I've never been a union member and know very little of the details as to the UAW's influence on the problems with the big 3 US auto companies. It is obvious something is wrong with GM, Ford, and Chrysler in that they are having definite financial troubles at this time.

I've heard and read these auto companies (their suppliers, etc.) employ over 5 million people. If this is true and they close shop, where do these people go?

These auto companies actually produce something. Whether or not some people don't care for the product, it is a product. We the people, through our government representatives, set aside $700 billion for the financial industry to "bail" them out. What exactly is it they produce? I know, I know, somewhere down the food chain, a house or car would not be built without the financial industry. I also know the financial industry employes lots of people. I'm just not sure I'm ready to shut out the auto companies, if they are willing to agree to some rules. Well, maybe not Chrysler, been there, done that.

Organizational stupidity and management's rights are tightly related to each other.

"my stepson, who is in an MBA program at MIT and a very smart guy"

maybe he's being misled by his MIT profs. why is GM, an automaker by tradition, in the home mortgage business? and why are they producing dinosaurs of vehicles? the auto industries of japan and germany are both unionized and doing fairly well. by some calculations, the labor component is only 7% of the cost of the vehicle. one needs to remember that it was GM that bought the electric trolley system of los angeles, then closed it down to spur auto sales. maybe GM, like boeing, should get into the electric trolley business, producing vehicles that might be useful to society and helpful to the environment, instead of escalades, avalanches and denalis. i don't think it's helpful OR smart to blame this problem on US autoworkers.

Seems to me that there are a number of reasons that the auto makers are not doing well (that means going down the toilet to some of us...) and the union wages and benefits are only one part of the problem. We also have the CAFE rules that decry that the auto makers are to make a certain percentage of cars that don't sell very well. This is part of a regulation requiring two layers of production limits. Also, the fuel regulations for use of flex fuel autos and ethanol also contribute to the cost of production.

Add to this the problem of unsold vehicles. People don't buy cars when they cannot get loans, or are unsure about retaining their jobs. The loan problem is rooted in the housing market and the regulations requiring or almost requiring housing loans to unqualified buyers. And this has its roots in the UN Treaty called the International Convention on the Elimination of All Forms of Racial Discrimination from the 1960's but finally signed by Clinton on Nov. 20, 1994. When it was signed, Fannie Mae and Freddie Mac expanded loans to low income borrowers and the sub-prime market was born. Financial institutions bought the bundled mortgages without properly considering the real risk and the bottom finally fell out of the credit market. Now the dealers cannot sell because money is not available to loan. Detroit suffers even more.

Accounting practices also were changed by regulation to make the value of property marked to market. Suddenly assets in property were without value even though the property had land and structures with real value. Banks began to fail and money to loan was gone. No car loans with out money to lend. No car sales without car loans. Government strikes again with unintended consequences.

It appears that the social engineering regulations are all to the downside of the auto industry cost basis.

The speculation of the financial markets in the oil commodities doubled the cost of crude, the that balloon burst, too. The brief exercise in high gasoline prices brought auto travel to a minimum quickly and the flow of money in support of that stopped as well. Business faltered. No one wanted to buy cars with bad fuel mileage, even if it made little sense to reject those vehicles when alternative vehicles were even more expensive on a total cost basis.

That's what I think. Do you agree?

John Andrews, Knoxville, Tennessee

I take great pride that both my Saturn and Nissan truck were built right here in Tennessee.

Guess that makes me a locomotorist.

____________________________________
"Whoever corrects a mocker invites insult; whoever rebukes a wicked man incurs abuse."

that do get in the way of the big 3's ability to compete effectively. These issues are add ons, however, and not central to the overall problems they face. They are also not really tied to either compensation or benefits, per se. But let's start with UAW issues.

1. Worker task inflexibility. The job descriptions at a Big 3 auto plant are laughable. But anyone who's ever worked in theatre on broadway has also seen similar silliness and they manage to turn the occasional profit. At the Big 3, these job descriptions are based on a manufacturing methodology that's been obsolete for generations now. "Worker will affix component A to assembly C using press H" kind of stuff. In a modern manufacturing plant, a factory floor worker is hardly the "unskilled laborer" of his forebears. The UAW needs to work with the Big 3 to bring job descriptions in line with today's realities. But that bumps up against point 2.

