Saturday, December 13, 2008

Auto Industry: Dead or Still on Life Support?

Is today the day the American automotive industry dies?

In July 24, 2007, I asked the above question on LinkedIn. Today I re-opened the same question intact for further discussion.

Chrysler, general Motors and Ford all begin labor negotiations with the UAW labor union over the next few days. Will they have the capacity and ability to reach unprecedented levels of cooperation to work out a deal on which their mutual survival might very well depend?

I added this clarification the same day:

The "Big 3" and the UAW have begun negotiations for a new collective bargaining agreement. 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 what has been a prolonged withering period of what might 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 2 years
A dazzling array of benefits provided to union employees by companies that cannot continue 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 that 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 three companies will be seeking concessions to help them offset the disparity of costs they currently fight against with Japanese auto makers, who make about $2,000 per auto in profits. American auto makers claim that hourly costs per employee run about $25 per hour higher than those of Toyota, Honda, and Nissan, when considering non-hourly compensation such as health care costs, pensions, retiree costs, and others. GM, for example, paid about $4.8 billion dollars in health care costs last year. (Sources: NPR and AP news)

Bye-bye, Miss American Pie?

I received 44 answers back then. I will share the best in a coming post.

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