Don’t Blame The UAW — Update

May 29, 2009

It appears that when GM engages the UAW in an effort to work together to promote their common interests (such as: “survival”) good things happen. GM and UAW announced today a new agreement:

DETROIT, Mich. – General Motors today confirmed that its UAW-represented employees have ratified the modifications to the GM-UAW 2007 National Labor Agreement. The amended agreement covers approximately 54,000 hourly employees located in 46 U.S. facilities.

“The leadership demonstrated by UAW president Ron Gettelfinger and UAW vice president Cal Rapson, and the hard work from the members of the GM and UAW negotiating teams, resulted in an innovative agreement that will enable GM to be fully competitive and has eliminated the gap with our competitors,” said Diana Tremblay, vice president of GM’s Labor Relations. “We very much appreciate the support of our employees and retirees. Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks.”

Key highlights under the modified agreement include attainment of cost and cash savings comprehended in the GM Viability Plan that will enable the company to eliminate the wage and benefit gap with its competitors. It also includes changes to the agreements regarding the Voluntary Employee Beneficiary Association (VEBA) trust for retiree healthcare. The agreement also highlights GM’s plan to utilize an idled assembly and stamping facility for future production of a compact/small car in the United States to meet future fuel efficiency regulations.

In other words, in exchange for a healthy cut in overall compensation (wages, health insurance coverage/retirement benefits) GM agreed to use UAW workers to build the cars instrumental to its survival, including the Volt.

This is a good move by both sides.

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An Anti-Union Guy Says: Don’t Blame the UAW

May 27, 2009

I’ll start by making it crystal clear: I don’t like unions. Most unions, in my humble opinion, penalize the best workers and deliver unjustified compensation to the worst. As a guy who loves to negotiate on my own, I’d only join a union as a last-resort.

That being said, America’s infatuation with demonizing the United Auto Workers is DEAD WRONG. Almost everything you’ve heard or believe about the UAW is not accurate, because the UAW is different from most unions.

Myth number one is the UAW, like all unions, exists only because it makes the leaders rich off of union dues. Guess what? Ron Gettelfinger, the President of the UAW, made $156,000 in 2007 and just under $160,000 in 2008. It might sound like a lot of money, but consider that this most powerful union boss in the world makes less than almost any regional union chief. For instance, the Service Employees International Union (SEIU) Local 32B-32J chapter in New York was paying its president $530,000 each year.

Even better, a person with no experience and no education can get a base of $80,000 if he is lucky enough to get a Longshoreman’s union entry-level job.

In comparison, Rick Wagoner, former President of GM, had a 2008 salary of $2.2 million. Bob Lutz, GM’s former high-profile VP, saw $1.56 million in 2008. Gettelfinger, the demonized head of this so-called greedy union in actuality makes less money than the average GM low-level department director.

Myth number two is that the UAW has no interest in the survivability of the auto companies and has never been interested in anything other than better pay and benefits. This is totally untrue. Indeed, in 1949, UAW President Walter Reuther oversaw the publication of a position paper called “A Small Car Named Desire”, which urged The Big Three to start producing smaller, more fuel efficient cars, because that is exactly what the UAW perceived the American public would want. The Big Three’s top brass told Reuther to stick to negotiating contracts, rather than tell them how to run their businesses.

Throughout the 1960s and 1970s, the UAW was regulated by the Big Three to being concerned only about protecting members’ benefits. By the late 1970s, the UAW started to see the foreign competition as a legitimate threat to the US auto industry, even when Big Three SWAT (strengths, weaknesses, opportunities, and threats) analyses focused solely on one another in each segment.

The UAW urged foreign automakers to build their cars here in the USA. Unfortunately for them, right-to-work states did better jobs of lobbying, so most foreign-owned shops became non-union.

Interestingly, though, the Japanese-owned factories seemed to offer fair compensation for work. So what does that say about the Big Three? To me it says they were…and still are greedy, shortsighted, too inbred, and insulated to see that it was their own damn fault, not the UAW’s, for the domestic auto industry’s collapse.


The verdict on proposed changes to automotive and clean air standards

May 19, 2009

I could go into great detail about all that I’ve learned about the issue from my background with transportation issues for Members of Congress, product line development and management for corporate America, discussion with industry insiders from work in automotive journalism, but instead I’ll just say this about the current administration’s proposed changes to fuel economy and pollution regulations:

Do it!

It will be great for domestic automotive companies and their American consumers, because every single time the Big Three have faced tougher standards (such as 1968 and 1975), they have succeeded far beyond their foreign rivals.

