Prepare for the Worst-Expect the Worst

[Mr.Krinkle]

Just in Case

Jan. 5 (Bloomberg) -- General Motors Corp. plans to boost vehicle inventories as much as 20 percent higher than normal as a precaution against a possible labor strike this year, people familiar with the matter said.

The world's largest automaker may stockpile as many as 1.2 million cars and trucks, up from about 1 million, according to people briefed on GM's strategy. They didn't want to be identified because the plans haven't been made public.

Edited January 6, 2007 by Mr.Krinkle

[Mr.Krinkle]

GM would build inventory ``to get the message across that they're going be tough during the talks

GM and the union will probably try to achieve a ``soft landing'' rather than a confrontational ``hard landing,'' Lehman Brothers analyst Brian Johnson wrote in a report today. GM used the ``soft'' approach to get 34,400 workers to accept buyouts or retirement, he said.

even after cutting $9 billion in annual labor, health-care and manufacturing costs, his Detroit-based automaker needs more concessions

GM spends $5 billion on U.S. health-care annually, $4 billion more than rival Toyota Motor Corp., according to Wagoner. Toyota has a younger U.S. workforce and far fewer retirees than GM.

The UAW agreed in late 2005 that active GM workers would divert $1 an hour from future wage increases to a health fund.

We are not fully competitive in all parts of our business from a cost perspective,'' Wagoner told reporters

Delphi Matters

Wagoner reiterated yesterday that another key labor issue concerns GM's largest parts supplier and former subsidiary, Delphi Corp. He said that it's taking longer than he expected to resolve the Delphi matter.

David Thursfield, a former Ford Motor Co. executive who now heads Cerberus's automotive unit, will begin talks Jan. 8 with the UAW about his bid to take control of GM's largest supplier, a person familiar with those plans said. Cerberus said last month it would like to finish union talks by Jan. 31.

Cerberus could still walk away from its Delphi bid, the people said. If the talks with Cerberus succeed, Delphi may be able to provide more jobs and save more factories as it emerges from bankruptcy, they said.

Credit-default swaps based on $10 million of GM bonds fell to $385,790 at noon today, down 1.4 percent from $391,310 yesterday, according to data compiled Credit Market Analysis in London.

[AxelTheRed]

Call me crazy, but I think the talks would go better if GM made EVERYONE in the company take some concessions on benefits and whatnot, not just the unionized workers.

[ellives]

Call me crazy, but I think the talks would go better if GM made EVERYONE in the company take some concessions on benefits and whatnot, not just the unionized workers.

OK: "You're crazy"

Employees should be procured for market value. The argument is GM's UAW workers are being compensated at substantially more than market value which is one of the reasons GM is not competitive. There has been not argument made for any other employee category in the Company I'm aware of. Probably because the non-unionized employees are considered "at will" employees and can be replaced fairly easily, particularly in management positions if these are the ones you were referring to as "EVERYONE."

[AxelTheRed]

OK: "You're crazy"

Employees should be procured for market value. The argument is GM's UAW workers are being compensated at substantially more than market value which is one of the reasons GM is not competitive. There has been not argument made for any other employee category in the Company I'm aware of. Probably because the non-unionized employees are considered "at will" employees and can be replaced fairly easily, particularly in management positions if these are the ones you were referring to as "EVERYONE."

I'm not seeing where its fair that only the unionized workers should have to face benefit cuts. Everyone working for that company should be responsible for helping the company back on its feet. And it would be nice to see the executives cut back on their big extravagent bonuses too. Maybe even cut back a little on their salaries (The only executive that had the balls to do that was Wagoner and that's peanuts to the dollar a year Iacocca took when he was helping Chrysler back up)...if anything it would be a show of good faith to the workers.

[Northstar]

I guess this is a good idea, though I hope they don't run into the same problem that Chrysler is having right now.

[ellives]

I'm not seeing where its fair that only the unionized workers should have to face benefit cuts. Everyone working for that company should be responsible for helping the company back on its feet. And it would be nice to see the executives cut back on their big extravagent bonuses too. Maybe even cut back a little on their salaries (The only executive that had the balls to do that was Wagoner and that's peanuts to the dollar a year Iacocca took when he was helping Chrysler back up)...if anything it would be a show of good faith to the workers.

Having the CEO cut his pay is a "feel good" move. Most of them make their real money on their bonuses anyway so fine have the CEO do it. The problem with having the whole employee base take a pay cut is "why should they?" If you cut their pay and they can get more money elsewhere they will. The best way to manage the cost of non-union employees is by establishing a bonus target and if they don't meet their goals / company goals, their bonus is reduced or eliminated.

