I don't usually talk about "the act" of blogging because, well... it is boring. A quick aside - I wrote this on Sunday night but put it aside because sometimes I am too busy during the work week to blog, so if I write something in advance I can put it up on the blog quickly during the week by changing the setting from "draft" to "publish". Then the WSJ "scooped" me with a story on their editorial page called "Why Toyota Won"... doh! However, I don't agree with their assessment because they are too soft on the UAW.
There has been a lot of talk lately about bankruptcy for General Motors. I personally think that this is bad for the United States, but pretty much inevitable. Closely behind Ford Motors will probably fall into bankruptcy, as well.
Here is a link to an incredible article about employees in the "jobs bank". The "jobs bank" is a program created by the UAW to ensure that, even if plants are closed, their unionized employees still get paid. Thus there are thousands of workers on the payroll of Ford, GM and Delphi (the already-bankrupt parts supplier that was spun off from GM) currently sitting around, doing nothing, and contributing to the downfall of these companies.
If you can slog through that depressing article, where the "workers" sit around all day doing nothing, you should ask yourself WHY those workers don't try to develop some new skills while they are idle. They could take a class, read textbooks, even put up a blog or web site! Anything, other than sitting there every day, reading the paper, and staring at the wall. I would go crazy in five minutes, and I expect that is the "logic" behind the jobs bank in the first place, that people with dignity would leave and get a job where they could make a contribution rather than sitting around all day, every day, for years and years, doing nothing.
There are many other articles that discuss the heavy "legacy costs" in the form of pensions and health care costs for active and retired workers that burden GM and Ford on every car that they create.
However, all of these articles, while damning, miss the true and essential picture of why GM and Ford are dead meat... here are the real reasons:
1) their dealer network is less efficient - the dealer networks for GM and Ford are hurt by hidebound laws issued on a state by state level that make it extremely difficult for them to rationalize their franchises. As a result, they have far too many franchises (from the days that there were separate brands for GMC, Oldsmobile, Chevy, Pontiac, etc....) and these franchises are far less profitable than the powerhouse franchises for Honda, Toyota and the German cars (BMW and Mercedes)
2) their factories are less productive - even setting aside the fact that the unionized workers in their factories cost more and come with a heavy legacy burden, these workers are less productive than the non-union factories set up on US soil by the Japanese and German car companies. These factories were set up in the South with right-to-work states specifically to escape the UAW and it takes them many fewer hours to build a car compared to GM or Ford. Thus the fact that the UAW workers are more expensive is a "double whammy" on top of the even more crippling fact that they are less productive in the first place
3) they don't create enough cars that people want to buy - certainly there are exceptions, such as some trucks, the Corvette, the Hummer line, selected Cadillac products, etc... but in general no one is very excited about most of the car lineup for Ford or GM. Go to any rental car fleet and you will see row upon row of GM and Ford cars... because these are the people that actually buy a big chunk of the cars that are sold by these 2 companies
Thus, ignoring the heavy legacy costs and lunacies like the "jobs bank", even if these costs were driven to zero the 3 facts above would eventually doom them to second rank status against the Japanese and German competition.
However, these same facts also give rise as to how GM and Ford could "rise from the ashes". It is simple:
1) go bankrupt and use the bankruptcy code to consolidate the dealer network into a smaller group that could gain scale and battle the foreign brands more effectively
2) take a page from the "transplants" and locate factories where they can find workers who are flexible, have a positive attitude, and want to compete effectively. This is likely in the Southern states since the UAW has poisoned most of the North. The fact that the transplants are booming with US labor means that it isn't the US workforce that is the problem, it is the UAW
3) cull brands and get down to only the cars people want to buy. If GM and Ford culled their lineup down to cars people are excited about instead of being all things to all people, they could probably find enough decent cars and designs to remain a large entity, something closer to the size of Honda or Nissan rather than Toyota (which will probably end up ruling the world)
The US Steel industry has already risen from the ashes by going through bankruptcy and re-emerging with US labor and new enterprise structures. The US work force is the most productive in the world, and can be cost effective even while paying a good wage. However, there isn't much room for error, especially when competing against "best in class" companies like Toyota, so insanities like the "jobs bank" only bring on the grim reaper that much faster.
Finally, anyone who has relatives in a unionized area of the country like central Illinois should just talk to the locals to see how they really feel about management... they hate management with a fire that is amazing to behold. I find it hard to believe that anyone willingly dropped a manufacturing plant into that area knowing the attitudes of the local workforce. Some of the grimmest strikes in history, from Firestone to Caterpillar to Hormel happened in the Midwest. What more do you need to know?
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