2. Worker responsibility. Take a tour of any of the Japanese (especially Toyota) facilities in the general area. Every worker has the authority to stop production if he spots a quality problem. Every worker has the responsibility to stop production to address the problem, in fact. Every worker performs certain basic preventive maintenance and repairs on the equipment he uses. He doesn't have to wait for something to break and then call maintenance. If something does break, he doesn't go "on break" until it's repaired, he actively assists maintenance and is reponsible for learning if there was anything that he could have done to address the issue before it caused a work stoppage. Of huge significance, workers are included on ad hoc or standing cross functional teams to address any opportunities or issues that the facility may be have.

The UAW has real problems blurring the line between line workers and maintenance workers. But factory throughput (worker productivity) is tied to preventing equipment failures or addressing them as rapidly as possible. We could get into concepts like six sigma, TPM, etc., but I feel eyes rolling already.

Both the UAW and the Big 3 have serious problems blurring the line between management and labor. But blurring that line - even deliberately ignoring it - is a key factor in achieving optimal production processes for both throughput (worker productivity) and sustainable quality gains. In fact, no respectable modern manufacturer would go into production with a new product without having a standing team with members from the line workers, area managers, plant management, cost accounting, and engineering ready and empowered to tackle any issues and to identify and implement any production improvements. Oh, and the team leader is usually from engineering, not plant management.

But if you really want to talk about what's wrong with the Big 3, you have to leave the UAW out of it. The UAW issues are all tied to execution. The real problems with the Big 3 are tied to planning. The design to production cycles are absurd. The functional silos that exist between design, engineering, marketing, costing, and commercialization (turning a 1 off design into a mass produceable end result) almost guarantee a less than optimal solution.

There's also an over reliance on "common components" between product lines, and even across car companies (Chevrolet to Cadillac or Ford to Lincoln). In and of itself, there's nothing wrong with sharing common components. Lexus and Toyota, Inifiniti and Nissan also share a lot of common components. But there has to be some common sense applied here. If the consumer is touching it or looking at it, either it shouldn't be a common component or the common component had better be taking a higher end component and using it on a lower end product. You also don't sacrifice quality, performance, or aesthetics on the altar of common components. I remember sitting in a first year model of the Cadillac CTS and noticing the instrument panel was illuminated in a pale green while the center console was illuminated in orange. And this is what they were rolling out to compete with the 3 series BMW and G35 Infinti?

Big 3 planning is pitiful. If you go to production with a crappy design, you're going to lose. Manufacturing efficiency won't save you.

Top 20 sellers for Oct. 2008:

Link...

The only models that saw an increase in sales for Oct. 2008 v. Oct. 2007 were Toyota Corolla/Matrix, Chevrolet Impala, and Chevrolet Malibu.

The models that saw an increase in YTD sales as of Oct. were Honda Accord, Honda Civic, Nissan Altima, Chevrolet Malibu, Ford Fusion, and Ford Focus.

At some point you'd think shareholders would demand that automakers start building cars people want.

Here are sales statistics by class:

Link...

By manufacturer (with market share):

Link...

Here's another analysis of what's selling and what's not.

Link...

RE US Mfg quality, Ford fan here.

Started buying Ford Explorers around 1992. Loved them. Never had any real problems with any of them.

Bought a Ford Freestyle about 3 years ago. So far still love it. It gets 27-29 mpg on the highway (23-24 around town) and holds about as much as an Explorer. It is based on a Volvo design, i.e. very safe. Ford doesn't offer the Freestyle anymore. The new Taurus X is not the same thing.

I'd buy a Ford Escape hybrid if I had the need, just don't have the need. The Ford dealer in West Knoxville has had a few in the last couple of months.

RE: Nissan
Within the past several months dealers were offering the Nissan big pickup for sale and they would toss in a Versa. How can they do that? Nissan has been hurting for several years. Is the Japanese government subsidizing them?

Oops! Posted at the same time as R.

Not to derail this interesting discussion further, but it should also be noted that you don't have to buy (or build) a hybrid to get good fuel economy.

Five of the top ten EPA MPG rated vehicles are non-hybrid regular old ICE cars. And there's a whole bunch of others that get combined 25MPG+.