As I said in my prior post, the problem with the UAW employees GM has is they are being grossly overcompensated vs. what the rest of the market is so GM can't be competitive. This situation simply can't continue. Toyota doesn't have a pension plan for their labor. GM needs to dump theirs if they want to be competitive.

Talking about "fairness" is counterproductive. Life isn't fair. We're talking about reality here and the reality is GM can't afford the current labor arrangement and should actually shoot for a better cost structure than Toyota has. It doesn't feel good but it's what is required to survive, return to profitability and kill Toyota.

[haypops]

I think the answer to non-union GM workers also taking a cut is that this has already happened - big time.

[ellives]

I think the answer to non-union GM workers also taking a cut is that this has already happened - big time.

If they have, the Company should publicize it more and make this discussion go away. The union will use it to argue their case for more compensation if the cuts others have made aren't well known. From my perspective it's no business of the union what the Company does in other areas.

[CARBIZ]

2007 is going to be THE pivotal year for the UAW and Detroit. What happens this year will make or break both of them. I know what it is like to have one's income cut in half. It happened to me 10years ago. I lost everything. GM won't be asking for any where near that kind of concession, but Delphi is. The trouble is, unionized workers that I have met have such a feeling of entitlement - it is scary, like watching the Twilight Zone. I have many teacher friends and my sister is in a union. In some cases, it is nearly like a cult.

I don't think we have seen labor talks like this in a couple generations. The last time GM was struck (in 1998) the company was in much better shape.

In most companies that I know, when times are tough the management gets sacked, something the UAW has lobbied hard to prevent for their members. At one company I know, the General Manager (who was making $150k a year) was replaced by someone making a third less.

I'll be GM's stock is in for a rough ride again.

[ellives]

2007 is going to be THE pivotal year for the UAW and Detroit. What happens this year will make or break both of them. I know what it is like to have one's income cut in half. It happened to me 10years ago. I lost everything. GM won't be asking for any where near that kind of concession, but Delphi is. The trouble is, unionized workers that I have met have such a feeling of entitlement - it is scary, like watching the Twilight Zone. I have many teacher friends and my sister is in a union. In some cases, it is nearly like a cult.

I don't think we have seen labor talks like this in a couple generations. The last time GM was struck (in 1998) the company was in much better shape.

In most companies that I know, when times are tough the management gets sacked, something the UAW has lobbied hard to prevent for their members. At one company I know, the General Manager (who was making $150k a year) was replaced by someone making a third less.

I'll be GM's stock is in for a rough ride again.

I completely agree with everything above. The sense of the entitlement is amazing. It's a shame it may take the demise of GM before they get their comeuppance. The municipal unions are the ones who scare me (teachers, police, state workers, etc.) There is no limit to what (in theory) taxpayers can be made to pay so their demands seem to be unendless. It's going to be interesting to see what will happen with underfunded pensions over the next 10 years. I hope they are eventually all killed. I'm personally tired of paying for underperforming, uninterested teachers who are only in it for a pension and not for the kids.

[RJB]

I for one don't need or should get a paycut. I'm a contract worker at GM and I have only received ONE raise in the 5 YEARS that I have worked here. It upsets me to have this burden on my shoulders everyday and it takes a big toll on my morale. Beleive me if I could find a job that is closely related to what I do for more money I would jump in a heartbeat, but the way the economy is going in Michigan particularily I would have to move out of state for this to benefit me. I am not willing or ready at this time to make that jump, and so it goes. I will tell this though, I am very grateful I have a job at all during these rough times!!

Edited January 8, 2007 by RJB

[Mr.Krinkle]

The best way to manage the cost of non-union employees is by establishing a bonus target and if they don't meet their goals / company goals, their bonus is reduced or eliminated.

Its funny you say that. They were off by less than 2% Talk about a mess.

Hyundai Sues Union for New Year's Violence

Hyundai Motor Needs to Stand Firm in Crisis

Hyundai Motor¡¯s union members wrought havoc at a company ceremony on Jan. 3. The company president received a facial wound after unionized workers pushed him, while other members sprayed fire extinguishers, covering the hall with a misty cloud. The solemn New Year ceremony had to come to an abrupt end.

The reason the union caused such a commotion on the first work day of the year was because they felt their year-end performance bonus was not enough. At the end of last year, Hyundai Motor gave its workers a bonus equivalent to 100 percent of their average pay. That¡¯s because last year¡¯s production volume of 1.62 million vehicles was 98.3 percent of their goal. If they had met their production target, they would have received a 150 percent bonus. Union and management representatives agreed upon the condition during last year¡¯s pay negotiations.

