GM just can't cut it. How long until GM is for all intents and purposes dead? From CNN (http://cnn.com): NEW YORK (CNN) - General Motors Corp. said Monday it would cut 30,000 hourly jobs and close or scale back operations at about a dozen U.S. and Canadian locations in a bid to save $7 billion a year and halt huge losses in its core North American auto operations.

The cuts are 5,000 more than the 25,000 jobs GM had said it would cut in June, and represent more than 22 percent of its union work force in North America. Many of the cuts would start next year, GM said Monday, despite job protection provisions in its union contract that runs through September 2007.

GM Chairman and CEO Rick Wagoner said he expects another 7 percent of salaried workers in North America would also be cut by the end of 2006, though he gave no specific number of job cuts planned there. Seven percent would equal about 2,500 jobs in the United States and additional cuts in Canada as well.

The automaker said the plan is aimed at saving $7 billion a year by the end of 2006.

Wagoner said the cuts were what the troubled automaker needed to turn around its operations but he wasn't ready to predict when GM will return to profitability. He also wouldn't promise this would be the end of job cuts and plant closings.

"As we sit here today, it's our best guess and well thought out analysis," Wagoner said.. "If we've learned anything in the last five years, it's that there's no guarantees in this business or any other business."

Not surprisingly, the leadership of the United Auto Workers union blasted the move as unfair.

"We have said consistently that General Motors cannot shrink itself to prosperity. In fact, shrinking General Motors only exacerbates its problems," UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement. "Unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others," they added.

Wagoner said he had received support from the company's board of directors and from its employees as he moved forward with the cutback plans and that he had no plans to leave the company. Some investors and analysts have lost confidence in Wagoner given the company's spate of troubles this year.

"I've given no thought to anything but turning the business around," Wagoner told reporters, adding that he believes his experience with GM should help him lead that effort. "I wasn't brought up to run and hide when things get tough. I'm convinced that's the way that things get righted."

He said the moves were not due to any pressure by the board. "We're not taking these actions because of any pressure on me," he said. "We're taking these measures to get the business right."

Stock rallies, but ... GM (down $0.58 to $23.47) stock opened higher on the news but turned lower in afternoon trading as a growing number of investors and analysts said that while the plan addressed costs, it did not deal with the automaker's lackluster product offerings.

"The plan is essentially as expected, meaning not terribly aggressive," UBS analyst Rob Hinchliffe wrote in a note to clients, adding that the company's market share, which has been sliding, may fall further. He kept a sell rating on the stock and a price target of $20, below the current price.

In June, GM announced plans to trim 25,000 hourly jobs in its North American operations by the end of 2008 in an effort to stem losses. The company has lost $2.2 billion in the first three quarters of this year, excluding special items. Most of those losses, about $1.6 billion, have come at its core North American auto operations.

The company's contract with the United Auto Workers union essentially prevents layoffs before it expires in September 2007, as the company needs to pay union members whether or not there is a job for them.

Wagoner said that some kind of buyout would likely be offered to speed up the job cuts, but that until the buyout packages are worked out with the union, the company can't say how many of the job cuts would come through retirement and how much through buyouts.

The assembly plants being closed are in Oklahoma City, Lansing, Mich., and Doraville, Ga., with the first two closing next year and Doraville slated to shut in 2008.

Some shifts will be eliminated at three other assembly plants, including Line 1 at Spring Hill, Tenn., and Oshawa, Ontario, Car Plant No. 2, which will both be shut, although assembly plants on the same property will continue to operate.

Other facilities to be closed include stamping plants in Lansing, Mich., next year and in Pittsburgh in 2007, along with two powertrain plants, in St. Catharines, Ontario, and Flint, Mich., in 2008.

And the company will shut three parts facilities in Portland, Ore., Ypsilanti, Mich., and St. Louis by 2007. One other parts facility yet to be identified will also be closed.

With the announced closings, GM is essentially keeping its capacity of large sport utility vehicles and pickups intact, even though big SUVs sales have slumped in recent months in the face of higher gasoline prices.

Wagoner said he believed that a new line of large SUVs due early in 2006 should give a lift to those sagging sales, and that some of its large SUV capacity is being changed to produce either SUVs or pickups, depending upon demand. He said GM needs to keep capacity for the vehicles that it can sell at the greatest profit -- namely the larger vehicles.

Among the vehicles made at the assembly plants being closed are the Chevrolet Impala and its twins, the Saturn Ion, its minivans, the SSR sport pickup and some mid-sized SUVs. The company will have a North American capacity of about 4.2 million vehicles a year at its own plants, down from about 5 million.

"Oklahoma City, (which makes the mid-sized SUV) is a very good plant but a classic example of ... just having too much capacity in that segment," said Wagoner. "That's why that plant in on the list today. We don't have any plants left that aren't very high quality and quite productive. I'm sure I'm not going to satisfy any plant as why they've been chosen to be on the list."

Granted they are in deep trouble. However I remember Chrysler seemingly in the same boat with share prices under $5.00. This was in the late 70's.

The question is will GM be able to find a "Lee Iacoca".

Or will dinosaur management plod along to destruction while the unions insist on feeding of the carcass.

James

Granted they are in deep trouble. However I remember Chrysler seemingly in the same boat with share prices under $5.00. This was in the late 70's.

The question is will GM be able to find a "Lee Iacoca".

Or will dinosaur management plod along to destruction while the unions insist on feeding of the carcass.

James

:agree1: "Iacoca" made a huge difference for Chrysler at that time by being a "leader" (JMHO), and the $1.00 per year salary was a great piece of PR work on his part. :topic: To bad he has slid down to being a pitchman teamed up with Snoop Dogg.

Chrysler also sold off some very valuable assets (AM General) that helped in bolstering their recovery, or at least showed they were committed to making a decent attempt. Other than the plant closures and hourly workforce reductions I don't see the same level of committment from the Mr. Wagoner and those at the top of the GM heap. They still don't get it IMHO. The "dinosaur management", as you so aptly phrased it, is still trying to figure out why it was that in 2003 Toyota had an annual profit of 8.3 billion, which was larger that all 3 of the big 3 combined. :nope: They just don't get it.

I'm not interested in the share price of the company. It has to do with GM as a company being able to build and sell cars (providing jobs in the US).

As to Chrysler, I remember BailOut with US tax money where every tax paying US citizen got to pay to keep Chrysler in business. Give me the equivalent money in today's $ Lee Iacoca got and I could probably help out GM.

Not to mention - Where is Chrysler now? It's a shadow of it's former self, not to mention it's DaimlerChrysler.

Ford and GM will both soon bite the dust for all intents and purposes in so far as their providing jobs in the US.

One aspect of the Chrysler story that is often overlooked is that Iaccoca did not go to the government empty handed - he took with him not only a plan to restructure but laid before congress the K-car (the company's plan to turn away from the large cars that couldn't compete against the foreign competition).

GM, Ford and DCX have all in recent years moved towards large SUV's and high performance (both non-competitive during a fuel-crisis), both which are precisely what the customer wanted (at the time), but unlike their Asian competitors they haven't been working on the other end of the spectrum as well.

Look at Honda as an example. Just this year they introduced for the first time in their history a fairly large pick-up truck, but at the same time they have introduced several smaller hybrid cars that are capable of carrying sales when the bottom falls out of the truck market.

You'll find this same practice happening over at Toyota as well. American auto manufacturers have missed the boat when it comes to product change-over, and in a world where the ecomomy (and the whims of the buying public) change so rapidly - this is a big miss.

Unfortunately, Marc, you and I are alone in that opinion. Somewhere in the board rooms of corporate past, holding share price up for the 30 elite who do care, became more valuable than the economic contribution of 30000 laborers. I suggested in a related thread GM should switch to building electric cars. Now that I think about it - That would be the other shoe hitting to floor. The war - The oil - The government corruption. I'm just disgusted with whole discussion.

One aspect of the Chrysler story that is often overlooked is that Iaccoca did not go to the government empty handed - he took with him not only a plan to restructure but laid before congress the K-car (the company's plan to turn away from the large cars that couldn't compete against the foreign competition).

GM, Ford and DCX have all in recent years moved towards large SUV's and high performance (both non-competitive during a fuel-crisis), both which are precisely what the customer wanted (at the time), but unlike their Asian competitors they haven't been working on the other end of the spectrum as well.

Look at Honda as an example. Just this year they introduced for the first time in their history a fairly large pick-up truck, but at the same time they have introduced several smaller hybrid cars that are capable of carrying sales when the bottom falls out of the truck market.

You'll find this same practice happening over at Toyota as well. American auto manufacturers have missed the boat when it comes to product change-over, and in a world where the ecomomy (and the whims of the buying public) change so rapidly - this is a big miss.

Yes David!

One of the basics of investing is being diversified. That way if, say, your telecommunications stocks take a hit hopefully your real estate investments (and others) will take up the slack. When the dot.bomb bubble burst, the folks who really hurt were the ones who were overly exposed in the tech market. They went after the quick buck.

Here we have some "very smart people" (dripping with sarcasm) who bet the company on pickups and SUVs. If they had put a little less effort in yet another flavor of SUV and a little more effort in a small, interesting, and efficient car, maybe 30,000 people would not be anticipating pink slips.

Sad that its the screw ups who will still be collecting paychecks.

Very true Marc. It is difficult to sell / continue selling the oversized, heavy fuel drinking behemoths that seem to have taken over American automobile production.
I have often wondered / thought (sometimes out loud) that the perceived demand in the SUV / Light Truck market was created by Madison Avenue through the marketing of a "lifestyle" to support higher profit margin vehicle lines at the expense of the research & development of new technologies and vehicles / product lines that meet the governments "CAFE" standards. Why would they work to develop fuel efficient or alternative energy vehicles that would require capital intensive re-tooling of existing facilities or building new ones when they can successfully market the SUV. If my memory serves me correctly SUV's, when they were first introduced, were not included for calculation of the fleet fuel efficiency average, weren't required to meet the same FMVSS requirements as autos, and in many instances were built off of existing platforms / chassis that required minimal skin changes to the older models (ie: UN-93 Expedition or UN-46 / 105 / 152 Explorer). I mean just how much safer are you in an Explorer than in a Taurus? Instead of trying to compete with the Asian automakers by building a higher quality, more fuel efficient auto they chose a course that let them realize the highest level of profit in the short term while gambling against their long term viability & whittling away at the economies of a good number of communities. :soap:

I too remember the bail out, and would not be altogether surprised should both GM & FORD end up in the same boat, although I am not sure it would be as readily accepted as it was in the 70's. Afterall aren't TIF districts & economic development zones created by local & county governments already a subsidy of the same nature as the bailout?

I too remember the bail out, and would not be altogether surprised should both GM & FORD end up in the same boat, ....

My friend; they already are.

The checks written - Blood for ink.

A contract that says if you lay off people they still get full pay?
The Company isn't allowed to shut down plants?
And if I remember right, Robotic welders and painters that pay union dues.

James

I wonder why they insist on making a (-)$2300 per vehicle sold and act like they don't know what's happening?:confused:

Doesn't make good business sense to me.