Here's the list from the EPA database:

I think it is a mistake to compare the American automobile industry to the Japanese automobile industry.

Japanese industry has never exactly been a free-enterprise model. All Japanese industries have a closer relationship with their government than any US industry, except for the defense industry.

I think at this time it would be a huge mistake to let one of the Big 3 go under. That doesn't mean I believe that they should be given help with no strings attached.

But looking at the big picture, the unintended consequences of such inaction could be devastating for the US economy.

We know what we're getting with the auto industry. We've already given $250 billion to the financial industry, and I haven't heard anything yet, from anybody on the right or the left, that would indicate exactly what we have with the financial industry.

Granted the Big 3 have made mistakes, but they are very symbolic to the country, and although I'm sure many professors would like to have us believe the country is truly "post-industrial," I don't think auto-manufacturing is something that we as a country should let whither away.

Correction: wither away

Let them go bankrupt as what will emerge will be better and stronger for it. The failing business model employed by all automakers, not just the big three, is why there is this issue of poor sales but as for the Big Three, it is due to a mix of incredibly stupid business executives as well as the UAW. They are dinosaurs and the best thing for them and America is to let them fail and regroup because consumers still need cars. It is beyond pathetic that they are begging the federal government for what amounts to nothing more than a welfare check. Where is the leadership of these Big Three is the real question before us?

see michael moore's "roger and me" for an informative (and entertaining) overview of gm. it's available at our county library.

Let them go bankrupt as what will emerge will be better and stronger for it.

Then the financial sector, AIG, and all the others, which were bailed out, unconditionally, by a Republican Administration, and de facto Republican Congress, should be allowed to fail as well.

But maybe there's a bias against labor on the Republican side when it comes to an industry that actually makes something that is clearly absent when some Democratic lawmakers believed there should have been a restriction on the compensation of upper managemnt of the bailed out financial firms, and Republicans wanted that bail out money to be free of any advice, much less strings.

Or maybe Wall Str. just have better lobbyists on K Street than manufacturing sectors do.

Or maybe the Republicans are just sore at Michigan over the election?

Nah. That couldn't be it, could it?

Like I said before, I have never been a member of a union. I did work in a factory for a very short period making seatbelts. If I had worked there for any length of time I would not have hesitated to join the union for the necessary representation.

I would hope working in auto factories is a lot safer than it was back then. Is it safer due to unions?

Yes, it paid good money and you would have to pay me good money to do those jobs.

We had to be very careful with all of the heavy duty equipment. You could get seriously hurt very quickly. During those few months I built seatbelts, a woman did get hurt and was rushed off to the hospital. It was frightening to watch them scramble to get the machine stopped and then untangle her.

I don't know. Is it all robot driven now?

"Even then I was a taxpayer reluctant to see the federal government get so involved in what must be a market based solution for this mess to clear up or it will never recover from it."

I continue to be aghast at many Repuublicans ignorance of economic history.

Since this is the worst economic crisis since the Great Depression, it should be easy for people to look back and see what rescued the country from it.

Conservatives are always quick to claim that the New Deal didn't rescue the country, but it was World War II.

While that is true, all World War II was, in economic terms, was the New Deal on massive amounts of steroids and amphetamines.

The Great Depression was ended because of massive amounts of government involvement in business due to the war. The "free market" quite frankly had nothing to do with it.

Yep.

And since Pres. Elect Obama made a promise to NASA in Florida, and the Democrats proved that they don't have to have Tennessee to win, but Florida will be key, I think it is guaranteed that less federal funding will be sent to Oak Ridge and more will go to Florida and NASA.

But then in East Tennessee, I guess we will always have free enterprise and the "market."

Enclave has an interesting write-up on unions and the big 3 auto mgfs, Inciting Class Warfare is So Easy for Those with Ulterior Motives.

Foreign auto makers like Honda can pay their employees less because they accept sunbelt incentives (a.k.a., corporate welfare) from non-union, exurban hinterlands in Ohio and Alabama where employment and wages are depressed and residents feel lucky just to get a job with a salary higher than the meager prospects offered locally. One of the ways Honda boasts that its record on lay-offs is better than the big 3, is that it utilizes sub-contracted temp workers who have no benefits in place of full-time hires. That depresses the salary of Honda employees and generates the illusion that Honda does more with less. Honda decides to pay for work related surgery rather than design for workplace safety, which further drives up the price of medical care. There is so much detail that matters, but which is left out of graphs and scapegoating commentary.

