The Generals Are Losing the War at American Axl
Management and labor sometimes do the dumbest things. Consider the strike against Detroit-based American Axle & Manufacturing Holdings, a first-tier supplier of drive systems and electronic components to General Motors and other car and truck manufacturers around the world.
The strike against American Axle has been underway since Feb. 26, when a labor agreement between the company and the United Auto Workers union representing 3,650 of its workers expired.
It has been a bitter dispute, one that has wiped out tens of thousands of units of production -- about 75,000 GM trucks, according to one industry estimate.
The good thing is that the forced production cuts have come at a most propitious time, when consumers, many of them struggling to keep roofs over their heads and gas in their tanks, are buying substantially fewer fuel-thirsty trucks.
GM and Chrysler last week each reported 19 percent sales declines for the month of March, much of that led by drops in truck sales. Ford's sales fell 14 percent. Toyota, which has pumped tens of millions of dollars into the marketing of its gargantuan Tundra pickup, said its sales fell 10 percent from March 2007. Toyota has cut back Tundra production.
So, from that perspective, the strike by American Axle's workers seems dumb on its face. Why shut down a company whose products are in low demand in the first place? Isn't that doing management a favor, giving the company a free pass to do what it would have had to do anyway -- cut production and trim jobs?
But nothing is as simple as that.
The truth is that the global automobile industry is going through wrenching changes, many of them occasioned by economic developments worldwide, but just as many, if not more, caused by the creeping realization that the industry can no longer afford to keep rolling out cars and trucks with little regard for the environments in which they operate or the amount of fuel they consume.
More aggressive jurisdictions, such as those in Europe and Asia, are putting heavy taxes on automotive carbon dioxide emissions, effectively forcing consumers to consider more wisely their choices in the automotive marketplace. Those consumers, in turn, are beginning to purchase smaller, more fuel-efficient vehicles, as evidenced by current sales reports from Europe.
Something similar is happening in the United States, but not because of higher fuel taxes. (Our elected leaders would much prefer holding congressional hearings on oil industry profits than they would on a national energy policy that requires some degree of sacrifice by the electorate.)
U.S. buyers are turning to smaller, more fuel-efficient vehicles because of rising gasoline prices. It's that simple -- and that complicated for the automobile industry and its workers.
We are at the beginning of a massive shift in a global understanding of the automobile: how it is designed, developed and manufactured; how it is distributed, fueled, garaged and ultimately used.
It costs money -- lots and lots of money -- for the automobile industry to adapt to those changes. Those future investments, billions in global currencies, both in products and now in infrastructure (as represented by GM's new investments in alternative fueling stations), work against profits. That's especially true in the United States, where government policies tell manufacturers to improve fuel efficiency while promising the electorate the continued availability of the cheapest gasoline in the developed world, thus assuring continuation of the often-wasteful consumer behavior that cheap fuel affords.
What it comes down to is a need for us all to understand and be committed to the concept of equality of sacrifice -- to give a little on labor contracts, to give a little on executive compensation and perks, to invest more in fuel economy, perhaps to pay more of the real costs of the fuel we burn in our cars and trucks.
Equality of sacrifice -- it is on that issue that the management of American Axle did something so dumb, it borders on the unforgivable. While demanding that its workers accept cuts in pay and other compensation to help the company underwrite future development and competitive costs, American Axle's top four managers gave themselves hefty raises.
Richard E. Dauch, 65, the company's chairman and chief executive, earned $10.2 million last year -- $850,000 more than in 2006, according to Securities and Exchange Commission filings. American Axle earned $37 million in 2007 after posting a net loss of $222.5 million in 2006, when it began hinting that its workers would have to give something back for the company to keep moving forward.
It just doesn't sit right. It matters not that the company is Dauch's company, or that he can move it to Mexico if he wishes. It is simply wrong to ask the troops to bleed while the generals feast.
No one wins wars that way. And no company trying to gain a favorable position in the future of the global automobile industry will succeed using such an ill-considered strategy.
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