Monday, June 1, 2009

American Automotive : looking back

Will American auto companies survive?

I wrote the following post about the American auto industry in July 2007. I wasn't very compelling or prophetic in what I wrote, although I was fairly introspective when Iwrote the piece, inspired by reports airing on NPR while I drove to work at my old employer, Firmenich.

I mused concerning whether or nor if in during the then looming collective bargaining process between Ford, Chrysler, GM and the UAW, any of the parties would manage to achieve the daring compromises that seemed necessary to save the automotive industry in the United States.

Filtered through the lense of the past 6 months, the answer is they tried and didn't even come close. It took events far bigger in scope and scale than any of the parties ever imagined to force them to entirely new places on the map.

Who knew that:

  • GM and Chrylser would both be in bakruptcy.

  • Fiat, the UAW and the Federal Government (us) would be the major shareholders at Chrylser.

  • Who could imagine that the UAW would not only grant major concessions (again), but literally bargain away thousands of jobs?
  • That GM would owe their Michigan suppliers $450 million dollars
  • Ford would look like the strongest company left standing?

Is today the day the American automotive industry dies?

The new non Daimler owned Chrysler and the UAW begin negotiations for a new
collective bargaining agreement today, and negotiations begin with GM and Ford
on Monday. Much is at stake for both parties, and it could mean that the ability
to find collective solutions and compromise will have to approach new heights to
stave off what has been a prolonged withering period of what might be the
quintessential symbol of American manufacturing for most of the past 100+ years.

At stake,

  • more jobs beyond the 60,000 production jobs lost in the past two years

  • A dazzling array of benefits provided to union employees by companies that
    cannot continue to provide them indefinitely

  • retirement benefits for over 1 million US retirees, costing a staggering $11 billion dollars

and the list goes on and on....

Monday July 23, 2007....Radio story lead line heard driving on I-4 between
Tampa and Orlando on NPR's Marketplace business news show: "Today may be
the day the American auto industry as we know it changes forever".

UAW President Ron Gettelfinger said the union is not in a concessionary
mode, and a strike is still possible despite the precarious financial position of the Detroit auto makers. The union plans to stick to its old tactic of pattern bargaining by
negotiating a contract with one company that will extend to the others. A target company has not yet been selected. "That depends on the tone of the negotiations." Gettelfinger said.

All 3 companies will be seeking concessions to help them offset the disparity
of costs incurred vs. Japanese auto makers, who make about $2,000 per auto more
in profits. American auto makers claim that hourly costs per employee run about
$25 higher than those of Toyota, Honda, and Nissan, when considering health care
costs, pensions, retiree costs, and others. GM, for example, paid about $4.8
billion dollars in health care costs last year. (Sources from NPR story and AP
news stories)

Bye-bye, Miss American Pie?

Today I heard news reports that Chrysler is nearly ready to emerge from bankruptcy, that GM filed bankruptcy, that some small car production is returning to the us, and that in NEw Your state auto workers at Magna are still trying to decide whether to approve a contract that will save their jobs.

Oh yeah, Magna International also was the winning bidder for Opel, GM's former European division.

Where the hell will this story be in another year?


  1. Whatever happened to capitalism? If these companies are dying that is capitalism! How about an RFP and we give the money to a new innovate automotive company isnstead of these dried up ones that can't manage thier money?
    Just thoughts, from the warrior!

    Ann Evanston
    The Warrior is Within You

  2. Gotta go with you there, Ann. I am not at all confident that Chrysler will survive any way, even though it is probably good Nardelli is leaving. The huge test for General Motors will be abandoning bad old habits, fighting the UAW intransigence, morale issues, and avoiding constant public criticism over the way they are spending "taxpayer bailout dollars".

    Hmm, I am not confident GM can survive either, now...Damn


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