All I can give this is a big fat DUH

it seems so easy to stop selling cars at a lose but if you don't move the inventory, there is a great cost associate with it...it is much better to lose -2300 per vehicle than not selling....think about this.....if you shut the factory down, you still have to pay all uaw employees...which could be greater than -2300.

Apparently you aren't going to be teaching business economics anytime soon are you?

Apparently you aren't going to be teaching business economics anytime soon are you?

you are missing the point, randy...this is not about making money but it is about survival!!!......i think it is easy to roll our eyes at -2300 per vehicle but the truth is...the system gm created is unsustainable...

stop selling costs more than selling at lose....it is a vicicious cycle that gm is in...and eventually gm will pay the piper (who know when that will be) but for now, they are willing to take the loss by selling since they have no choice (until they go through the bogus restruction they announced)...and gm will make money again when things are good again.

if you got better ideas, am more than willing to listen :)

Folks,

For an interesting read, I recommend “Profit Beyond Measure”. You’ll find pretty quickly that Toyota has been beating the Big 3 in combined profit for the past 30 years. Marc, do you still have the copy I sent you?

I’m with Marc on this one: GM is done! A government loan to try and duplicate the intervention done with Chrysler comes at a much different economic climate not to mention the other interesting points made by the other contributors. It will only prolong the inevitable, in my opinion. Keeping Wagoner in place is of little difference: the damage done to them is decades old. GM lacks the leadership and management philosophy to do them any good. I can’t imagine that they could do anything now to save themselves. What a tremendous collapse it will be!

Consider this: Toyota possesses the ability to buy the Big 3 and assume all of their collective debt. What competition are the Big 3 really providing?

Simply stated: bad management ruins the day…again!

Regards,

Kevin

GM, Ford and DCX have all in recent years moved towards large SUV's and high performance (both non-competitive during a fuel-crisis), both which are precisely what the customer wanted (at the time), but unlike their Asian competitors they haven't been working on the other end of the spectrum as well.



The edge towards "high-performance" actually goes to the Japanese. The biggest hits with the "tuner" crowd are Honda's Civic, Mitsubishi's Lancer, and Subaru's Impreza. In many cases, people are pumping thousands of dollars, in some cases it is just the price of a chip (a couple of hundred dollars at most) to further modify their vehicles. The results can be a huge increase in horsepower, with only marginal loss of fuel efficiency.

Many of the Japanese models are now in excess of 200hp, with some of the models >280hp. I think it comes back to a perception, and in some cases a reality, that the Japanese models are more versatile and better built.

The past three months I've been doing quite a bit of traveling. For rental cars I've had:

Pontiac Grand Prix - Poor fuel economy and poor ride
Ford Taurus - Sloppy steering and extremely soft suspension
Subaru Outback - Nice Ride and a good feel for the road (except it is a station wagon)
Toyota Camry - Very nice ride and great fuel economy.

From a simple driving perspective at just around 400 miles per trip, I felt much more relaxed after the drive with the Camry and Subary because of the better seat ergonomics.

Manufacturers can make all kinds of excuses for not being successful, but at the end of the day, people have to want the product.

Wayne

Simply stated: bad management ruins the day…again!
Kevin

Kevin, It's good to see you contributing again. Your post is on target. Society at large :tg: remains asleep at the wheel, so management continues to ruin the day.

It's not a vicious cycle, it's a dead end street and it started to be paved when greed and pride overtook ingenuity, resoursefulness, and diligence.

The US auto industry, it's suppliers and workers have been in self destruct since the end of WW2 and it's finally started a meltdown that will make Chernobyl seem like a fizzled firecracker.

Look at the stupidasz planning of GM. Gas prices out of sight, diminished fuel reserves, GHG vs auto emissions ratio and so on and what do we plan to do? LETS BUILD BIGGER SUV'S to drink more gasoline (or diesel).

Where is the long term, strategic planning of the unions, manufacturers (excluding the Japanese) and suppliers that could help guarantee continued existance? NADA--Nowhere. At least not beyond the existing horizon that those of us outside the industry can see.

If this wasn't so serious I'd laugh my fanny off:lmao: and scream "C'mon Japanese, show us how to do it". Remember to give thanks to Doug McArthur because this is the realization of his plan.

The #1 best thing that could be done in the US auto industry would be to pull the chain and flush, then start over by thinking with your brain instead of talking through your asz.

Am I upset? You betcha!! I have friends in the industry (some of them are you folks here) and it hurts to see friends hurt or fixin' to be. You guys do what you can, but it's the leaders of all the groups that nedd to haved a Louisville Slugger taken to them, not you

A quote from the recently-deceased Peter Drucker who, like Deming, spoke to the Japanese when American executives were too busy counting their money:

"American workers know how to build quality products--they just need permission."

Where is the long term, strategic planning of the unions, manufacturers (excluding the Japanese) and suppliers that could help guarantee continued existance? NADA--Nowhere...

If this wasn't so serious I'd laugh my fanny off:lmao: and scream "C'mon Japanese, show us how to do it". Remember to give thanks to Doug McArthur because this is the realization of his plan.

Randy,

Don't forget China! The world has been teaching them how to design and manufacture products (electronics, cars, etc.) for at least the past 10 years. With their human resources and lower wages they could very quickly become the next economic supper power.

Dubya's attempts at pushing China to the free market way of life is not a bad approach towards leading them to become a more democratic nation; but the cost to the world may be great in loss of industry.

How's the old saying go: If you give a man a fish, you feed him for a day. If you teach him how to fish, you feed him for life.

The world has been in the process of teaching China how to fish in the world market for years.

Am I upset? You betcha!! I have friends in the industry (some of them are you folks here) and it hurts to see friends hurt or fixin' to be. You guys do what you can, but it's the leaders of all the groups that nedd to haved a Louisville Slugger taken to them, not you

And with good reason.

GM and Ford are getting ready to take a dirt nap. And with the rest of the North American sham economy close behind.

:nopity:

Remember, we're all going to be high tech servicemen making a fortune in the globalist borderless paradise and buy all our primary essentials from starving 3rd world corporate slaves. Rainbow stew (http://www.tamus.edu/chancellor/mcteer/articles/ma94autumn.html) for all, a second helping for me, please.

In a couple of years, North Americans in the inner cities will be hunting and harvesting one another for food during the winters.

Reason for edit: Added link for those interested

At the same time there has been the bad news about GM there have also been some references to GM in the obituaries for Peter Drucker. Here are some excerpts from a Washington Post article.

Management Visionary Peter Drucker Dies
By Patricia Sullivan
Washington Post Staff Writer
Saturday, November 12, 2005; Page B06

Mr. Drucker pioneered the idea of privatization and the corporation as a social institution. He coined the terms "knowledge workers" and "management by objectives." His seminal study of General Motors in 1945 introduced the concept of decentralization as a principle of organization, in contrast to the practice of command and control in business.

"There is only one valid definition of business purpose: to create a customer," he said 45 years ago. Central to his philosophy was the belief that highly skilled people are an organization's most valuable resource and that a manager's job is to prepare and free people to perform. Good management can bring economic progress and social harmony, he said, adding that "although I believe in the free market, I have serious reservations about capitalism."

It was a typical remark for a man who believed in the empowerment of workers and the futility of big government, which he called "obese, muscle-bound and senile."

Mr. Drucker taught part time at Sarah Lawrence College and then full time at Bennington College in Vermont. After publication of his second book, "The Future of Industrial Man" (1943), General Motors Corp. invited him to study GM's corporate structure. The two-year study put him in close contact with GM's legendary patriarch Alfred P. Sloan.

The book that resulted, "The Concept of the Corporation" (1945), introduced the ideas of decentralizing decision-making and managing for the long-term by setting a series of short-term objectives. It was an immediate bestseller, although GM wasn't pleased initially; Mr. Drucker said he was told that a manager found with a copy would be fired.

Maybe they did find all the copies or fired those who listened.

Bill Pflanz

:applause: :applause: :applause: go Randy!!

I would add - Corporate vision ends at the next quartly report.

I would add - Someone mentioned (corporate) survival? Think bigger !

Now you've got the picture!

Our country, this world, is at a crossroads.
Change now, or it's a 12 story dry-dive for us all.

In a couple of years, North Americans in the inner cities will be hunting and harvesting one another for food during the winters.

Yes, but other than that, things look pretty rosy :lmao:

Yes, but other than that, things look pretty rosy :lmao:

Absolutely, I couldn't agree with you more. What can I say, I'm an optimist.:tg:

Here's an interesting blast from the past (of historic value for those that choose to learn from it).:cool:

January 21, 1829
To: President Andrew Jackson

The canal system of this country is being threatened by the spread of a new form of transportation know as "railroads" and the federal government must preserve the canals for the following reasons:

If canal boats are supplanted by "railroads," serious unemployment will result. Captains, cooks, drivers, hostlers, repairmen and lick tenders will be left without means of livelihood, not to mention the numerous farmers now employed growing hay for the horses.

Boat builders would suffer and towline, whip and harness makers would be left destitute.

Canal boats are absolutely essential to the defense of the United States. In the event of the expected troubles with England, the Erie Canal would be the only means by which we could ever move the supplies so vital to waging a modern war.

As you may well know, Mr. President, "railroad" carriages are pulled at the enormous speed of 15 miles per hour by "engines" which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside, setting fire to crops, scaring the livestock and frightening women and children. The Almighty certainly never intended that people should travel at such breakneck speed.

Martin Van Buren
Governor of New York

it is soooooooo sad to see such pessimism....guess what guys/gals...no matter how bad usa is economically.......everyone else in the world wants to come to usa....so, stop worrying!!!....japan and china have their own set of problems....talking about toyota, honda and other japanese companies....they too will fall, just like gm/ford/chrysler has/willl...you don't have to look far...look at the current generation of japanese....they are more individualistic than their precessors (although they are much much smarter)...it will take awhile but japanese business will become a short-term, profit oriented entity..which means they will become like gm/ford/chrysler...it took gm 40+ years to be where they are...give toyota/honda and others few more decades.....a classic example of japanese company falling off the crest is sony...they were the leading edge of everything...they invented sony walkman, ps2, etc in the past...what they have done recently?....nothing but a major headache with a spyware which they installed in their music cds....so, it is sad to see gm/ford and others fall but am sure they will be other companies that will fill the voids.

it is soooooooo sad to see such pessimism.....

Ouch, your youthful exuberance has cut my hide.:tg: I do however remain optimistic that history repeats itself, and the law of cause and effect remain constant.:rolleyes:

a classic example of japanese company falling off the crest is sony...they were the leading edge of everything...they invented sony walkman, ps2, etc in the past...what they have done recently?....nothing but a major headache with a spyware which they installed in their music cds....so, it is sad to see gm/ford and others fall but am sure they will be other companies that will fill the voids.I think that was SONY USA that installed the spyware!

I'm not sure if this is 'the beginning of the end' or the 'beginning of the future.'
They would be silly to carry the extra capacity. The marketplace is saturated with cars - foreign and US. They've tried to remain optimistic IMHO, but finally are biting the bullet. Meanwhile oil companies continue to lobby for them to keep making gasoline powered cars, and oil companies are making millions. Need to get the fuel cell technology out there. I'm in the middle of Kodak country - they've lost a ton of people in the last 10 years due to reduction of film photographs. But small local shops are picking up the business, including printing, packing and packaging of printer photo paper. My point - cutting overcapacity and restructuring resources is what's needed, not necessarily a sign of an incurable problem. The problem is, having to close facilities, they are going to lose good people as well as dead weight. There is so much dead weight overhead in a company that size - ineffective employees, with no ownership making stupid decisions. And seniority and good old boys rule, not effectiveness.