We've been mainly talking about how U.S. automakers got where they are, and there is plenty of blame to go around.

But what now? Bailout? I'm starting to think not.

Congress has already authorized $25 billion in loans to jump start R&D and retool for production of more fuel efficient cars. As has been noted, any new production, or even significant changes to engines, etc. would be months or years out. This doesn't help GM.

Plus, their R&D investment for 2007 was only $8.1 billion on sales of $181 billion, which works out to about 4.5%. This appears to be typical of most auto manufacturers, which doesn't exactly suggest a forward looking, innovation-driven industry. (By comparison, Microsoft invests about 14% of revenue in R&D. Pharmaceutical companies are in the same ballpark or higher.) This also suggests that GM may not have the mental or physical infrastructure to suddenly absorb billions of R&D investment and figure out where and how to spend it effectively.

So what if we just gave them the $25 billion? Let's say we gave it to all to GM. This doesn't help, either.

GM has cut, slashed, frozen, restructured, and renegotiated about every expense they can. Reports suggest they are still burning through $2+ billion per month. Their latest quarterly report showed about $17 billion cash on hand. One analyst said they need around $14 billion on hand at any given time just to make payroll and keep the lights on. So how far would $25 billion go? Not very far. They are fundamentally screwed.

Here's a chilling statement from GM's latest 10-Q:

We have taken far reaching actions to restructure our U.S. business, but the effect of current global economic and credit market conditions on the automotive industry require that we obtain additional near-term liquidity support. Based on our estimated cash requirements through December 31, 2009, we do not expect our operations to generate sufficient cash flow to fund our obligations as they come due, and we do not currently have other traditional sources of liquidity available to fund these obligations.

Isn't that sort of the definition of bankruptcy?

It would seem, then, that bankruptcy is their only way out. Their creditors and suppliers and shareholders would get screwed (actually, their shareholders already have). On the other hand, taxpayers would probably end up bailing out their pension plans and some of their employees would probably end up on public assistance such as Medicaid, etc., so we would get screwed either way, I guess, but not as bad as their employees.

But in the end, the GM board of directors, management, and shareholders would bear the brunt of it, as they should, and they would then have to figure out how to reorganize and restructure to emerge as a going concern selling a product people want to buy.

"If you include GM's dealers, parts suppliers, and aftermarket suppliers, that would put millions people out of work in very short order."

I agree. I think letting GM go under would be a financial, symbolic, and, as a result, an economically strategic disaster.

We've bailed out people who manage, and mostly mismanage paper assets, Ponzi schemes described as credible financial investment vehicles (see, I just did it), and other Wall Street creations that would put the Imagineers at Disney World to shame with their imagination.

Letting GM sink would cast a pall, and send a shockwave throughout the country that could possibly destroy what little confidence is left in America's leaders and future leaders. It would only deepen the recession and possibly slow the recovery.

Yes, but GM sold 4.5 million vehicles last year in North America, 2.2 million in Europe, 1.4 million in Asia, and 1.2 million in Latin America, Africa, and the Middle East.

Those markets may shrink, but they aren't going to just dry up and disappear. And I doubt that any other manufacturer has the capacity to step in and fill the void.

Somebody is going to make the cars, and workers will be needed to make them and the suppliers will be needed to supply whoever does, even if it's not GM.

And if we're going to bail out GM, then do we have to bail out Ford and Chrysler? If we're going to nationalize auto manufacturing, where does it end?

(Playing devil's advocate a little.)

P.S. Maybe it would be better to write a $700 billion check to bail out and shore up our manufacturing base and save the big three automakers v. paying off bad-stupid Wall Street bets.

But then we have to ask whether we should be doing either.

In either case, are we sending a message that capitalism is dead, and we're creating some new weird hybrid where profit is privatized for a wealthy, protected few while risk is socialized so that failures are paid off by everyone else?

(And what about the irony of claiming that Obama is a "socialist?" Who are the socialists again? I'm having trouble keeping up...)