GM and UAW Keep Building Clunkers
General Motors should have been picking up pointers from Toyota, its Japanese partner in an auto manufacturing venture in Fremont, Calif., since 1984. Apparently GM did not; it is in declining health while Toyota continues to prosper.
Now, with its credit rating at "junk" level, GM is planning to fire another 25,000 workers and close more domestic plants. Toyota is still expanding manufacturing in the United States. General Motors' share of the U.S. auto market is half of what it was in the heyday of domestic car companies. Toyota's share keeps rising; in May, it took more than 13 percent of the U.S. market, slightly better than half of what GM can claim.
Together with the United Auto Workers, GM has managed to waste the years since the 1980s. The union's response to a tide of imported cars was to ban them from its Detroit headquarters' parking lot and fight to retain as many jobs as possible. GM failed to make enough cars that consumers wanted and accepted punishing labor contracts. The two sides need to change if there is to be any chance at reviving GM's auto operations.
Rick Wagoner, GM's chief executive, wants the UAW to share more health insurance costs. About $1,500 of the price of each vehicle GM sells goes toward health care expenses, a competitive disadvantage. It's clear GM cannot carry that burden forever. Likewise, there's little doubt that some plant closings are necessary; how that will affect the company's van plant in Doraville is unknown.
How willing the UAW is to provide relief on health care is uncertain, but it made its stand on plant closings clear. "The UAW is not convinced that GM can simply shrink its way out of its current problems," the union said following Wagoner's appeal for help last week.
Nor is Standard & Poor's, one of the rating agencies that downgraded GM debt. Prior downsizings have been "undermined by market-share losses," Standard & Poor's points out.
General Motors' problems are not new, nor are the kinds of mistakes it keeps making. Even though nobody in the car-making business should have believed low gas prices would last forever, apparently GM did. Now, a drop in sales of gas-guzzling SUVs contributed to a $1.3 billion first-quarter loss in North American auto operations. Yet, Wagoner's answer is to speed up the introduction of new-model SUVs and big pickups.
Toyota, in contrast, plans to start building fuel-efficient gas-electric hybrids in Georgetown, Ky. General Motors should take a cue from that.
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