Laura,

Valid points: they need to cut and reorganize to survive. But here's the issue: with the same old management philosophy, do these steps sustain the organization or merely delay the end?

From the Preface of Out of the Crisis, W. Edwards Deming, Page ix: "...The causes usually cited for failure of a company are costs of start up, overruns on costs, depreciation of excess inventory, competition - anything but the actual cause, pure and simple bad management."

I think many of us here have had the unfortunate experience to work for a company of some size that in the end, cut the ranks to save the company. I’ve worked for those that did it time-and-time again. What didn’t change was the management. Repeat after repeat. Dr. Deming called it “Recycled Ignorance”. I think that this phrase hits the mark!

Qualeety,

Why do you think that the Japanese businesses will run a similar track to that of its US competition? Do you really think that Toyota and Honda will deal with a similar fate as GM? What are your reasons for believing this?

Regards,

Kevin

Kevin, Good to see your posts.
I remember when Ford and GM paid Dr. Deming big bucks to come in and educate them. He told it like it was. They must have been asleep in their paradigm.:confused:

Might be an example of "Business Darwinism"

Qualeety,
Why do you think that the Japanese businesses will run a similar track to that of its US competition? Do you really think that Toyota and Honda will deal with a similar fate as GM? What are your reasons for believing this?
Kevin

Kevin et al

I have a horrible fear.

What if Toyota is not the company we think it is?

What if they just haven't got caught yet? There have been some terrible accounting scandals in Japan.

Remember how fantastic Enron (or insert your favorite scandal here) was? Remember all the experts climbing on the Enron bandwagon?

Magic is about misdirection. Is Toyota magical? Or are they just that good?

Time will tell.

Kevin,

I agree - but until we know if they are going to do something different we can't assume the recent cuts are a bad sign.

I too worked for their spin off org, so for awhile GM. I've been gone almost 7 years - on my own accord - and some complete IDIOTS are still there. And in some pretty high paying positions. The restructuring is needed do to competition and marketplace, but they need to downsize based on talent, not the good ole' boys.

Laura

Ralph,

Paradigm paralysis: could be a killer!!

Caster,

Hmmm...interesting slant. I guess I'm hoping that they are just that good. In fairness, fraud can't be outruled.

Laura,

Yes, cutting jobs is tough, but in the overall scheme of things, necessary. I to would like to see that the cuts reach the levels they need to be in. I'd need to dig, but I recall reading (or perhaps posting it myself) long ago here at the Cove that in Japanese businesses, line workers are asked last to take pay cuts or accept layoffs. In Japan, the cutbacks start at the top first for many businesses.

Regards,

Kevin

Might be an example of "Business Darwinism":mg:

Looks like it!

The latest I found on GM's chances of bankruptcy:

http://www.forbes.com/investmentnewsletters/2005/11/14/gm-bankruptcy-lehmann-in_rl_1114soapbox_inl.html

Forbes.com Adviser Soapbox

Five Reasons GM Won't Declare Bankruptcy
Richard Lehmann, 11.14.05, 10:00 AM ET

General Motors recently said that it would have to restate its 2001 earnings by as much as $400 million, spurring fresh downgrades and prompting some analysts to raise the probability that the automaker will declare bankruptcy. The talk about a GM bankruptcy makes for market attention but lacks real substance. Here are a few of the reasons why this is so.

Lock in 12% yields on Canadian energy trusts. Click here for picks in Forbes/Lehmann Income Securities Investor.
Reason No. 1: You have to be eligible to declare bankruptcy; you can’t just decide it would be strategically beneficial to do so. General Motors (nyse: GM - news - people ), with $19 billion in cash and a book value of $40 billion, hardly meets that test now or for a number of years.

Reason No. 2: GM doesn’t need a bankruptcy threat to win concessions from its unions. It has Delphi (nyse: DPH - news - people ) to do that for them. When the Delphi bankruptcy is concluded, the unions will know what they can expect to win from GM if they force it to use the bankruptcy route. Chances are, they will settle for something close to the Delphi concessions because they have even more to lose with GM.

Reason No. 3: GM as a business is a very valuable franchise. Before it goes into bankruptcy, it would likely reach a merger agreement with a foreign car manufacturer much as Chrysler did seven years ago when it “merged” with Daimler to form DaimlerChrysler (nyse: DCX - news - people ).

Reason No. 4: Unlike the airlines, GM and its unions have it within their power to fix the problems. There are a variety of ways this can be done short of bankruptcy. The main battle may well be within the United Auto Workers, pitting young workers against those who are either retired or about to retire.

Reason No. 5: A bankruptcy filing would be most devastating to GM shareholders. It is the duty of the board of directors and management to do everything to prevent that from happening. While this principal seems to have been ignored in several recent bankruptcies, it seems less likely to happen here. Besides, we have Kirk Kerkorian watching to make sure this doesn’t happen. I’d be more worried if he had bought GM debt instead of stock.

This just in


f you're extremely adventurous, the stock could be worth a look at these levels. In fact, four analysts actually rate GM a "buy." But six analysts rate GM a "hold" and seven have an outright "sell" call on the stock. For many, the bankruptcy risks are just too high.

Banc of America Securities auto analyst Ron Tadross estimates the chance of of GM filing for bankruptcy protection from creditors over the next two years is about 40 percent and that an eventual filing is "inevitable."

The UAW has brought the Big 3 to their knees.

When 40+ % of the cost of a vehicle is related to just health care expenses, how can they compete. Now we add on labor expenses, etc..

No wonder they cannot compete with foreign competition.

IMO, once the 800 pound UAW Gorilla is knocked aside the Big 3 will be in a better position to restructure.

Also, I do not disagree that they probably need a major management overhaul as well.

My dad used to complain about unions a lot.

In truth there is much that unions could do better, but I stand my ground that unions are not the main source of ills at Big 3.

There is so much to it--working class compensation is a big expense, but so is cost of poor quality and loss of market share due to a failure to keep pace with market trends.

According to my research, Mr. Wagoner earns 157 times an auto worker whose hourly wage is $28 and receives a $5000 yearly bonus.

If medical etc. is set at a rate of 30% of a worker's pay, it boosts that worker's compensation to 1/123 of Mr. Wagoner's.

The pressure on unions to reduce or eliminate health and retirement plans is made with the focus on controlling payroll costs, which is preoccupying many managers who compare our society to overseas, where health care and retirement is for the well off and stoicism is for everyone else.

I have read no articles on how much GM is doing to boost efficiency in its processes or costly flaws that result in all those recalls, so I just can't stop thinking GM's cost cutting focus is myopic.

The UAW has brought the Big 3 to their knees.

When 40+ % of the cost of a vehicle is related to just health care expenses, how can they compete. Now we add on labor expenses, etc..

No wonder they cannot compete with foreign competition.

IMO, once the 800 pound UAW Gorilla is knocked aside the Big 3 will be in a better position to restructure.

Also, I do not disagree that they probably need a major management overhaul as well.

I agree 100%, once they file for bankruptcy it will allow them to re-structure and get the union out. IMHO once this happens they will come back stronger than ever. However, it will take some time gve them 5-7 years and see where they are as compared to today.

I agree 100%, once they file for bankruptcy it will allow them to re-structure and get the union out. IMHO once this happens they will come back stronger than ever. However, it will take some time gve them 5-7 years and see where they are as compared to today.I, on the other hand, would like to see everyone of the managers fired and whole new team brought in. Let's move to a Japanese or European business model where the top exec only gets about 20 or so times the income of the line worker.

I was reading a proposed settlement for United Airlines where executives are going to come out of the bankruptcy with bonuses and big hunks of stock in a new company, but the workers will get much less than they had been getting. I'm not a communist, but that kind of disparity between worker and exec hardly seems fair.

The finger pointing at mgt in the case of GM is a little naive. I have witnessed a GM plant invest $750M in automation to become more efficient and eliminate approximately 1000 jobs. The local UAW negotiated a settlement that required
GM to spend the money on the automation, keep all 1000 people on and allow them to sit out each shift in the cafeteria playing cards drawing full pay.

Both parties have been gouging their customer since the 1950's 1960's when they enjoyed an oligopoly. Both mgt and union knew they were screwing their customer. It takes 60,000 customers a year paying $20,000 for new car to pay for the 12,000 UAW "employees" in the job bank that draw full pay doing nothing. It takes sales of another 600,000 vehicles at a 10% margin to generate the profit lost on the job bank cars.

No offense Wes and Jennifer, but debating who is more guilty is a little like debating which parasite drew the last drop of blood from the host. There are no underpaid employees at GM in any capacity. They all excel at optimizing minimum calorie expenditure each "work" day. You should be shedding tears for those who have struggled to buy transportation they had to have at the expense of these merciless leeches.

Jconlake makes very good points.

I do sound one sided, and have made only half efforts to assign "guilt" to anyone outside of management. Management is the area where I have more knowledge than line worker leeches, as they were called, but overall I disdain the Wall Street model that rewards short returns based on limited vision.

In truth the work force is slow to recognize changes in industry. Unionized workers can, and too often do feel sheltered from the inevitable. That is due to sloth and perhaps gluttony, two of the Seven Sins as the ancient Greeks described in their tragic plays.

Gluttony, greed and pride are arguably the capital of 7 Sins for management who take bonuses based on cutting other people's jobs.

If management replaced my job with a machine or overseas worker and proceeded to claim a bonus because of money saved, I dare say I might also feel inclined toward sloth. I would find it very difficult to retain pride as a member of this economic system.

Understanding that human weakness I do, I am thus not surprised at the idea of those people playing cards after their jobs were replaced. After all, they also have families to support and bills to pay, and not everyone can become nurses. Some doubtless moved on; how many are still there playing cards right now? There would eventually be that economic elasticity again.

Making underdogs of blue collar workers is not a way to encourage a good work ethic. Maine business leaders complain "The Maine work ethic is dead" [among young workers]. Given their observations of their families' experiences with the New Economy, the only part that surprises me is that the business leaders somehow expected high spirits and devotion.

Myopia still reigns supreme.

If the union out-negotiated GM management, what does that say about the quality of the management?

If my union leaders negotiate a featherbed deal and I would be the object of violence for making waves against the deal, I guess I'd sit in the cafeteria and play cards if the alternate was to quit and have my family starve.

If you saved your money for a year to buy a new bike and you asked your dad to take your money and buy it for you, you'd be pretty disappointed if he came back and said, "I tried to buy it for the price on the sales tag, but the sales clerk talked me into paying more, so I only was able to buy the frame and one wheel with the money you gave me."

I think the managers at GM should have negotiated for the whole bike!

Seems neither GM managers nor union employees figured it would be any problem getting folks to pay more money for cars - no one figured on "competition."

For that arrogance alone, both managers and union folks should suffer, but it seems only union guys will actually pay by losing jobs and pay.

