Monday, February 16, 2009

Guest Blog: A View from Detroit on the Eve of the Unveiling of the Big-3's Restructuring Plans

Editor's Note: The automakers will be handing over their restructuring plans this week, at the same time the Obama Administration has just made it clear there will be no "Car Czar." Instead, several senior administration officials will oversee the restructuring of the Big Three of the American car manufacturing industry.

This seems like a good time for a Guest Blog from someone who knows the American auto industry -- the good the bad and the ugly. Read on for an Insider's View of Detroit from hard-working friend, Grumpy Bear. I think you'll find it illuminating. And, in the interests of full disclosure, I drive a cute little 1999 Ford ZX2 Escort. Yep, it's 10 years old and going strong -- it's a great car, and never broke down until a few months ago, at the ripe out age of nine -- which it was polite enough to do in my own driveway. When I buy again, I'll be looking at Fords.

It has been with more than casual interest that I have tracked the process which Detroit’s Big-3 automakers have followed in their attempts to secure the financial means to a more stable future. Rest assured, if you were an engineer located in Detroit who worked for an organization whose balance sheet is roughly 70 percent dependent on the success or failure of these organizations, you would too. While it may seem preordained that my chosen vocation and geography would lend itself towards a bias in favor of Detroit I tend to think that I see a picture bigger than most, and most assuredly from a different perspective. The whole process of obtaining the bridge-loans brought forth a number of interesting points that, taken as a whole, seem to paint a picture within this country that from my vantage point is not very pretty.

The hearings themselves did seem a little bit like grand theater, with a DC twist. You had good-guy politicians (is that possible?) jockeying for the spotlight and in this era of "sound-bite" journalism, attempting to come across as more outraged than the next guy that anyone would dare to ask for help from the government. The scene also featured the bad guys –- the CEO’s of the Big-3. It almost appeared that they were prejudged by everyone outside of the Midwest as the source of all that is wrong with this country and emblematic of corporate America gone bad (private jets anyone?). So what did we learn from these hearings. In my case a great deal, and like many issues what you took away from these hearings sure seems to be a combination of your perspective mixed with any preconceptions that are brought to the table.

One big lesson I have taken from this entire affair is that many folks view the concept of good pay and manufacturing as an unworkable, almost undesirable, combination. I got the impression that the politicians sitting up on that bench during the hearings think you should expect low pay when you work in manufacturing. It was as if they felt that if you worked in manufacturing you must not be qualified for anything better. My best guess is that they think the preferred occupations folks in this country should aspire to are lawyers, bankers, and economists, and based on the amount of questioning the banking and financial industry received from congress prior to checks being sent in their direction, my guess may be closer than we all think.

But what is it about manufacturing in general, and it would seem the manufacturing of cars in particular (or at least American cars), that seems to bring this out in folks? Having been involved in the assembly of products for my entire professional career (I’m 44) I seem to have not gotten the word that having the skill, desire and ability to think on your feet, solve problems on a continual basis, and end the day knowing you had produced something tangible for your efforts wasn’t honorable and worthy of compensation. But I digress…

The automotive sector in this country has a long and colorful history to say the least. From innovators and inventors (think Henry ford and Thomas Edison) to the flamboyant and charismatic (think Lee Iacocca and John DeLorean) there is no shortage of characters or scoundrels. Also, the business has never been for the faint of heart what -- with the inherent long-lead times to bring product to market mixed in with the fickle nature of the buying public and overlaying government polices. For a more up close and personal feel, talk with anyone who has dealt with any of the Big-3’s purchasing agents (I don’t know how Original Equipment Manufacturer's [OEM] buyers sleep at night -- but that's another blog).

Of course, intertwined in this entire hodge-podge are the folks that actually do the heavy lifting and produce the cars that the majority of Americans still drive. Since about 1935, these folks have been represented by a union we now know as the UAW, or United Auto Workers. To say that it has been an historically love/hate relationship between the automakers and the UAW would be putting it mildly, but other industries (steel and rubber come to mind) have had their own rocky roads as the American labor movement progressed. And like these other industries, the Big-3 would often buy labor peace with lucrative agreements that made these union workers the envy of the world. Some would argue that they helped to create and then expand the middle-class. This model of ever expanding benefits worked as long as folks bought cars. However, as the only constant in this world appears to be change, even this model eventually failed.

So the world changed, and like many companies, the Big-3 tried to change with it. It did not help that their management teams were more than a little slow on the uptake. An oil embargo in the 70’s drove customers initially to smaller foreign cars; the same small foreign cars that had been languishing on dealer lots six months prior. This is a good example of the buying public voting with their wallet and asking an organization to move faster than they were capable. It was not as if the Big-3 did not have smaller cars to choose from during the embargo (think the Chevy Vega or the, in my opinion, exonerated Ford Pinto). But as can be read about in great depth from other sources, this period started a multi-year game of catch-up for the Big-3, as market share slowly fell and build quality and product design came into question. Depending on whom you ask, the Big-3 may still be playing catch-up.

So did this sudden shift towards smaller cars -- combined with other corporate faux pas, poor build quality, and a growing perception that the UAW and corporate America were out of touch -- lead to a backlash against the Big-3? Or did we have a generational event occur where folks would buy anything as long as it was not the same choice as their parents'? Perhaps the 1980’s brought on buying habits that changed as folks sought out new and different ideas, and discovered that your personal wealth might grow at a faster rate if you did not work with your hands -- other than to shuffle paper. Or perhaps since a car often represents the second-largest consumer purchase most folks make, they wanted the most perceived value for their money.

But the world kept changing and the UAW and Big-3 slowly changed with it. One must give credit where credit is due: the UAW and Big-3 have worked together, improved product design and productivity, avoided a major strike for many years (longer than some teachers' unions), and recently hammered out contracts that nearly put them on par with other non-unionized auto workers in this country (I have to wonder, though -- is it a crime to earn just a bit more than the other guy?). Today, the Big3's build quality and productivity is on par, if not better, than many overseas companies. In short the Big-3 are really back, and have gone through very painful changes in the process. But, of course, it is never enough -- and none of their detractors want to believe it or give them credit for it.

This brings us back to the hearings in DC and the almost venomous thoughts many folks seemed to have for the automotive industry. I’m not questioning folks' patriotism, or the fact that they might actually prefer to "Buy American" products when it's possible. It just seems that folks' do not want to buy American cars, come hell or high water -- to the point that people would refuse a family member’s offer to use a domestic discount plan in favor of paying sticker (or higher) for a foreign car. Some actually wished the entire industry would just go away.

From my perspective I find this whole turn of events rather disheartening. Of course, I don't have the answer. But knowing folks' perceptions about those of us in the automotive industry, even if I did have the answer I doubt it would be believed. I’m even willing to bet that folks believe and support the nuclear power industry more than the Big-3 auto and its executives -- and after Three Mile Island that is saying something.

Perhaps I do feel a bit of nostalgia for the home team; my family growing up drove American cars for as long as I can remember, and I eventually spent six years working for an OEM before I switched to working in support of them. I will be the first to say that the Big-3 have made mistakes and are more than a little difficult to work with. However I thought Americans traditionally liked to root for an underdog. Unfortunately in the case of the American auto industry, that does not appear to be the case -- and that makes me more than a little sad.

This blog has been nominated for the Bloggers' Choice '09 awards. Vote for The Zaftig Redhead!

Copyright 2008. The Zaftig Redhead. All Rights Reserved.

No comments: