
$2000 added to the price tag of a $10,000-$15,000 vehicle would be a 13%-20% addition in price or reduction in profit. $2000 added to a $25,000-$40,000 SUV or Truck would equate to only a 5%-8% price or profit impact.
Dave | 12.24.08 @ 10:46AM
Unions do not help the situation at all. Legacy costs and onerous work rules are a problem. They are not the total problem, but at this point in time the auto unions are an anachronism. The market will dictate what the autoworkers labor is worth, just like it does for the foreign manufacturers.
John T OConnor | 12.25.08 @ 1:45PM
Mr Peters, no matter how you cut the cookie, it's hard to cover an additional $30/hr/worker in efficiencies elsewhere, especially when those efficiencies have to be approved by the same UAW. And that's only part of it. There are job banks and legacy costs, which are crushing now. As Waggoner recently commented, "He never thought he'd be the CEO of a health care company" Sure they were negotiated back when the Big Three really were, but that was then and this is now. And the unions have always been able to exploit a mon0poly advantage against the companies in negotiation. One segment threatens strike, holding one automaker hostage, while the other two segments subsidize the strike funds for the striking workers. Hardly a fair negotiation. And you can still see evidence of this arrogance in the union's recalcitrance in giving anything to save the dying companies.
The Big Three have been under a cost crush disadvantage for years. New technology development also costs a lot of money and has come very slowly. GM stuck with archaic OHV engines so long, because costs of production would be incrementally prohibitive. (Don't get me wrong, I love the Chevy small block and marvel at the things their engineers with this 60 year old design)
GM styling updates also come as frequently as geological ages, and when you're stuck with a bad one, you're stuck. And good looks sell!!
Sure the managements have made many mistakes, and big ones, but they're not forever, union policies are!! And no amount of ignoring the problem will negate that fact. The UAW will ultimately disappear (or be drastically altered) one way or another. When the country itself goes broke and can no longer tolerate the subsidies now planned by Obama, they'll stop along with GM, Chrysler an very likely Ford. Another loss for US business.
John T. O'Connor
Matt J| 1.10.09 @ 10:07PM
Hater! Envy green is an ugly color. Nine out of ten of the most efficient auto plants in the U.S. are Detroit Three plants(Harbour Report, look it up haters). G.M. built roughly 4 million vehicles in the US in 1997, and built roughly the same amount in 2007 with 28% of the hourly workforce of 1997. Your hatred of unionized workers is evident in the statements about how the union must be forcing the company to develop 58 models of vehicles, many with poor visual design and rebadged. Are you serious? Think before you write something. Also, GM builds 20 vehicles that get 30+ mpg. Thats more than Toyota and Honda combined. Current wage and benefit differential of active workers between domestics and transplants is about 6 dollars an hour. Stop listening to "facts" given by anti-union "experts" who have not set foot in an auto plant in 20 years if ever. Finally to all you haters who had an opportunity 30 years ago to work for an auto company but were too good or weak to lower yourself to performing a difficult, hot, filthy and usually dangerous job in an effort to better yourself and your family, get over yourself and live with your decision.
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