For that arrogance alone, both managers and union folks should suffer, but it seems only union guys will actually pay by losing jobs and pay.
Oh no Wes, lots people will suffer, not just the union folks. What about all the white collar jobs that are being deleted. I am suprised to hear such a biased thing from you.

So what would happen to us (our economy) if GM or Ford filed bankruptcy or were shut down by a supplier (Delphi) strike?

Suppliers to these guys need to understand where they may be exposed by the bigger guys potential bankruptcies. I would think there would be a lot of suppliers following them down the bankruptcy path. The ones diversified (smart/fortunate) enough to also supply the Japanese may be safe.

It seems to me like a GM bankruptcy could potentially cause another “Great Depression”, at least in the Midwest.

Please share your thoughts.

I may have an unpopular opinion here, but good for the UAW!!!
Health care cost, across the board, as a percentage of the GDP, is about 40%.
Why should an employer like GM be exempt from this (you heard it here first folks) “TAX DE-FACTO”!!!!

Three cheers for the UAW!

…Or do we still think privatizing health care is a good thing?

More from the soap box: The US is the only industrialized, modernized nation which does not provide health care for it’s citizenry. Greed strikes again.

Over 60% of all bankruptcies in the US are families with medical bills they can't pay. And if I remember correctly, something like 40% of them are people who have medical insurance.

You're right, I've heard that too.

BTW - I was one of the 60%.
My second daughter’s birth had 200KBucks of complications.

More from the soap box: The US is the only industrialized, modernized nation which does not provide health care for it’s citizenry. Greed strikes again.

Yes, and the US is also one of a few countries with tax rates under 50%.

Have you ever wondered why we have so many doctors coming over here from India (a nation that has government provided medical care for all)? It's because in order to fund that "free" medical care, they must tax business, professionals, et all at a 50% tax rate. So many of there doctors go to school (where much of the cost of education is covered by the government - more taxes at work) then in order to get the most for their education they come to the US, where they get to keep much more of their hard earned dollar.

Socialized education, medical care, et cetera is well and good, but let's not forget that there is a cost to these services and it does come out of our pockets. Are you prepared to pay for increased social services for those who are out of work and currently not covered (whether they are able to work or not)?

Let's be real, we can't have our cake and eat it too. It is impossible to continually increase government provided social services while maintaining a free-market/capitalist economy (at some point these services must be paid for, and it can only come from those who can afford to pay for it - the currently employed tax payer).

Oh no Wes, lots people will suffer, not just the union folks. What about all the white collar jobs that are being deleted. I am suprised to hear such a biased thing from you.

So what would happen to us (our economy) if GM or Ford filed bankruptcy or were shut down by a supplier (Delphi) strike?

Suppliers to these guys need to understand where they may be exposed by the bigger guys potential bankruptcies. I would think there would be a lot of suppliers following them down the bankruptcy path. The ones diversified (smart/fortunate) enough to also supply the Japanese may be safe.

It seems to me like a GM bankruptcy could potentially cause another “Great Depression”, at least in the Midwest.

Please share your thoughts.
Don't make the mistake of considering a white collar worker "management."

Note bankruptcy laws still favor corporations. The only significant change in bankruptcy has been to change the focus for individuals to "assume" the individual is trying to commit fraud and must prove he is not. The expenses of filing have gone up tremendously and folks cannot automatically shed debts like a corporation can shed pensions, health care, employment agreements, etc.

The significant difference in corporate bankruptcy is the one between Chapter 7 and Chapter 11. In Chapter 7, everyone is fired and the company is liquidated. If someone buys the company's assets to "rebuild," he really does start with a clean slate and doesn't have the burden of the bad managers who put the company in the toilet in the first place.

In Chapter 11, the guys who screwed up the company in the first place get another chance to ruin it, in the meantime wiping out any benefits the labor had won and also wiping out many suppliers who get pennies on the dollar, while the big banks and finance companies who put up money to pay big bonuses to these bozos get paid back 100 cents on the dollar PLUS get lucrative contracts for future business.

The reason many people believe the management hokum is because that's the only story they hear, depending on what TV show they watch, radio station they listen to, or newspaper they read.

If you are a big-time communications outlet, who are you going to give voice to? The company that buys advertising or the employee who cancels his newspaper or cable subscription because he can't afford to get a paper every day or pay $40 to $60/month or more for cable?

Remember this: If something is wrong with the system, only the managers are responsible, not the employees. Deming has never been proven wrong on this point!

Many interesting thoughts on the subject.

Good, Bad or Ugly we live in a Capitalist / Free Enterprise System.

We cannot compare ourselves to a European, Chinese or even Japanese model of doing business as they are not apples to apples, more like apples to bananas.

Our foreign competition does business using Socialism, which works for them and leaves them with problems different from ours, but problems nonetheless.

We are a capitalist society and we have our problems as well. If the Big 3 all fall and are no more, then we have just witnessed our system at it finest. They wont die, they will restructure or be bought out, or be replaced. It's all part of doing business in this country.

This discussion is starting to sound like a management/union bash.


I think you have all missed the main problem with the Big 2 1/2...

U.S. citizens would rather support a foreign company producing vehicles in this country than their own neighbors:mad:

The profits from each and every vehicle still goes overseas. How much of the $124 billion kitty Toyota has amassed came from the US?

This discussion is starting to sound like a management/union bash.


I think you have all missed the main problem with the Big 2 1/2...

U.S. citizens would rather support a foreign company producing vehicles in this country than their own neighbors:mad:

The profits from each and every vehicle still goes overseas. How much of the $124 billion kitty Toyota has amassed came from the US?

I do believe it is you all who are missing the point.

It's called Free Enterprise

If you don't like it.....MOVE :D

Now, can someone tell me what this thread has to do with quality ? Seems more like a topic for Meet the Press.

The Quality aspect of this thread has to do with the Big 3's neglect of quality characteristics that customers perceived as poor quality once the Toyota vehicles came into the market. Remember the items such as body panels uneven fits for gaps and flushness, like the hood, fender and trunk lids. The the early rust development and paint peeling. Poor interior color matches of mating panels. The demise of the Big 3 is not the fault of the consumer.
Also, there are no more "American" cars with out foreign parts content.

I do believe it is you all who are missing the point.

It's called Free Enterprise

If you don't like it.....MOVE :D

Now, can someone tell me what this thread has to do with quality ? Seems more like a topic for Meet the Press.
Seems to me Quality is about meeting or exceeding customer requirements. Management is in charge of determining customer requirements and configuring the organization's systems to meet or exceed those requirements. Part of meeting or exceeding customer requirements is delivering a product which meets those requirements, including price. Somewhere along the line, many of the corporations now in financial straits had managements that deviated from what customers required and delivered something else. Should they have been surprised when someone else moved in to fill the void? At what point should that management determine the customer is the guy who buys the product, NOT the guy who buys and sells (emphasis on "sells") the organization's stock shares? When the shares trade on a stock market, NONE of that money made or lost is going back into the company. The company only gets the money the first time the share is sold. (The organization cannot sell retained shares to realize "market value" without depressing the market value by the sheer act of selling.)

It further seems the ideal strategy is to make products customers want in the most efficient way possible. If that means refusing to make a featherbedding union contract, then so be it. However, there is a distinction between featherbedding and paying fair wages and giving fair benefits to retain a talented work force. A talented work force means cross training all employees so they can be diverted to the best (most needed) places within the organization as demand for specialty tasks waxes or wanes. It does not mean agreeing to pay employees to play cards in the cafeteria. When employees are idle, it means management has not arranged proper staffing, NOT that employees are lazy thieves!

I have worked in the Automotive Industry since leaving High school and starting on the line at a Ford plant. Even then I saw practices that had nothing to do with providing a quality product to the customer. It was all about managers turning in good looking reports even though the facts where bogus. It was all about hide the weenie and make sure you don't get caught.
35 years later and having worked in Quality for the last 10 years we continue to everything except talk to out employees, train them well and use their knowledge. We have come up with certifications (ISO, QS9000, TS16949, TS16949:2002) and about all that has ever changed is the logo on the coffee cup. It is an unfortunate fact of life that managers tend to bring along behind them people who support them and cheer for them therebye reinforcing their methods and systems. When is the last time a manager ever said, guys I have realy screwed up here, would anybody in this room like to tell me what I could do differently.
What is happening to the big 3 is just the inevitable conclusion of years of management protecting themselves rather than there customers and employees.
In 1976, I was putting Ford Pintos together working on the line. One day our manager took us off the line over to the repair hole, there sat a Honda Civic, a VW rabbit and a Toyota. they showed us how great they where and told us that if we didn't put the Pinto together with the same care for quality that the Japanese and German workers did that we would someday be out of jobs. At the time I said to my boss, I can put a Pinto together perfectly, and at the end of the day it is still a Pinto. Of course at my age I was just a smart ***. Sure like to run into that superintendant now and talk it over with him. Of course I am sure he is a high paid executive somewhere with Ford and thinks the system is just fine.

I once worked for a major contract manufacturer who was doing business for the big three. A quality problem was detected and I identified it to the Program Manager (who previously was the quality manager) and he stated that he didn't care what the problem was , we were to ship the product so we could book the revinue and that we could always rework it. (It was the end of the month) Needless to say, I balked at that, the plant manager got involved and we shipped the defective product.

Sure enough, we reworked the product and had a major problem with the customer.

As long as I am in the quality business, I hope I NEVER loose the passion for quality.

In 1976, I was putting Ford Pintos together working on the line. One day our manager took us off the line over to the repair hole, there sat a Honda Civic, a VW rabbit and a Toyota. they showed us how great they where and told us that if we didn't put the Pinto together with the same care for quality that the Japanese and German workers did that we would someday be out of jobs. At the time I said to my boss, I can put a Pinto together perfectly, and at the end of the day it is still a Pinto. Of course at my age I was just a smart ***. Sure like to run into that superintendant now and talk it over with him. Of course I am sure he is a high paid executive somewhere with Ford and thinks the system is just fine.



Daro31, this true story speaks volumes.

Eventually I became a supervisor at Ford, and I was then on the other side, of the process, the management side. I was running the department just before rolls test where the car is run for 3 minutes at up to 60 miles per hour so that it's mechanical performance can be evaluated befor the interior, trim and glass is installed. My radiator filling equipment went down so we couldn't put any coolant in the cars for about 40 minutes. They wouldn't let me stop the line, so for 40 cars they ran fresh engines through rolls test and only 2 blew up. It was the same time as the quality pushes where going on in about 1979. "Quality is Job One" time. When I complained to the super that we were probably damaging engines and we should stop the line, he told me that is what warranty was for. One of my performance appraisals shortly there after said I would have a good future with F*** if I could do something about my honesty problem. I still have freinds there and they tell me nothing has ever really changed. I also did a stint at GM after going back to school and found it to be pretty much the same.

