Ian in the library… And out of it…

The Economy != A Zero-Sum Game September 27, 2007

There is a report making the rounds on how the GM deal is a black day for the Canadian auto industry:

One of the key pillars supporting Canada’s long-standing competitive advantage in the auto industry began crumbling Wednesday, less than a week after another one collapsed.

General Motors Corp. and the United Auto Workers reached a deal that shifts the burden of retiree health-care costs for U.S. workers to the union. The agreement dramatically reduces GM’s burdensome cost structure and once it’s followed by Chrysler LLC and Ford Motor Co. , will reduce the health-care advantage Canada has used for more than a generation to help lure automotive investment to this country.

It comes just days after the Canadian and U.S. dollar reached parity, vaporizing a competitive advantage that buttressed billions of dollars in investment in the automotive heartland of Southern Ontario.

Oh no! the world is ending… except that it isn’t. GM has been in Oshawa/Windsor/Southern Ontario for a long time and invested a lot of money they’re not just going to pull up shop and leave regardless of comparative advantages.

The fact of the matter is that if this deal helps General Motors survive and if GM can be bothered to build cars people actually want to drive there is every likelihood that there will be more investment across the board in GM’s operations (to say nothing of the fact that currency fluctuations occur all the time). These reports are nothing but alarmist sensationalism…

That was quick… September 26, 2007

The GM strike is over and GM got the union to handle retiree heath care benefits… but no word on what they gave up to get it… Story here and here

Can both sides lose… Please? September 24, 2007

Word today that GM in the States is now on strike. I don’t really feel sorry for either side in this one. The workers have gotten their way since WWII and now the GM doesn’t have the danegeld to pay them off. Of course, the UAW isn’t entirely to blame, they are just doing what they are supposed to do, it is up to management to occasionally say no and then have the stones to keep saying no. For some reason though GM’s management hasn’t been able to do this for a long time.

To make matters worse, management these days at GM isn’t exactly helping their own cause. Their story these days is that the General is uncompetitive because their labour costs are so high (which is probably right), and thus the union must make concessions on wages, jobs, health care – the lot really. The problem with this picture is that the brass at GM aren’t taking a pay cut to set an example – its a little difficult to convince the union faithful that things are bad when there is no sacrifices being made at the top. Quite frankly, I don’t have a problem with management making the big bucks – most of them probably deserve it – but in the current climate the optics would look better if management were saying “we’ll take a pay cut if you give us what we want – we’ll share your sacrifices.” Instead this battle is going to play out in the press as a battle of greedy management (who have managed to bankrupt a once great company) against the poor workers who just want some job security.

So why do I want both sides to lose? The UAW is like an anchor dragging the big 3 to the bottom, but management is right there with them unwilling to take a temporary profit hit and say no when they could and unable to say no now.

UAW and the Big 2.8 – is the end nigh? August 6, 2007

Good editorial over at The Truth About Cars about the blame game between management and the UAW:

Bottom line: labor costs have zero impact on what cars consumers decide to buy. You could argue that an extra grand here and there– taken out of direct costs and plowed back into new vehicles– would make The Big 2.8′s vehicles more competitive. Given the failure of heavily discounted domestic product to strike back against the Toyotas of the world, you could make an equally compelling case that lowering the domestics’ production costs wouldn’t have any impact on the end result and, thus, U.S. consumers’ choices.
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There’s only one way to “save” Detroit. American automakers and their unions must set aside their adversarial relationship and find a way to build the world’s best cars– price no object. That’s right: they must stop focusing on margins and start focusing on market share. Making a small profit on a smaller and smaller slice of the U.S. market will do nothing more than prolong The Big 2.8′s agonizing journey on the road to oblivion. They need to recapture the high ground, destroy the transplants’ mindspace advantages, restore America’s carmaking reputation and THEN think about profits.

Is there enough time? Probably not. At this point, committing all remaining resources to building the world’s best automobiles at any cost is a death or glory strategy that has more than a whiff of the grave to it. But thinking that Detroit’s future depends largely on reducing labor costs is the worst kind of self-delusion: the kind without any chance of working.

On my old blog I had made some comments about the death spiral of the big 2.67432. I think the above puts the problem succinctly. Product is the key. The Big 2.8 is finally starting to realize this but like the constant stream of negativity on TTAC and Autoblog I think its too little too late… Look at Ford of Europe – if some of those cars had been brought over here… product, product, product – that is the bottom line.