Washington acknowledges Detroit

i can't possibly say it any better, so here it is, verbatim. thanks to the Post and Warren Brown.

The Generals Are Losing the War at American Axl

By Warren Brown

Sunday, April 6, 2008; Page G02

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.

UAW wake up call

Dick Dauch, chairman and CEO of American Axle Mfg said that he can take his production elsewhere if the union is unwilling to make a deal. in the Free Press article on this there are all sorts of union sympathizers saying that the union needs to hang in because AAM will have to cave soon because GM is turning the screws.

well, be careful, UAW, or you may just find out that Dick's bite is as bad as his bark.

do you think he relishes puting people out of work? of course not. but the reality is that he in large part built this company and he is not going to let overpriced union labor ruin his company. you have to look at the reality that in a state with 7% plus unemployment that he can easily go out and find non union guys who would jump at the chance to work at $14/hour. and thats keeping jobs right there in Detroit. just think of the wages that he could get in Mexico or Asia.

the reality is this: the UAW cant call the shots anymore. whether you like it or not you have to face the fact that we live in global economy, and no matter how loud you shout 'BUY AMERICAN!' it means nothing. GM, Ford, and Chrysler all have to compete with VW, Honda, Toyota, Hyundai, and soon Tata and Mahindra. there is no changing that.

US companies theoretically have the advantage of no or minimal shipping costs. but that is squandered on overpriced union labor making a frequently inferior product the same price or more expensive. i must admit that US auto companies have stepped it up recently, especially GM, but the fact is their reputation is still stuck with the late 90s stigma. unfortunately if US companies dont continue to compete making affordable and high quality cars there will be no more 'American' brands.

to help save the industry and your jobs and future American jobs and the economy, you need to take some cuts. if you want the UAW to be relevant, sit down to a real negotiation. you have to recognize that AAM and Dauch are in the power position. he can make AAM American in name only and you cant do a damn thing about it. then that will be one more part in your 'American' cars that will come from south of the border or across the seas.

they just dont listen

and now GM is laying people off.

the American Axle vs UAW strike is now rippling through the auto industry. Delphi and Lear are now looking at layoffs. they say they are temporary, but if AAM cant supply the parts that they had been because of this, then the will be less temporary.

while i dont ethically agree with AAM's tactics and stance, i cant say i blame them. they want to stay competitive. and with a surplus of labor in in Detroit, why not push the union. if GM hurts for parts, they will start to push the UAW as well. there are plenty of people who would sign up for jobs at the rates that AAM is offering, and the UAW wont meet them.

I dont blame the UAW for trying to hold their ground, theyve got a great deal going. those guys making those ridiculously high wages dont want to give them up. but the reality is that they are over paid and that AAM could go out and find workers to train and pay half of what the current union guys make. and those workers would be happy. the union is try to shore up pay rates that the market cannot support.

its a delicate balance, and i can see both sides, and i can see why this isnt getting resolved as quickly as i had hoped. i just have trouble justifying the union side of this. if it was AAM trying to rob people and pay them minimum wage, i could see it. but thats not the case. domestic manufacturing needs to be able to compete with outsourced manufacturing. and that doesnt mean paying Americans cut rate prices that they get away with in other parts of the world. US companies have an advantage of being able to buy raw materials domestically and sell the finished ones domestically avoiding all sorts of shipping costs and tariffs. therefore they can still pay decent wages, which i have to say AAM is offering.

maybe im missing something, but the way i see it, the union has to give more. not completely agree to AAM's conditions, but it cannot single handedly shore up unrealistic wages.

im pulling for you, Detroit.

i like the freep.

not baseball

detroit is now seeing the 4th UAW strike in less than 6 months. this time it is picketing American Axle Manufacturing, a detroit based auto supplier with plants in michigan and new york. this comes in response to management asking the union to take cuts in wages, health benefits, and restructure retirement programs. the union says this amounts to unfair labor practices.

the union gave just such concessions to all of the big 3 late last year. my guess is that AAM needs to cut costs, and this is the first offer. these things always come down to negotiations and in light of the deals at the auto makers you cant blame AAM for trying to reduce costs. the cynical side of me wonders if this was worked out in advance by AAM and the UAW to draw attention to the situation, then positive press for resolving it quickly. the detroiter in me wonders if AAM, which has been a bright spot in detroit's ever gloomy economy, is trying to get more for the bottom line at the expense of the workers.

either way, its in everyone's best interest to restructure things in the pattern of the GM and ford agreements late last year. no one can afford to have this draw out for any length of time.

from what i hear, word of mouth, mind you, there are union guys making $65/hour. if thats true, these guys need to take a cut. thats ridiculous. union carpenter wages arent nearly that inflated in this area where the cost of living is at least twice as high as detroit. apprentices make like $14. foremen make something like $28 to $33. the union has to accept something at that scale. thats damn good pay for the type of work. and to come in line with the rest of the world and accept 401K's instead of company retirement is not only reasonable, its the way the rest of the world works and perfectly acceptable. and as far as health insurance goes, the union should fight for the best coverage possible. everyone should.

lets hope this one follows the pattern. i think it will. it should. detroit cant afford a prolonged strike like this for sundry and various reasons.