I have worked in the Automotive Industry since leaving High school and starting on the line at a Ford plant. Even then I saw practices that had nothing to do with providing a quality product to the customer. It was all about managers turning in good looking reports even though the facts where bogus. It was all about hide the weenie and make sure you don't get caught.
35 years later and having worked in Quality for the last 10 years we continue to everything except talk to out employees, train them well and use their knowledge. We have come up with certifications (ISO, QS9000, TS16949, TS16949:2002) and about all that has ever changed is the logo on the coffee cup. It is an unfortunate fact of life that managers tend to bring along behind them people who support them and cheer for them therebye reinforcing their methods and systems. When is the last time a manager ever said, guys I have realy screwed up here, would anybody in this room like to tell me what I could do differently.
What is happening to the big 3 is just the inevitable conclusion of years of management protecting themselves rather than there customers and employees.
In 1976, I was putting Ford Pintos together working on the line. One day our manager took us off the line over to the repair hole, there sat a Honda Civic, a VW rabbit and a Toyota. they showed us how great they where and told us that if we didn't put the Pinto together with the same care for quality that the Japanese and German workers did that we would someday be out of jobs. At the time I said to my boss, I can put a Pinto together perfectly, and at the end of the day it is still a Pinto. Of course at my age I was just a smart ***. Sure like to run into that superintendant now and talk it over with him. Of course I am sure he is a high paid executive somewhere with Ford and thinks the system is just fine.
As Muleskinner says, "Speaks Volumes!" Where was management that day in putting together a plan so even Pintos could be put together in a quality manner? No - like the Pharoah asking for bricks without straw, these managers (I'm talking about the top brass making 300K and up) didn't have a plan or tools for the employees to match quality. No employee was empowered to even suggest an improvement in the process, because that would have been impugning the process designer's wisdom.

In the 70's and 80's, GM, Ford, & Chrysler laughed at Deming as a crazy old man (he was born in 1900) and they still haven't gotten the point of his comments after all these years! Ford DID do something with its supply chain based on a Deming suggestion, but apparently they were unwilling to follow the entire suggestion in terms of evaluating what did or didn't work! GM did pay lip service to a type of process thinking, but too little and they didn't integrate it with their entire philosophy of business.

In the 70's and 80's, GM, Ford, & Chrysler laughed at Deming as a crazy old man (he was born in 1900)Hmmm, isn't this the time frame when Japanese car makers started taking U.S. market share? My family had a Datsun, and I remember the zippy looking 240Z that was selling to people, even at $1000 more, who didn't want U.S. cars like Pintos or an AMC Gremlin.

The Pinto's exploding gas tanks were the first big slap I recall, where it became plain to me, youngster as I was, how design flaws were ignored for years until enough customers died from them to force the models off production. Tsk tsk...even at 12 years old I could see the mismanagement.

But let's play fair. Please help me out here. I can't recall any Japanese cars that made headlines like Pinto's gas tank, Explorer's rollovers, Chrysler's faulty minivan door latch and so on. Aren't there competitor examples of such gross mismanagement so we can truly claim we are being victimized in the market?

The point about profits going overseas for buying Toyotas is valid. I beg to point out though that the U.S. economy is 2/3 propped up by consumer spending. Toyota building cars here with U.S. people are comparable in my mind to cars built by GM by U.S. workers because I question how much of my purchase's profit to GM would be returned to the economy. I know there's more to it than that, but wages still speak loudest to me.

... It was the same time as the quality pushes where going on in about 1979. "Quality is Job One" time. When I complained to the super that we were probably damaging engines and we should stop the line, he told me that is what warranty was for. One of my performance appraisals shortly there after said I would have a good future with F*** if I could do something about my honesty problem...


Well, we reap what we sow, and for decades they have sown poor quality seeds.

Well, we reap what we sow, and for decades they have sown poor quality seeds.
Careful, you are talking about your master. IAOB.

...U.S. citizens would rather support a foreign company producing vehicles in this country than their own neighbors:mad:


Oh, c'mon. Most Americans would rather buy American, if all things being equal. People began buying foreign when the German and Japanese cars became better, cheaper, or more tuned to customers' tastes and needs.

The foreign manufacturers listened to what the customers were asking for. The Big 3 didn't. GM TOLD us what we were going to like and buy. I still remember the GM announcement after the oil embargo in 1972/73, that we were all going to go back to big cars, "because we (GM) can't make any money on small cars."

Well, it was 14 years, before I bought another GM car. Customers are not going to be told what they will do. Whatever happened to the Big 3's vaunted Voice of the Customer?! Finally, they are starting to listen, and make good vehicles. But, just read the posts on this website. If the people in the industry don't want to buy Big 3 vehicles, when are they going to start trying to repair the damage to their reputation?

Profits ($2,000 per car) may go to Toyota, but the wages and parts ($18,000) go to Americans building the car. It's a world market, as the Big 3 like to say.

Is it better to pay wages to Canada, Mexico, China, et cetera and have the profits come back to the Big 2 here in the states (have to remember that DCX profits go to Germany); or is it better to pay wages to American workers and send profits overseas?

Is it better to pay wages to Canada, Mexico, China, et cetera and have the profits come back to the Big 2 here in the states (have to remember that DCX profits go to Germany); or is it better to pay wages to American workers and send profits overseas?My vote's in for the U.S. wages. The pond-ring effect is quite far reaching when salaries are available and adequate. I dare say the effect of that churning local money is more profound than the corporate profits.

Oh, c'mon. Most Americans would rather buy American, if all things being equal. People began buying foreign when the German and Japanese cars became better, cheaper, or more tuned to customers' tastes and needs.

The foreign manufacturers listened to what the customers were asking for. The Big 3 didn't.

Since Helmut lives in Ohio, he is probably aware that the quality of and demand for cars is not related to where the car is made. Honda makes very good cars in Marysville Ohio with American workers and American parts suppliers. Toyota has a plant in Tennessee and does the same thing.

The current buzzword is innovation but I believe that quality will win out over the long run. Recently, Ford has been trying to get back to their quality roots that they learned in the 1980's. For all the talk about the quality profession dying, there are a lot of companies that return to the concept when they need to get "Out of the Crisis".

Bill Pflanz

I have sweared by Toyotas the last 15 years, I may be changing to Nissan or Honda. I sit in a group of say 25 people at work and I couldn't help but overhear a co-worker talk about his motor running out of oil because of "gelling" in his 2005 4 Runner, the same happened in my 2000 4x4 Pickup. Let's hope they don't catch the Big 3 disease. This behavior is very unlike Toyota in the past which confuses me. The dealership will only repair if you show evidence of your oil changes. I don't keep my reciepts but do have the little stickers, but the dealership wouldn't accept them as evidence. Unfortunately I had to resort to the use of a scanner. Oh well.:nopity:

http://www.theautochannel.com/news/2002/04/03/038262.html
http://www.cartalk.com/content/columns/Archive/2002/May/07.html

That's just plain scary! When a supplier (especially a retailer) starts getting "legalistic" in its return/repair policies, it is a symptom of one or both of the following:

Returns by dissatisfied buyers are rising to the point they are a severe drain on profit
Its own supplier has been experiencing item 1In my own opinion, the only reason 1 or 2 occurs is because someone in the supply chain has a severe lapse in quality. Could this be someone in the American side of the supply chain or the overseas part?

Wes, based on the following quote from the Autochannel article, it doesn't appear to be a supplier issue. It appears to be more design related. A "hotter" engine reduces the amount of Nox (the reason that many manufacturers have moved to 192 degree to 196 degree thermostats -Vs- the old 180 degree stats they used to run. It appears that Toyota may have raised the engine temp to a point of prematurely damaging the oil.

Michels also said the company was making a "minor change" to the design of the V6 engine to improve crankcase cooling. Some experts had speculated that Toyota had made the engines run too hot to lower emissions, speeding up the decay of the oil, but Michels said the change was an extra margin against infrequent oil changes.

Wes, based on the following quote from the Autochannel article, it doesn't appear to be a supplier issue. It appears to be more design related. A "hotter" engine reduces the amount of Nox (the reason that many manufacturers have moved to 192 degree to 196 degree thermostats -Vs- the old 180 degree stats they used to run. It appears that Toyota may have raised the engine temp to a point of prematurely damaging the oil.

It should also be noted that OEM design issues are more likely to result in warranty claims being challenged (requiring claimants to produce maintainence receipts, e.g.) because there's no one to shift the blame and costs to.

Also, the way that claims are handled and how much the OEM will pay the dealer for warranty repairs can be fundamentally different, sometimes causing dealers to actively discourage customers.

The demise of the big three has been in the making for qite sometime now. The top management has conducted themselves in an extremely self indulgent unethical manner and will continue to do so. Why? Because they can. When the worst that can happen is you get a million dollar bonus when the company folds, why would you care. One out of every 100 are worth a ****. As if taking management courses is a difficult thing. More like a party. You know what i'm talking about.

Don't foil wits! Tell us how you really feel!!

I wonder how many big 3 employees subscribe to this forum, I know I came here for the great help in dealing with the requirements of the Big 3.
I don't remeber problem solving techniques ever being a big part of the 10 years time spent in one of the big 3. I do remember a 4 day course though in Dearborn entited "CYA" or subtitled "Survival in the Ford Motor Company."
It did turn me into a good note taker though, a skill which has served me throughout my working career. I wonder, do they still teach that course at the begining of your career in management. :)

I wonder how many big 3 employees subscribe to this forum,
Maybe if they are in here lurking they will realize they are in a sinking ship and quickly run below deck and put a finger in the leak.

Maybe if they are in here lurking they will realize they are in a sinking ship and quickly run below deck and put a finger in the leak.

You are assuming they have not first been thrown overboard as unnecessary weight rather than a solution to the problem. :D

Bill Pflanz

I don't know if the sinking ship is a good analogy. Unless, of course, this one ends with the Captain escaping in a 100' life boat, running over the crew at full speed.

Maybe if they are in here lurking they will realize they are in a sinking ship and quickly run below deck and put a finger in the leak.

You are assuming they have not first been thrown overboard as unnecessary weight rather than a solution to the problem. :D


I also see no basis for the assumption that once below deck they'll be able to recognize the relevant orifice.

I also see no basis for the assumption that once below deck they'll be able to recognize the relevant orifice.

JSW, thanks for the laugh - you just made my day.

I also see no basis for the assumption that once below deck they'll be able to recognize the relevant orifice.
Yea, you are right, they will probably go for the usual orifice, the one with sand on it.

I wonder how many big 3 employees subscribe to this forum...
Quite a few... Ford upper management used to (still does??) monitor this forum. GM is less paranoid but folks from there do stop by. As far as I can tell DCX doesn't care about much of anything, much less this forum.

I don't know if the sinking ship is a good analogy. Unless, of course, this one ends with the Captain escaping in a 100' life boat, running over the crew at full speed.


Only after he grabs the loot.

Marc,

Interesting. I wonder what brought some of Ford's management here? Was it information about Quality in general, or was it information about itself?

Maybe they are interested in helping themselves. This past October, I had an opportunity to speak with a statistician at Ford. He was not optomistic about the management there. He felt that they were in declining position regarding their ability to manage and lead. I wish I could say I was surprised, but I'm not.

Regards,

Kevin

Quite a few... Ford upper management used to (still does??) monitor this forum. GM is less paranoid but folks from there do stop by. As far as I can tell DCX doesn't care about much of anything, much less this forum.


I am glad to hear upper management monitors this forum. I still believe in my heart that Ford, GM and DCX management are bright, experienced, and intelligent,

I just don't understand why they can't seem to harness that knowledge base, and manage their organizations better. I really don't believe the consumer, or the supplier base is the primary issue. Deming was right. Most of the sins are internal, and only Top Management can resolve them.

