07
Nov
07

The Heartbeat of America Falters

I saw these two headlines right next to each other this morning:

GM Has a Record $39 Billion Loss

Toyota Reports 11 Percent Jump in Profit

For years, Detroit automakers ignored the obvious and insisted on playing catch-up instead of innovating. Now, as anyone who pays even a little attention to the news knows, GM, Chrysler, and especially Ford, are paying the price. The Japanese manufacturer Toyota, taking a cue from Henry Ford’s Today and Tomorrow, has displaced GM as the largest auto seller in the world, and all three U.S. manufacturers are scrambling to address union issues to keep plants running.

I can sympathize with U.S. automakers, and even with their employees. However, the rationalization that companies could be more competitive without the costs extracted by the union and the unions protesting that said automakers are trying to cheat them out of what they deserve strikes a false note. The unwillingness to acknowledge their necessary relationship is flabbergasting. If the U.S. car makers go out of business, the union has bigger problems than whether they’re making less per hour. And if its employees can’t buy the product your producing…the need for balance is obvious, but few seem ready to have that discussion without taking potshots at one another.

The conversation about modern-day American car production seems stuck on the same issues that have plagued it since the Japanese landed with their safe, economical alternatives. Instead of telling the car-buying public about the amazing models that are in R&D or in production, the focus of U.S. companies remains on union negotiations and the cost of health care. On the other side, Toyota and Honda get to talk about their hybrid models and saving the earth. Two distinctly different conversations with somewhat obvious outcomes.

Perhaps Toyota, Honda, and other foreign car companies have the advantage because they aren’t dealing with unions and the historical baggage weighing down the Big Three. However, instead of blaming the unions, I think U.S automakers are suffering from something else that Ford discussed in Today and Tomorrow:

One sees them all about—men who do not know that yesterday is past, and who woke up this morning with their last years ideas […] there is a subtle danger in a man thinking that he is ‘fixed’ for life. It indicates that the next jolt of the wheel of progress is going to fling him off.

If the flinging hasn’t already commenced, I suspect it will shortly.

Comments?

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5 Responses to “The Heartbeat of America Falters”


  1. November 7, 2007 at 6:05 pm

    I believe their fling was flung some time ago I’m afraid. Perhaps their hope now lies in a nimbleness borne of their destruction—not unlike an alcoholic bottoming out. If only those Big Three fallen behemoths represented but one man—disconcerting on so many levels.

  2. 2 Britt
    November 7, 2007 at 6:10 pm

    Sometimes the issue with an alcoholic lies in acknowledging the real issue, not something that big companies excel at. One would hope that utter destruction isn’t required for recovery to begin.

  3. November 8, 2007 at 12:10 pm

    It’s the message of tough love, “These cuts and roll backs are necessary for us to survive in a global economy. This is going to hurt now, but you’ll probably thank me later”. I would say that the US automakers had to take on the labour movement.

    Today’s labour unions are living in a fool’s paradise. Current labour rates & benefits in North America are making it extremely difficult for corporations to stay competitive. Unless the labour unions are willing to allow concessions, corporations will have to continue to outsource.

    I am a Canadian and I have grown accustomed to a lower dollar compared to its’ US counterpart. This is because we’ve had a lower dollar for over 30 years. This made exports of Canadian manufactured goods attractive. Our former government seemed seemed to purposely lower our dollar to cover the fact they didn’t want to challenge the labour unions. Well the cover is blown. As you are probably aware, our Canadian dollar has reached and surpassed parity with the US dollar. I am pointing this out, not to gloat (gloating is so un-Canadian 🙂 – but to show that it has really hurt our Canadian export market. Hey, we’ve had over 30 years to fix that problem, so who can we blame?

    Bottom line. I think there needs to be a dual focus. Control costs and focus of innovation – it keeps companies relevant.

  4. November 8, 2007 at 4:22 pm

    Life wouldn’t be the same without Ford or Chevy – I absolutely love my classic Mustang and I salivate for one of the new ones – but a dose of reality in both pricing and wages is overdue. As you suggest, live in the NOW, automakers!

    Having said that, I think labor unions are like strong medicine – they can sometimes cure what’s wrong if used correctly, but if overused, they just might be worse than the disease.

    Case in point: Writer’s strike in Hollywood. I guess I sort of get their point about digital distribution, but this would make more sense if we faced a shortage of good writing and they had a stronger competitive position (not to mention the fact that this hardly constitutes “labor”).

  5. 5 Britt
    November 8, 2007 at 5:14 pm

    @Caleb You’ve hit the right combination—controlling costs and focusing on innovation. And it’s been interesting to watch how the U.S. dollar has dropped. However, it does make American products more attractive because they cost less in countries like Canada, increasing demand (in theory).

    @Shannon Unions have a role to play in equalizing the roles between companies and their employees, but they’ve become entities unto themselves. In many ways, they’ve lost the independence that made them so valuable to members.


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