

America's Other Auto Industry - DanielBMarkham
http://online.wsj.com/article/SB122809320261867867.html

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JoelSutherland
I don't think it is fair to blame unions for Detroit's problems. A union's
motives are clear: to maximize income of its members.

The fault lies with management. They agreed to terms with the unions that have
made it impossible to run a profitable business. The writing has been on the
wall for a very long time. The pension and benefit issues have not silently
crept up in the last couple of years. It has been an issue for decades.

So now Detroit is screwed. Their only outs are to default on the pensions they
legally owe or to have taxpayers cover their debts.

Repayment on a loan isn't realistic when their cost structure is so screwed
up. A loan now will only delay the inevitable.

The only realistic solution is for the automakers to declare bankruptcy,
allowing the courts to decide what to do about their obligations.

~~~
brk
Are you at all familiar with the UAWs negotiating tactics? I worked at Ford
(in systems) many many years ago. I ran the IT and plant-floor systems
operations for a now-defunct Ford plant (Dearborn Glass). This was about 14
years ago, for reference sake.

As a sideline I was also building and selling PCs to various coworkers,
including a lot of fairly high ranking UAW negotiators. As such, I would go to
their houses after hours to fix various user-inflicted issues, we would have a
few beers and get to talking... Let me just say that there was little room for
"management" to negotiate in the grand scheme of things. The majority of the
demands by the UAW were completely unreasonable and unscalabe, and underneath
it all they knew this.

Your first sentence is correct in that the UAW seeks only to increase its
membership and payroll, but they go about this in a very non-beneficial
parasitic arrangement. I am not saying that management is/was all saints
either... But when I had to almost physically drag a forklift operator away
from a poker game to move something, or witness a guy whose sole purpose for
being was to make sure the "knobs" (thing the rear view mirror attaches to)
were properly installed on finished windshields (he managed to do this job
while simultaneously reading the paper) something was clearly wrong.

The non-American automakers really had to make only 1 critical business
decision: keep the UAW out of the factory.

~~~
JoelSutherland
I don't think tactics are relevant. Management had a choice at each
negotiation:

1\. Stand Firm and accept a strike.

2\. Cave, agree to something clearly not viable and let someone deal with the
problem in the future.

Option 1 doesn't make management look too great -- the were likely concerned
for their jobs. This is why they took option 2 with the hope that the 'future
someone' would be the government.

Let's keep in mind that the automakers are not profitable and have not been
for some time. Long term, shutting down is generally preferable to operating
at a loss.

~~~
brk
As publicly traded companies, the management is beholden to the stock holders
and are (in essence) required to act in the manner that most increases stock
value. Wall Street is notoriously short sighted and will ALWAYS prefer short-
term moves over long-term moves. Therefore, accepting a strike for the
greater/future good would have only decreased the stock value and resulted in
a massive management turnover.

BTW, while I worked in Ford Systems, my wife worked in Ford Finance. I'm
pretty familiar with most of the inner workings at Ford and can tell you that
your assumptions about the available options are not very accurate, although I
can understand why you might think that way.

I'm not sure about your statement of profitability. Ford had a profitable Q1
this year, and it's last full profitable year was as recently as 2005 (just
under 3 years ago). "Profitable" can be very open to interpretation, although
they have been losing marketshare for quite a while, they have not been
unprofitable for a significant amount of time when you look at the bigger
picture. Not sure about GM or Chrysler.

~~~
Retric
I don't think Ford was "Profitable" in 2005. To be profitable you need to
reduce you income by all liabilities you are adding in the future such as
pension and heath care. They have been cooking to books for so long it looks
like they only recently got into trouble, but an under funded pension is just
as much debt as any other loan even if it takes a while to come due.

~~~
brk
Well, according to their SEC filings they were profitable in 2005. You can
argue the point ad nauseum if you like, when they move billions of dollars in
cash there can be a lot of room for interpretation at times.

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jeroen
_[the 12 "foreign" producers] can switch their assembly lines to different
models in minutes._

That's pretty impressive.

~~~
kqr2
Ford's plant in Brazil can do this too:

<http://info.detnews.com/video/index.cfm?id=1189>

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llimllib
is it normal for an article like this one to appear without an author credit?

~~~
DanielBMarkham
Yes.

It's an editorial. It reflects the views of the editorial staff of the
publication in question. Sometimes one editor is chosen to write it, sometimes
it is more of a group effort (such as when a paper endorses a presidential
candidate)

Yours is an interesting question. This is a common feature in printed
newspapers and has been for decades. It might be good for online versions of
newspapers to explain things like this, because today many online readers are
not exposed that much to the print editions.

~~~
llimllib
Thanks, I figured it was something like that.

It feels very weird, in the extremely personal medium of the web, to attribute
a voice to a newspaper; Steve Waldman (see?) wrote about something related
this morning: <http://www.interfluidity.com/posts/1228128707.shtml> .

------
jm3
Are companies considered "American" if their profits are shipped to another
country? If their design, business strategy, and engineering are done places
other than America?

Or is that simply considered, "modern?"

~~~
dmv
As the article hinted at, part of that question rests on ownership. Profits
"shipped to another country" are ultimately the property of the shareholders.
If all of the shareholders are American, then the profits get shipped to Japan
and then returned to America in the form of dividends and share buybacks.
There are legal issues, of course, regarding taxation and jurisdiction, but it
does make you wonder. There are plenty of companies in Panama (et al) which
the US Government would like to have enough evidence to prove are American
owned...