It is not really surprising that the priority of manager in the Big 3 would be hard to change. After all the way they have managed things and the old boys network they are part of has gotten them an excellent standard of living and success. Most people at all levels promote and encourage like mindedness. It would be very unusual at any level of any company to find a manager or a line worker to gather their group around and ask for a true critical appraisal of their performance. I don't know of any human organization that is so open that people would feel free to express their true feeling about the people that sign their pay cheques and not fear some sort of retribution. What the old boys should look at is how they expect the line workers to willingly embrace change for their own survival, so that the management level can not have to see any change to their lifestyles. :bonk:

You really can't blame the managers if they continue to do what they have always done, it is all they know.

It is not really surprising that the priority of manager in the Big 3 would be hard to change. After all the way they have managed things and the old boys network they are part of has gotten them an excellent standard of living and success.

I frequently remind clients that Rule #1 in Detroit is not price or quality, but rather, "Do nothing to jeopardize my fat paycheck!" If it rocks the boat, they won't do it. Deming was right when he said Top Management has to change that culture. Still is the case.



Most people at all levels promote and encourage like mindedness. It would be very unusual at any level of any company to find a manager or a line worker to gather their group around and ask for a true critical appraisal of their performance. I don't know of any human organization that is so open that people would feel free to express their true feeling about the people that sign their pay cheques and not fear some sort of retribution.


There are some companies, but we need to make many more that open. Top Mgt. has to lead that and change it, maybe with a little help from us.



You really can't blame the managers if they continue to do what they have always done, it is all they know.

If you don't change this at your company, one of competitors will change it at theirs. As Toyota has shown, once a company gains traction over a competitor, even the mighty begin to fall (ala GM, where an exec was quoted as saying, "We (GM) don't compete with the Japanese, we compete with Ford." That should go down in the textbooks as a bigtime fumble of leadership.

I'm far to be, or consider myself an expert. My opinion is that the key to success today,is more on continuous improvement (development) of advanced technology (R&D), and process design.. Only after these comes in the play the continuous improvement of the already designed and implemented process. I wonder, if Toyota success, is due to continuous improvement of a manufacturing process, by shop floor employees by kaizen and other tools. I think that 90% of success is technology and process design, and only 10% is the contribution of improvement after the process was started. So the most important area for CI, is R&D, and process design. And for these activities, top Mgm. is responsible.
I may be wrong, and the percentage may be different.
I have heard that in some companies (Japanese), the number of improvement ideas /worker /year is 80. That would mean, that the process is poorly designed, or most of ideas are made only to sustain improvement in numbers. Everybody is aware of the cost of process change, in design or mass production phase.
I have already posted this, but I like it very much:
A Toyota view:
“Brilliant process management is our strategy.
We get brilliant results from average people managing
brilliant processes.
We observe that our competitors often get average (or
worse) results from brilliant people managing broken
processes.”
And as it has been many time stated, leadership is key to success, and not the improvement tools used to achieve the goal. If they have any.
Just an approach.
György

György,

How about this quote from Peter Scholtes' book, "The Leader's Handbook":

"All of the empowered, motivated, teamed-up, self-directed, incentivized, accountable, reengineered, and reinvented people you can muster up cannot compensate for a dysfunctional system. When the system is functioning well, these other things are all just foofaraw. When the system is not functioning well, these things are still only empty, meaningless twaddle."

Toyota is busy working on the system while most of the Big 3 Leadership (if you can call it that) are busy working on their personal domains. What Toyota and many other Deming companies have figured out is that excellence comes from the development of a culture of continuous improvement. Ford was in this frame of mind under Donald Peterson, but after his retirement, the leadership that followed merely brought about another large decline. The Taurus was a world-beater automobile. Now, 27 of the top 29 vehicles manufactured are from Japanese automakers.

If any of the Big 3 thinks that their competition is the other Big 2 at this time, they are as dumb as they sound and look when speaking to reporters. This country should not bail out any of the Big 3 during the collapse. Without the New Philosophy, a bailout would bring about an even bigger collapse of the American Economy and serve to only make richer the idiocy that brought about the doom of the Big 3. Sadly, I'm not so sure that our government leadership understand the ramifications of a bailout if it were to be proposed. I hope that I'm wrong.

I must respectfully disagree with Daro31 regarding the management of the Big Three continuing to propogate a failing management paradigm as being that they know nothing else. While I fully agree that they are heavily reinforced in their current management paradigm, they cannot ignore that an alternate management paradigm, one with proven positive outcomes, does not exist and has so for decades. What they elect to do, as with many managers of the Western Management Philosophy do in other industries, is take the road less challenging. It is not hard to get support from their superiors and subordinates since their management paradigm is the prevailing management theory. It has brought them their success, but what is not recognized, the success they have is limited an spans a shortsighted view. Looking at the success of Toyota, they have out profited the Big 3 combined for THREE DECADES while producing significantly fewer automobiles. Their keys to success are rooted in their management philosophy and business approach: they plan for the longterm and are humanistic. I must agree with Daro31 that they are less apt to give up the paradigm that brings success (especially personal success). Joel Arthur Barker termed their blindness as "paradigm paralysis!" Would you for the sake of others (the majority I might add)?

Deming's influence on Japan is unquestionable: they master many industries or are competitive in the ones they haven't mastered...yet! All of the Big 3 sought Deming out for his help: none have continued executing on his teachings and the results are painfully evident. I would be remiss in not noting that the playing fields were not even for Western and Eastern automakers, the Eastern groups with the distinct advantage of leveraging the strength of the US dollar in their own business strategies. But with a clear advantage on business worth, the Big 3 have done a tremendous job of losing the lot!

Deming's Management Theory may not be a cure-all solution, but is it worse than the prevailing management theory of looting and pillaging a business into bankruptcy, by design or by ignorance? How long can this country be held hostage by a few very wealthy, sometime ignorant, but often consciously aware of their ulterior motives, businessmen?

IMO, the paradigm must shift if we are to survive.

Regards,

Kevin

Just design/build reliable cars that we want at a price we can afford....and everything else (eg, shareholder satisfaction, market share, etc) will take care of itself..

Not a bad rant, Kevin (with the possible exception of the overuse of the word paradigm:rolleyes: )

par·a·digm (păr'ə-dīm', -dĭm') http://content.answers.com/main/content/img/pron.gif
n.

One that serves as a pattern or model.
A set or list of all the inflectional forms of a word or of one of its grammatical categories: the paradigm of an irregular verb.
A set of assumptions, concepts, values, and practices that constitutes a way of viewing reality for the community that shares them, especially in an intellectual discipline.[Middle English, example, from Late Latin paradīgma, from Greek paradeigma, from paradeiknunai, to compare : para-, alongside; see para–1 (http://www.answers.com/main/ntquery;jsessionid=t8xpi7gg3smh?method=4&dsid=1555&dekey=P0055600&gwp=8&curtab=1555_1&sbid=lc07a) + deiknunai, to show.]

Not a bad rant, Kevin (with the possible exception of the overuse of the word paradigm:rolleyes: )

I think it's time to task a subject matter expert with leveraging core competencies to enhance and develop new paradigms.:biglaugh:

Just design/build reliable cars that we want at a price we can afford....and everything else (eg, shareholder satisfaction, market share, etc) will take care of itself..


No, I think there is more than that.
The internal management systems and management processes have to improve to.
They can't make union contracts that are unsustainable.
They can't make salary payments that are unsustainable.
They have to stop rewarding poor performance with bonuses.
They have to collaborate with their suppliers as a true part of the team, rather than abuse them and make them scapegoats.

They have made good trucks for years, and still don't make any profit. Their internal systems devour any profit they make.

PS: it should be pointed out the early Toyotas and Hondas were NOT particularly good vehicles at first. They listened and improved. However, they also improved their infrastructure at the same time so those improved vehicles could be made efficiently and consistently.

This is a complex problem, and will require effective vision and leadership to resolve.

No, I think there is more than that.
The internal management systems and management processes have to improve to.
They can't make union contracts that are unsustainable.
They can't make salary payments that are unsustainable.
They have to stop rewarding poor performance with bonuses.
They have to collaborate with their suppliers as a true part of the team, rather than abuse them and make them scapegoats.

They have made good trucks for years, and still don't make any profit. Their internal systems devour any profit they make.

PS: it should be pointed out the early Toyotas and Hondas were NOT particularly good vehicles at first. They listened and improved. However, they also improved their infrastructure at the same time so those improved vehicles could be made efficiently and consistently.

This is a complex problem, and will require effective vision and leadership to resolve.

You make a good point; if GM sold Cadillacs for $1000 there would be a lot of happy customers and a lot of busy workers, but for how long? The challenge lies in finding ways to design/build cars that are reliable and that people can afford and want to buy, and be able to keep doing it in perpetuity. That's where leadership and long-range vision come in. If the goal is the end of the month or the quarter, almost anyone can get you there.

It is not really surprising that the priority of manager in the Big 3 would be hard to change. After all the way they have managed things and the old boys network they are part of has gotten them an excellent standard of living and success. Most people at all levels promote and encourage like mindedness. It would be very unusual at any level of any company to find a manager or a line worker to gather their group around and ask for a true critical appraisal of their performance. I don't know of any human organization that is so open that people would feel free to express their true feeling about the people that sign their pay cheques and not fear some sort of retribution. What the old boys should look at is how they expect the line workers to willingly embrace change for their own survival, so that the management level can not have to see any change to their lifestyles. :bonk:

You really can't blame the managers if they continue to do what they have always done, it is all they know.
You're right. Sometimes I sit around and wonder if I should actually contribute instead of taking credit where I can. Then I go out for some cocktails and forget that silly notion. Heck, if I start doing something now I might foul everything up. I think that my expertise at delegating deserves more than I'm getting and I'm taking that to the club tonight and negociate a better contract.

Having spent 20 fun filled years with the big "G", I would like to leave you with the following -
They will never die!

They can close all their automotive manufacturing plants tommorrow and still make a fortune on parts.

www.Forbes.com

Market Scan
GM Shares Seen Rebounding To Mid-$20's (http://www.forbes.com/markets/2006/01/09/general-motors-0109markets03.html?partner=rss)
David Ng, 01.09.06, 10:47 AM ET

Goldman Sachs upgraded General Motors (nyse: GM - news - people ) to "in-line" from "underperform," saying shares of the automobile maker are likely to rebound to the mid-$20 range in the first half of 2006.

In a recent research report, Goldman analyst Robert Barry said a Chapter 11 filing from GM is "very unlikely" anytime soon, and that upcoming catalysts could improve investor sentiment and allay bankruptcy fears.

"Our views on Chapter 11 reflect GM's high liquid assets and a belief that electing Chapter 11 is not an option, as GM's sales would likely plummet post a filing," said the analyst.

Among possible catalysts for GM shares include a GMAC stake sale and avoiding a Delphi strike, "both of which we feel are more likely than not," according to Goldman.

The research firm expects GM's first-half 2006 results to show a year-over-year improvement given lower end-of-year 2005 inventory.

