The Observation Deck

When unions begin to control the economic decisions of companies the company is headed for trouble.

When those same companies are managed by carpetbaggers who are intersted more in their own pay and perks than the legacy they inherited the fate of those companies is sealed.

If you bother to read the article keep in mind that those two statements apply to cities as well.

See:

http://www.forbes.com/2007/05/23/detroi ... r=yahootix

Ford and GM got slammed by the same circumstances they got slammed by in the Seventies. So far as I know the Management, Designers, and Engineers aren't Union. They are the one who decide what production technology to pursue, what size and mileage to pursue and market. etc.

They are more or less a victim of their own Oligarchy. They couldn't compete with Japan's combination of cultural and government of industrial nationalism. We can't compete with Japan's combination of cultural industrial nationalism and government of industrial nationalism.

Interesting article Bill. No surprises though. The US Auto industry is sad. Its been in bad shape since right after WWII. As long as the unions run the show, the business model of 'how much can we make this quarter', and they continue to produce sub quality vehicles, it'll never turn around.

How long have gas prices been rising? How long have we known they will continue to rise? How long has (what use to be) the Big Three been pushing (lower quality) SUV's? Why? Because the guys upstairs make money for the share holders this quarter doing it. That's what they have to do - make money this quarter for the share holders. Do they care about the long term? No. They don't need to. When they fail, they are paid big sums of money to leave. It's win-win for them. They don't care about you, me, or the poor sod on the assembly line.

Why do they push bigger vehicles? Because they (potentially) make a lot higher profits. For example, a lot of people don't realize they actually make only a handful of different chassis, then re badge them as a different brand. When people buy Cadillacs, they think they are getting a different/better car than it's Chevy sedan counterpart. Fact is, it's the same car(!), with options added that cost the manufacturer a few hundred more to manufacture but they sell it for thousands more. People think they are getting something different. It's not.

In the 70's Ford, GM, and Chrysler told us (the US market) we don't want smaller, higher quality, efficient vehicles. They continued to play their game of "how much are you going to raise your prices this year? We'll do the same?" It was a game the 3 played with each other. Why not? There was no competition. They had tons of cash and no worries.

Japan saw massive opportunities and capitalized on it. Ford, GM, and Chrysler have been behind the curve ever since. Japan's strategy was how much will we lose this year to advance in the coming years. It continues today. They do not live by the 'how much can we make this quarter' mentality. A concept American business can't grasp because we have to profit this quarter.

Meantime, China is watching Autoland (Detroit) crumble, learning from Japan (primarily Toyota Manufacturing), learning from Korea, and getting ready to assault the US with high quality vehicles. You think Ford and GM can't compete today? Think they have trouble today?

BTW, you can't entirely blame the American worker on the assembly line either. Honda, Toyota, Nissan, BMW... all have proven the highest quality vehicles on the road can be made by American workers in American assembly plants.

To learn about the American Automotive Industry, its history compared to Japan and why it will never turn around, read The Reckoning by David Halberstam.

I don't think I would have any money invested in GM, Ford, or Chrysler...

Ryan, they are and/or can be in their respective unions. I know a Ford Engineer who is in the union. I forget which one.

Joe
(in the automotive manufacturing tier 1 and tier 2 supply chain business over 25 years)

If Japan had played the Free Trade game there never would have been a Japanese auto industry:

Economies of scale meant Japan would never make cars as cheap: their domestic market was too small for modern economies of scale. So they developed entirely new production technology. They designed for a much smaller domestic market: cars that are small, easy to fix, fuel efficient.

America hyper-subsidized sprawl, then filled it up with giant cars.

China is developing buses and cars that top out around 35 miles per hour: This way they don't have to worry about building a massive infrastructure to handle millions of cars whizzing around at 55 or 65 or 75 miles per hour.

In my opinion, blaming the unions alone is way off the mark here.

I would focus on what I perceive to be the adversarial way that some corporations handle their operations.

These concerns were addressed many years ago in World War II by a fellow named W. Edwards Deming. He helped American business by introducing statistical analysis, and a win-win approach with labor.

By helping all sides to learn that cooperation was in their common interest, I believe that Deming's methods helped our country to win WWII.

After the war, Deming went to Japan and helped them to recover and learn how to better manage their factories.

When American companies began to suffer in the 1970's from quality issues and overseas competition, a number of them again turned to Deming, and were helped. (He lived from 1900-93)

When companies, cities, school districts sit down together with their workers, and look for common ground, I believe that good things can happen. It is when adversarial positions are taken, and strong words exchanged, that things can get counterproductive real fast.

Looking first for common interests is a great technique, at least in my opinion. I have a strong feeling that W. Edwards Deming would agree with me. :

Gary Rice wrote:In my opinion, blaming the unions alone is way off the mark here.

Who did that?

That was simply my perception of the sentence from the first posting on this thread. A sentence expresses a complete thought:

"When unions begin to control the economic decisions of companies the company is headed for trouble."

The second sentence may have been meant as a qualifier, or as an adjunct to the first; however it also was stated in a new paragraph; indicating to me that a different line of thought was being addressed.

To me, if the perception would be that unions control decisions, that would seem to make the case for my statement that you quoted.

Still, I would think that we'd all agree that there are many reasons for the difficulties now faced by our industries.