The Big 3 things to help put America back on the right road
“The pessimist complains about the wind; the optimist expects it
to change; the realist adjusts the sails.”
— William Ward, American scholar
It certainly hasn’t been smooth sailing for the auto industry or most other U.S. industries that have opted to chart a new course amid fierce competition in the U.S. market.
But the new tack has taken its toll on traditional manufacturing in America – from General Motors’ planned elimination of 25,000 union jobs over the next three years to Ford Motor Co.’s salaried worker firings.
Even with July U.S. auto sales soaring to historic highs and the Big Three posting double-digit gains, some ominous signs prevail:
• Annual U.S. sales have remained at about 17 million units, which in a mature market means further dramatic growth is unlikely.
• More serious players are competing for their slice of the U.S. market. Not long ago, Hyundai and Kia were jokes, but now they’re siphoning market share from competitors.
• Pricing pressures due to health care, high steel costs and fuel prices are intense, trimming already narrow profit margins. To meet the global (read: “China”) price, more suppliers are moving work there and to other low-wage nations.
• Automakers claim that overcapacity is a problem in North America, and globally as well.
The days of 400,000 annual vehicle sales for any one model are over, with the exception of full-size pickups. Automakers are looking to niche vehicles that sell 75,000 to 100,000 units – or, in the case of the new Pontiac Solstice, about 35,000.
This puts a premium on flexible manufacturing, the ability to produce three or more distinct models on one assembly line. The Japanese lead in this area, but the Big Three are gaining.
UAW Local 652 members at GM’s Lansing Grand River Assembly plant know all about converting to flexible manufacturing. In 2002, after some of their existing idled plants underwent facelifts, they began building the first Cadillac CTS. Now in their second full year building three distinct Cadillac models, including the SRX and STS, about 1,800 workers are on the same line.
“The old system was great, but it was just that – the old system,” said Tony Audia, a longtime Local 652 member and production shop committee member. “Because it’s a world economy now, you’re going to have to make changes.”
Audia said after a few adjustments, the teamwork system came together well. “They set up the jobs and figure out how to do it, and actually enjoy the rotation of different jobs,” said Audia, 57. “We could just about run anything on that line now.”
“The Lansing Grand River operation shows GM’s confidence in the UAW members who assemble world-class vehicles,” said UAW Vice President Richard Shoemaker, who directs the union’s General Motors Department.
It was announced in January that the Chrysler Group’s Belvidere (Ill.) Assembly plant would invest $419 million in new manufacturing flexibility and operational strategy. In addition, it will add a second shift and up to 1,000 jobs.
The Belvidere facility employs 2,100 workers (UAW Locals 1268 and 1761) who build the Dodge and Chrysler Neon and the Dodge SRT4.
The overhaul of the plant’s body shop, paint shop and final assembly area will allow them to produce multiple vehicles while simultaneously piloting another model, minimizing production losses and downtime. Production is targeted to begin in early 2006.
“This teamwork structure and streamlining of each line operator’s activities will result in a safer, ergonomically friendly plant environment,” said UAW President Nate Gooden, who directs the union’s DaimlerChrysler Department.
But at Ford’s Wixom (Mich.) plant, the biggest in its North American operations and sole site of Lincoln car production since 1957, revamping plans have put jobs of 1,450 UAW Local 36 workers at risk.
Earlier this year, Ford announced it would build Lincoln’s new entry-level luxury sedan, the Zephyr, in Hermosillo, Mexico – the first Lincoln in nearly 50 years to be built somewhere other than Wixom.
Wixom workers feel as if they’ve been kicked in the gut, said Dave Berry, Local 36 president. “We went from Ford’s flagship plant down to all this indecision. In the 1980s, we were Ford’s cash cow, so yes, there are a lot of mixed emotions,” he said.
Berry added that Local 36 workers took pride in the Lincoln nameplate. “Now when someone asks where they made it, people will say ‘in Mexico,’ ” he said.
“We’re extremely upset that Ford has chosen to go to Mexico with Lincoln models that would be better suited for the Wixom plant,” said UAW Vice President Gerald Bantom, who directs the union’s National Ford Department, adding that the UAW meets with Ford on a regular basis and efforts will continue to get a
product for Wixom.
Many challenges remain for the Big Three in building their U.S. market share and in preserving their manufacturing base in this country:
• If they’re going to get back to profitability in North America, GM, Ford and Chrysler need to wean consumers from big rebates, which trims profit margins and negatively impact residual and resale values.
• They need to beat the drums for national health insurance because they have higher legacy costs than most of their competitors who have a younger workforce, virtually no retirees and, in many cases, government-subsidized pensions and health care.
• The key to gaining, or at least holding, market share starts with products consumers want to buy. With some exciting new vehicles, the Chrysler Group has figured it out and, as a result, gained market share. With gas prices climbing and consumers moving away from full-size SUVs, GM, Ford and Chrysler have to reduce product development lead time and produce more appealing, fuel-efficient vehicles.
Finally, here’s another William Ward quote for Big Three CEOs to ponder: “Wise are those who learn that the bottom line doesn’t always have to be their top priority.”