Goldman emphasized that its long-term outlook on GM remains negative, and that its upgrade is driven more by sentiment than fundamentals.



What! No fundamentals.

Goldman emphasized that its long-term outlook on GM remains negative, and that its upgrade is driven more by sentiment than fundamentals.


Nothing wrong with that. It's the same rationale I use every year to predict that the Cubs will will the NL pennant.:lmao:

"Our views on Chapter 11 reflect GM's high liquid assets and a belief that electing Chapter 11 is not an option, as GM's sales would likely plummet post a filing," said the analyst.


...So, after the top 10% of the shareholders siphon their share of that quick-silver, a Chapter 11 will appear more attractive?

It seems even the financial annalists can't make up their minds about the future of GM. ...Good thing my crystal ball's still under warranty.

Another story from the Iceman:
In the late 70's and early 80's, Jap3 cars were notorious for quick rust out. In the late 80's a certain manufacturer began zinc coating every single steel part in the automobile. Unfortunately, zinc coated steel played h**l with their spot welding system. Sooo, at the same time, they replaced every single weld controller in their plants (almost 400 in one plant alone). In addition, a entire team of productions associates, maintenance, engineers and management reprogrammed every weld robot in the plant, adding an automated weld tip maintenance sequence. Result, in about 18 months, the production of each line went from 300 non-zinc to 400 zinc coated vehicles per shift with no significant change in personnel. No one ever questioned that the change could take place, only when. It was a competition to see which of the 3 would get there first, with the least amount of economic impact.

During that time, I took a tour in Detroit. I witnessed a gentlemen sitting in a folding chair, smoking a pipe, and reading the Detroit Free Press. He was not in a cafe but rather a worker on a Chrysler Final Assembly line getting up every 4 minutes or so to spend 10 seconds attaching a part. I thought that the final assembly associates from our plant, used to 50 second cycle times x 400 cycles per shift, would want to lynch him. Rather, they felt nothing but pity and anticipation. Pity that he would lose his job and anticipation that they would soon benefit from increased sales.

Yes Icy- I remember a similar situation in the early 70's Datsun(Nisson) and Toyota cars first hit our area in Bowling Green, OH. At our plant one guy in accounting bought a Datsun, and one supervisior bought a Toyota. The Datsun had a rusted through fender within a month after winter and the heavy salting of the roads in the area. Took over 2 months to get a replacement. Toyota was fine.
Then in the mid 70's Ford and GM started putting in E-coat systems in each plant to reduce corrosion whic had been finally decided was a big problem with customers.:D I used to go into their plants and audit the E-coat systems.
Guess what, most were running the bake cure ovens too hot and short timed to make up for the actual specified time/temp. for cure rate.

I used to go into their plants and audit the E-coat systems.

As a TS16949 Lead auditor and Layered Auditor Coordinator and Customer PPAP technician, all jobs which are basically just checking on others to see if they are doing their jobs, it seems that I really don't add much value to the product. It seems that the big 3 has added checking on top of checking which has huge costs; rather than accountability. When I worked at GM and at Ford it seeemed that every time something went wrong they build another layer of checking. Now that I am with a 2nd tier supplier it seems their solutions just seem to be more checking. One thing I have noticed in auditing is that I never have a check sheet to make sure that employees took their breaks on time or that their pay cheques were calculated correctly. People look after what is important to them.

Do the Japanese manaufacturers pay a lot of people to look over the shoulders of others?

Yes, everyone had the E(lectro)-Coat process in place ~1985. The process used a high (12kV) voltage to charge the coating and make it stick to a grounded auto body. Other than the problems you mentioned, it was not a rust cure all. Galvanizing the zinc to the steel eliminated the ecoat inconsistencies.

Here's the point: Management knew they needed zinc plated panels to survive in the marketplace. They said "Here it comes" and then supported everything necessary for the assembly plant operators to make good cars efficiently using the new steel. My '89 Ford E-150 rusted out in the same places that all '80s E150's rusted. B3's response was to offer expensive post sale "Rustproofing" coatings that were sprayed on at your expense.

B3's response was to offer expensive post sale "Rustproofing" coatings that were sprayed on at your expense.

And those treatments often accelerated corrosion because the new openings created during the process allowed moisture to enter. Auto dealers are still trying to sell it, though.

I started working on an assembly line putting cars together in 1969. If there is any big trend I have noticed which I think has put the viability of the big 3 in question is it that the last say on what will be done in car design and marketing is a finance guy, the cars guys have long been relegated to the dumpster of pleasant memories.
In our place now most of the guys that make the decisions think SPC stands for Sorting Parts Continuosly.

Do the Japanese manaufacturers pay a lot of people to look over the shoulders of others?Nope. They live Demings 14 points (http://www.deming.org/theman/teachings02.html). People want to do things right and they do (when encouraged to do so). Having said that, everyone in the plant is responsible for pointing out any defect in anything that was done before they laid eyeballs on the vehicle.

I used to go into their plants and audit the E-coat systems.

As a TS16949 Lead auditor and Layered Auditor Coordinator and Customer PPAP technician, all jobs which are basically just checking on others to see if they are doing their jobs, it seems that I really don't add much value to the product.

As aTS Auditor, I don't see my job as just checking whether people are doing their jobs right. I always look for where people can do things better, more effectively, efficiently, simpler. I evaluate how well they understand what and why they are doing something. My clients almost always get value from the audits. They take their own notes as we go, without prompting on my part. As they see it, that adds value to their process and product.


It seems that the big 3 has added checking on top of checking which has huge costs; rather than accountability.

I definitely agree with you here. They frequently require visual 3rd party inspection when there is a ppm of less than 10.

That's like using a 100 micron filter to catch 10 micron particles. That kind of thinking clearly is part of what is dragging the Big 3 down.

Interesting comments from all the folks from the automotive industry. I'd like to read more of your stories, especially since they span several decades of thinking.

David, your comment on whether the Japanese add layers of 'checks' reminded me of a story I was told: US businessmen on tour of several manufacturing plants in Japan were quick to notice that mixed amongst groups of manufacturing employees all in the same colored overcoats were a few wearing white coats. When the Japanese interpretors were asked who the folks in the white coats were, the businessmen were told that they were the 'Inspectors'. "Ahhh!!" said the businessmen, nodding their heads. What the businessmen weren't told was the truth. The truth was that when the manufacturing site new of a planned visit, they would ask a few of the manufacturing employees to wear white coats for the day. They did this because they grew tired of trying to explain to the Western businessman that inspection wasn't necessary.

Have a nice weekend folks!

Kevin

I heard an analyst on CNBC this afternoon make the statement that GM's global sales volume was at an alltime high. He acknowledged that it is declining in the uS, but increasing elsewhere. He said it just hasn't been recognized and built into the stock price yet. Unfortunately, I picked up the tail end of the conversation, and didn't get more details as to who he was, and what the data actually were. But an interesting anecdote, in any case.

I found Kevin Mader's story most illuminating.

Learning of the "inspectors" within the processes helps those businessmen believe the paternal business model is not only okay, but competetive. Since Americans tend to believe what we see and are often disinclined to deeply probe issues, the businessmen were satisfied and the status quo reaffirmed.

How sad that is.

I'm going to apply for a job managing an Enterprise Rent-a-Car outlet, as well as insurance agent trainee.

So sad also that there is little room for quality professionals like me in this area, since the paternal form of management is also well in place in services. It is firmly in place in public education...oh my. :( They just aren't aware there is a better way and my voice gets drowned out in the white noise of current economic churn.

I heard an analyst on CNBC this afternoon make the statement that GM's global sales volume was at an alltime high. He acknowledged that it is declining in the uS, but increasing elsewhere. He said it just hasn't been recognized and built into the stock price yet. Unfortunately, I picked up the tail end of the conversation, and didn't get more details as to who he was, and what the data actually were. But an interesting anecdote, in any case.Seems to me GM is dragging its feet in including global performance in its overall published metrics. But that doesn't surprise me. Recognizing it publicly would make it difficult to sustain the argument that GM is in deep trouble and must shed its employee costs (contracted compensation and benefits). It would undermine the sales pitch for restructuring labor.

I heard an analyst on CNBC this afternoon make the statement that GM's global sales volume was at an alltime high. He acknowledged that it is declining in the uS, but increasing elsewhere. He said it just hasn't been recognized and built into the stock price yet. Unfortunately, I picked up the tail end of the conversation, and didn't get more details as to who he was, and what the data actually were. But an interesting anecdote, in any case.
Of course, this is always a part of Rick W.'s pitch. Check this:
Wagoner tells analysts to expect better GM financial performance in 2006
16th January 2006
General Motors’ Chairman and Chief Executive Officer Rick Wagoner said on 13 January the top priority for his company is to return GM’s North American operations to profitability and positive cash flow as quickly as possible, but given uncertainties relating to Delphi restructuring, health care negotiations and the potential sale of GMAC, declined to give precise financial guidance.

In 2006, approximately 29 percent of GM’s North American sales volume is expected to come from recently launched cars and trucks, as well as forthcoming new models, from which by 2007 GM expects more than 30 percent of GM’s sales volume to come.

Wagoner said GM also is moving aggressively to implement the company’s previously announced plan to reduce ongoing structural costs by $6 billion a year by the end of 2006 and further reduce material costs by $1 billion.

The key elements of the structural cost reduction include the historic health-care agreement with the United Auto Workers union, the capacity utilization initiatives that GM announced late last year, and additional cost efficiencies in most other areas of the business including engineering, advertising, salaried employment levels and benefits and indirect material costs. Of the $6 billion already identified, GM expects to realize approximately $4 billion in savings in 2006 as the initiatives are implemented throughout this year.

Beyond the $6 billion in cost reductions planned for 2006, GM announced it is now trying to reduce structural costs as a percent of revenue to 25 percent in 2010 from the current level of about 34 percent, on a global basis. Initiatives to achieve this objective include the further globalization of product development and other key functions, achieving full capacity utilization, leveraging global vehicle architectures and powertrains, and achieving further progress in GM’s legacy cost disadvantage.

GM expects another record year for global auto industry sales in 2006, driven by growth in the Asia-Pacific region.

General Motors Acceptance Corp. (GMAC) is expected to post ‘solid’ results in both 2005 and 2006 despite ‘a challenging credit rating environment’. GMAC had approximately $20 billion in cash at the end of 2005 and continued access to alternative funding sources such as automotive whole loan sales. GM continues to explore the possible sale of a controlling interest in GMAC to a strategic partner with the goal of restoring GMAC’s investment-grade credit rating while retaining GMAC’s strategic financial services support to GM’s global vehicle sales operations.

GM also announced that its US hourly and salaried pension plans were approximately $6 billion over-funded at the end of 2005 on a FAS-87 accounting basis largely as a result of preliminary asset returns of 13 percent in 2005. For 2006, GM’s assumed rate of return on assets in its U.S. hourly and salaried pension plans remains unchanged at 9 percent from the previous year.

- General Motors sold 9.17 million cars and trucks around the world in 2005, up 2 percent from the 8.99 million vehicles sold in 2004, according to final sales figures released today. It marked only the second time the world’s largest automaker has sold more than 9 million units in a calendar year. Vauxhall increased to a 13.1 percent share of the United Kingdom market, up from 12.6 percent in 2004.