Give engineers and developers tough goals and they will deliver great products built more efficiently and at lower cost than ever expected.

Yesterday was the Prius. Tomorrow is the Chevy Volt. By 2016 there will be levels of high-performance, range, comfort, style, safety, and affordability about which we can only dream today.


What will Chrysler do with the remaining 2367 dealerships?

May 14, 2009

Chrysler announced that it will be pulling the contracts of a quarter of its dealerships. The worst-performing 789 dealerships will no longer be authorized Chrysler-Dodge-Jeeps retailers and service centers.

The talking heads are all over this issue. Some say that it is a bad move that will cost jobs, others say it will help save the company. Another group are focusing on the recent news that Chrysler executives are using loopholes to increase their salaries when they should be finding ways of keeping dealerships open.

Here’s my take: it’s about time Chrysler downsized its dealer network. If you’re like me, the first thing that came to your mind when you read the press release was “CHRYSLER HAS 3156 DEALERSHIPS!?!?!” Remember, folks, Chrysler, Dodge and Jeep only sold 1,453,122 units in 2008, which means the average was 460 car sales per dealership total – or each dealer selling 1.26 new vehicles per day. In actuality, Chrysler noted over 90-percent of sales were made by the top half of dealerships.

But the problem is deeper than it seems. The Big Three have a habit of selling dealership franchise contracts to anyone with money. They don’t give a crap about internal competition, nor do they care about quality of service at dealerships. At best, the Big Three have made a half-assed approach to quality-control, usually in the form of sending surveys to customers. If you’re like me and have circled “not satisfied” on one of these, you’ll know that the only thing that will happen is you’ll be treated even worse when you bring your vehicle in for service. (I actually had a Chevrolet dealership service manager in Shelton, WA yell at me for indicating on a surbey that I was “not satisfied” that my three-month-old Corvette had been in his shop for six weeks as they fumbled trying to repaint the car’s rear panel that had come botched from the factory!)

Having too many dealerships means that there aren’t nearly enough top-quality sales and service personnel to go around. Furthermore, it’s harder – and more importantly MORE EXPENSIVE to maintain effective sales and service training programs. Therefore, domestic dealerships have been the cesspool for auto-related incompetence.

My least fond memory of dealing with Chrysler dealerships was when my 1991 Le Baron convertible would sporadically buck and shutter. With the car still under its factory warranty, I made over a dozen trips to three Chrysler dealerships in the Seattle area to address the problem over a six month time frame. Two dealerships indicated that although they could duplicate the problem, they had spent so much time on it and thrown so many new parts at it that they’d have to start charging me for any future parts or service – even though the problem was occurring with more frequency! (I wound up calling a mechanic my family had used back in the 1970s, and the mechanic was able to diagnose AND FIX the problem within TEN MINUTES – a loose wire in the wiring harness for the ignition and fuel systems.)

It’s not just a problem with Chrysler. Last year when I had dinner with Bob Lutz from GM, I asked him his plan to train service centers to handle the complex Chevy Volt, especially when it was already common knowledge that most dealerships weren’t qualified to effectively maintain Corvettes (and then I cited my personal experience taking my new Corvette in fourteen times in two years to fix seven problems – four of which were caused by dealers trying to fix the other problems). Lutz’s comeback was “you know, dealerships are independent, so we don’t have much say with what they do. I suppose most of the Volt won’t be serviced at dealerships…the parts will just be replaced there.”

As for the sales side, not only are Chrysler dealerships (as well as GM and Ford stores) saddled with plenty of inferior products, but also these shops must compete with somewhere around 50 other dealerships with the same cars in their own state – not to mention all those with competing products. And since there’s little to no training for sales people, it’s every man and woman for themselves.

If you don’t believe there’s a difference, go walk into two different BMW or Lexus dealerships. Notice how the showroom looks, how the sales staff approaches the interaction, and the types of information provided. In contrast, go to two Chrysler, Ford or GM dealers…make them Lincoln or Caddy dealers if you prefer a more apples-to-apples comparison. The lack of structure and education is apparent in the Big Three.

With real market pricing available a click away on the web, there’s no need for ten dealers of one brand to be competing within the same metropolitan area. Chrysler is right to lower costs by cutting the dealership fat. GM and Ford should follow. Then they all need to get more from less by actually investing in some BMW-style education for sales and service.

It’s time for the Big Three…and maybe the US government (which outlawed direct sales to customers) to rethink the relationship between dealers and manufacturers.