But the union demanded the company pay them a 150 percent bonus, regardless of the performance. Taking into account lost output due to protracted labor strikes last year, Hyundai Motor had lowered its original output target of 1.78 million vehicles by 120,000. The reason unionized workers were unable to meet even the reduced output target was because, in addition to strikes over wages, they had downed tools 12 more times to take part in a broader strike by the umbrella labor group, Korean Confederation of Trade Unions.

It wouldn¡¯t have been so bad if there were no problems with the company¡¯s business conditions. But due to the continued appreciation of Korean won last year, Hyundai¡¯s 1.6 liter vehicles ended up becoming more expensive in the key U.S. market than models made by Toyota. In other words, Hyundai cars lost their price competitiveness in one of the company's top export markets. Hyundai¡¯s U.S. market share fell from 3 to 2.4 percent. But those unionized workers ignored such dire conditions.

Such blind unions are to drag their companies to the grave. That¡¯s what happened in the United Kingdom, which had been the world¡¯s top automobile exporting nation until the 1950s. Companies that manufactured world-renowned automobiles, like the Austin-Healey, Jaguar, Rolls Royce and Land Rover, were all sold off to foreign companies. What caused that was the ¡®British disease¡¯ or endemic labor strife, which made those companies less competitive. The main reason Japan¡¯s Nissan was sold off to France¡¯s Renault, while GM, Ford and Italy¡¯s Fiat face uncertain futures is due to greedy unions that ended up biting the hand that fed them. These actions by the union bode ill for the future. One day, the union may drive tens of thousands of workers, their families and hundreds of thousands of workers of their subcontractors out into the streets.

http://www.iht.com/articles/ap/2007/01/08/...undai-Motor.php

The municipal unions are the ones who scare me (teachers, police, state workers, etc.) There is no limit to what (in theory) taxpayers can be made to pay so their demands seem to be unendless.

This is wher you lose me. Teachers and police get paid dirt because they can be paid dirt. How many people are going to jump at the chance to pick up your trash or drive you to work or get shot at while someones sticking you up without having a certain sense of job security and decent wages? Sure there are some bad apples out there who see 20 years and 1/2 salary pension and thats it --but thats life. Should the hero cops, im sure theres still some out there, firefighters that run into your burning house while you are running out or the teacher that inspired little jimmy or suzy be punished because of some jackass.

Work needs to be done to get GM competetive. The sign of fair arbitration... everbody will walk away pissed.

[CARBIZ]

Not to hijack this thread, but I do agree that the police are probably paid what they are worth. I should point out that in my business a uniformed cop or TTC (transit) worker is the kiss of death because when they walk in the show room they are fornicating the canine while on the pay roll. Spectacular front page news aside, you should know that 3/4 of the fire workers calls are total BS and at the end of the year they get to file these huge reports at all the calls they made when in reality most of them were false alarms or drug dealers pulling alarms in high rises to warn that a narc is near by. When a fire alarm is pulled some where, 5 or 6 $500,000 fire trucks show up, each with 6 $55,000 workers in side and all they do is stand around for 30 minutes until a supervisor determines it is a false alarm. They all go back to the station, file a report and at the end of the year they demand a big raise, better equipment and more workers, based on those "calls."

The teachers are clearly the worst. They get 12 weeks holidays a year, get paid $60k, and bitch when they have to mark tests at home. Don't get me wrong, you couldn't pay me to baby sit 14 year old, precocious, know-it-all brats, but that is the profession that they chose and they get paid damn well for it.

As to municipal workers, locally they get paid $22 an hour, plus all their benefits (how many sick days a year do YOU get paid for? Me? none!) to pick up garbage or sit around in a truck, hidden in a city park and smoke cigarettes. My partner gets paid $13 an hour at a private company to do the same thing - and he has no pension and can be fired for any reason.

I worked in a unionized environment once (the Ontario Provincial government) and I lasted 3 months. It was the most soul-sucking, energy draining experience of my life. The union will be quick to blame management as the reason their jobs are meaningless, but it isn't that at all. One of the guys in my department had two mail runs a day (totalling 30 minutes each) and spent the rest of the day rolling cigarettes for himself. When I confronted my boss about why this useless twat was still around, she sniffed that he had 3 years to go to retirement and to just leave him alone. WTF??? I was 19 and knew that he was sucking my taxes through those cigarettes.

We all know the horror stories from the Dirty Thirties and the 19th century of what labor conditions were like in coal mines and early factories, but I think we are far removed from that now. The UAW/CAW needs to get with it, or their jobs will all be exported. Better yet, each union worker needs to work in the real world for 6 months just to see how damned lucky they are.