I found Kevin Mader's story most illuminating.

Learning of the "inspectors" within the processes helps those businessmen believe the paternal business model is not only okay, but competetive. Since Americans tend to believe what we see and are often disinclined to deeply probe issues, the businessmen were satisfied and the status quo reaffirmed.

How sad that is.

I'm going to apply for a job managing an Enterprise Rent-a-Car outlet, as well as insurance agent trainee.

So sad also that there is little room for quality professionals like me in this area, since the paternal form of management is also well in place in services. It is firmly in place in public education...oh my. :( They just aren't aware there is a better way and my voice gets drowned out in the white noise of current economic churn.
What?... I can't hear you with that churning noise going on.
No, just kidding. I hear you load and clear.

So the story today is that GM is declaring an even bigger dollar loss than predicted. Poor Kerkorian - he sold GM stock in December, claiming it was for tax purposes (to declare a capital loss), but he has since rebought (after the "wash rule" expired) back to put his holdings at nearly 10%. Even this savvy bottom feeder may have been surprised at the magnitude of the actual losses at GM (most of these are "paper losses" folks, not real money) and probably wishes he would have waited to buy back at a better price.

Mr. K. will probably urge breaking up and selling off profitable segments that are free of the pension and health care burdens, leaving a shell of a company which will be transferred into private ownership where the employee liabilities will be shed, then spun back out as a new public company.

The big losers, of course, will be the suppliers and employees who will get burned in the intervening bankruptcy.

FWIW, the article:GM net loss $4.8 billion, much worse than expected Thu Jan 26, 10:10 AM ET

DETROIT (Reuters) - General Motors Corp. (NYSE:GM - news) posted a fourth-quarter net loss of $4.8 billion on Thursday, much worse than Wall Street had expected, amid high costs, shrinking market share and sluggish sales of sport utility vehicles.

It was the fifth straight quarterly loss for the world's largest automaker and brought its losses for all of 2005 to $8.6 billion.

"The numbers are much worse than I thought they would be, especially given how Ford beat the estimates earlier this week," Argus Research analyst Kevin Tynan said.

On Monday, Ford Motor Co. reported a surprising 19 percent rise in fourth-quarter earnings.

GM shares dropped 80 cents, or 3.35 percent, to $23.05 in early trading on the New York Stock Exchange. The company's 8.375 percent bonds due in 2033 were quoted at 72.5 cents on the dollar, down 0.5 cent, according to MarketAxess.

The earnings report came a day after news that billionaire investor Kirk Kerkorian had raised his stake in GM to 9.9 percent. Kerkorian has called for sweeping changes at the auto giant, and a key adviser has suggested he might be prepared to organize a fight for control of the GM board.
GM's fourth-quarter loss amounted to $8.45 a share, compared with a year-earlier loss of $99 million, or 18 cents a share.

Excluding one-time items, the company posted a loss of $1.2 billion, or $2.09 a share. On that basis, analysts' average forecast was a loss of 12 cents a share, according to Reuters Estimates.

One-time items reduced earnings by $3.6 billion, or $6.36 a share. They included a restructuring charge of $1.3 billion at GM's North American operations, and a preliminary after-tax charge of $2.3 billion related to a benefit guarantee with the United Auto Workers union and bankrupt auto parts supplier Delphi Corp.

Analysts were expecting charges after GM in October announced plans to slash 30,000 jobs and shutter 12 facilities, but no one knew how large the charges would be.

Fourth-quarter revenue fell to $51.2 billion from $51.4 billion a year earlier.
"It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed -- our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," Chief Executive Rick Wagoner said in a statement.

GM earlier this month said it expects to cut North American structural costs by $6 billion by the end of 2006.

GM said its automotive operations lost $1.5 billion in the fourth quarter, driven by large losses in North America, where it has been losing market share to foreign rivals such as Toyota Motor Corp.

General Motors Acceptance Corp., the company's finance unit, posted net income of $614 million, down from $683 million a year earlier.

The automaker plans to sell a controlling stake in its finance arm in order to restore the unit's investment-grade ratings. Both GM and GMAC have said talks with potential partners are "ongoing."

Just so we are all on the same page:
our huge legacy cost burden
refers to employee pension and healthcare liability, which hasn't yet been paid and looks less and less likely to be EVER PAID!

Poor employees! They are used as the bogey man and yet they never get a chance to come out from under the bed. They are just used to scare gullible fools and children into doing what the so-called "adults" want them to do.

Poor employees! They are used as the bogey man and yet they never get a chance to come out from under the bed. They are just used to scare gullible fools and children into doing what the so-called "adults" want them to do.

What an incredibly profound and insightful analogy – I plan to use it the next time the soap box is vacant.

Economic terrorism.
Corporations use their own profit margin as a tool of extortion and intimidation.
Creating a mobius loop, subjugating acceptance of oppression.

Poor employees! They are used as the bogey man and yet they never get a chance to come out from under the bed. They are just used to scare gullible fools and children into doing what the so-called "adults" want them to do.

As a company makes more money, the “bed” should get bigger.
Ironically, we in who work in quality try to make the foot print smaller – The “bed” we’re cowering under get’s thicker – At some point, it topples or collapses under it’s own weight. (Enron, Worldcom, Tyco, GM, Ford, etc.) This, you’ll find, is the essence of Dr J. Nash’s Nobel prize willing dissertation. We should do something about it before our nation is in chaos.

There are no "Poor" employees at GM. The UAW contract rate is $65+ /hr for unskilled uneducated labor. The "poorest" UAW employee makes $130,000 per year straight time or $3.9MM ($3,900,000) in a 30 year career. If they only work 3 years they make as much as their skills and education warrant elsewhere in a 30 year career. How much sympathy is due someone who is in the top 1% of all wage earners?

I'd have to see where your figures came from. I know a lot of automotive people at places like Delphi, Ford, GM, etc and none of the line folks make near that much. I seriously doubt line folks are making anywhere near $130,000 per year straight time. None of the engineers I know make anywhere near that, either.

A combination of sloppy research and inaccurate definitions have combined to make Jconlake's post inaccurate and misleading.

There are many sources who will use the gross numbers of the cost of labor to the manufacturer at roughly the same as Jconlake's, but those are wildly different from the gross paycheck rate of a UAW member.

The $60+ figure adds in all sorts of expenses attributable to labor, while the true standard top union wage is closer to $30/hour. These wages are substantially lower at Delphi and Visteon.

For those willing to wade through a report that is two years old, I am attaching a 62 page pdf report on UAW wages.

A close reading will show how careless research and a built-in bias looking to support a theory of overpaid workers would generate the numbers cited by Jconlake.

In point of fact, UAW workers DO currently enjoy a premium over other manufacturing workers of approximately 68% according to this report ("In 2003, the UAW average rate (with COLA) was 68 percent higher than the average manufacturing rate of $15.74/hour—an all-time record for this premium.")


Take a look at the wage chart reproduced from this study.

Other points to consider in this report include the serious reduction in number of UAW workers over the last 8 years of over 10% between 1995 and 2003, not even taking into effect recently announced layoffs of another 10% over the next 5 years.

Lesson to be learned:
Do not cite a statistic unless you can back it up with credible documentation!

The $60+ figure adds in all sorts of expenses attributable to labor, while the true standard top union wage is closer to $30/hour. These wages are substantially lower at Delphi and Visteon.

...In point of fact, UAW workers DO currently enjoy a premium over other manufacturing workers of approximately 68% according to this report ("In 2003, the UAW average rate (with COLA) was 68 percent higher than the average manufacturing rate of $15.74/hour—an all-time record for this premium.")



Thanks for the info. Although, I suggest, both rates need to be considered. If the rank and file line workers make "only" $30, but the cost to the company is in the $60 range, both numbers have to be factored.

What strikes me is how great the range between 30 and 60 is. That means 50% of the labor cost is stuff they can't take home. That is far above the more common 15-30% many other large companies would report. Surely, there is something in that soft cost section that could be reduced without too many feeling any pain.

This link is a recent article that quotes the $65/ hour figure. I have seen it periodically printed in Detroit press w/o dispute. The UAW does not dispute the number.

http://www.nationalreview.com/comment/payne200511290819.asp

The last UAW Ford contract rate that was published is $65.31 in wages and benefits.


http://www.uaw.org/contracts/index.cfm

This link is the UAW site with a link for each of the current contracts. Each OEM link brings up a page with links on the right to the wages and benefits in the contract. The total cost of these to Ford/GM/DCX is the source of the $65/hr figure that is commonly quoted in automotive.

While the worker does not take home much of the benefit cost as a wage, they also do not pay income tax on those amounts. The cost is real to the automaker and to the consumer.

This link is a recent article that quotes the $65/ hour figure. I have seen it periodically printed in Detroit press w/o dispute. The UAW does not dispute the number.

http://www.nationalreview.com/comment/payne200511290819.asp

The last UAW Ford contract rate that was published is $65.31 in wages and benefits.


http://www.uaw.org/contracts/index.cfm

This link is the UAW site with a link for each of the current contracts. Each OEM link brings up a page with links on the right to the wages and benefits in the contract. The total cost of these to Ford/GM/DCX is the source of the $65/hr figure that is commonly quoted in automotive.

While the worker does not take home much of the benefit cost as a wage, they also do not pay income tax on those amounts. The cost is real to the automaker and to the consumer.As I said - your original premise wherein you stated "There are no "Poor" employees at GM. The UAW contract rate is $65+ /hr for unskilled uneducated labor. The "poorest" UAW employee makes $130,000 per year straight time or $3.9MM ($3,900,000) in a 30 year career." is simply not true. The exact quote from your own citation is:
an average $26 an hour ($60,000 a year) plus benefits that bring the company's total cost per worker to a staggering $65 an hour.

The matter is simply that you did not take into account the fact the benefits are not paid in real time, but are slated to be inflated dollars paid (or most probably NOT paid) at some vague point in the future. Those dollars are smoke and mirrors dollars which do NOT come out of real expenses - they are just accounting notations. No real money is set aside in a special sinking fund to pay those future liabilities if and when they come due - they will be paid out of current income at that point in the future. The employee may NEVER realize that benefit (as the airline pilots for United learned to their horror when United declared bankruptcy.) Therefore, the total sum is NOT a real cost to the company today, but making payments on 20 year old union benefits IS coming out of today's income.

This, of course, is a similar argument to the one folks make about Social Security - that it is a gigantic Ponzi scheme with each payee being paid directly from the contributions of today's payors and that there is no "fund" to continue paying those entitled to payment if the system stops collecting new money from current workers.

The citation you offered also fails to take into account the "slant" of the publication. By no stretch of the imagination could the National Review be considered a fair, unbiased source of news. "Conservative" is an appellation proudly worn by National Review, Weekly Standard, and some other similar magazines with similar small circulation that throw big shadows over the landscape.

There are no "Poor" employees at GM. The UAW contract rate is $65+ /hr for unskilled uneducated labor. The "poorest" UAW employee makes $130,000 per year straight time or $3.9MM ($3,900,000) in a 30 year career. If they only work 3 years they make as much as their skills and education warrant elsewhere in a 30 year career. How much sympathy is due someone who is in the top 1% of all wage earners?
You're wrong.