-- Harley Shaiken, Ph.D. explained
the importance of labor during the FACS conference at the
Detroit Free Press building. He said there are three things
hurting the U.S. Auto Industry -- competitiveness, conflict
said that Detroit's Big Three are experiencing tough times.
However, the UAW is still a powerful union. UAW will be vital
to the recovery process. Very important negotiations are coming
up later this year. Many companies are undergoing restructuring
right now, according to Shaiken.
industry is in tough shape. There are deep differences between
parties. China is a defining issue for years to come,"
Harley Shaiken said. "The Big Three are tied.
A lot of employment here."
pointed out that unemployment is very high in Michigan but
lower in the deep South. While Michigan's unemployment rate
is 6.9%, it is only 3% in places like Alabama. The city of
Flint, Mich. has an unemployment rate of 8%.
industry expert mentioned that Hyundai pays less than the
Big Three Detroit automakers. He said that it could invite
are some of the major problems with U.S. automakers? Shaiken
says it is health care, overtime costs, and vacation pay.
The UAW understands how severe the crisis is. He noted that
the UAW is one of the most socially active unions out there
will end for the Big three in September. There will be national
talks between the union and Ford, GM and Chrysler. On the
table will be big transformations. The Big Three will have
to do some more cutting this time around.
Mullaly, CEO of Ford Motor Company was recently quoted "The
only thing I care about was the competitiveness of Ford."
Chrysler announced they would build small cars in China and
sell them in the U.S. Honda said they would build the Fit
compact car in the U.S.
said that it will be hard to predict what will happen at the
bargaining conference later this year. "Nobody
wants a strike this year. Both sides are looking to create
more competitive companies. Labor costs are the problem."
expert believes some of the problems are direct results of
bad management decisions. He said management of the Big Three
made the wrong moves in terms of targeting customers and providing
incentives. In addition, oil countries are not stable.
noted the average GM inventive for their vehicles was $2,700.
Meanwhile, the average inventive for a Toyota vehicle is only
$600. This difference allows Toyota to make more money on
the sale of an automobile. GM needs to find a way to lower
their incentives but still keep selling cars.
costs also hurt U.S. automakers. Those are fees that the automakers
pay for health care for retirees and active workers plus pensions
for retirees. The Big Three pay $1,500 per vehicle for legacy
costs. On the other hand, Japanese automakers only have to
pay $400 to cover these legacy costs.
Shaiken said, "U.S.
automakers support thousands of retirees. It puts a burden
on the Detroit three."
The third reason
why the Big Three is in bad shape is due to the economy. When
an analyst gives GM, Ford or Chrysler a junk bond rating,
their stock price usually goes down. This hurts the company
overall. The automakers have been taking loans out at 6% and
paying them back at 7%. When you look at the millions of dollars
they are borrowing, it has a huge effect on them. GM and Ford
have been moving active employees to retirement through buyouts.
According to Shaiken, labor costs are not the only problem.
introduced in 1984 as a transitional spot for employees between
jobs. They were meant to be a bridge. JobsBanks are expected
to go down to zero in the next few years.
China was the final
part of the discussion. Shaiken said there is a "highly
integrated economy" in
China. In 2005, China exported $10 trillion of goods. It is
one of the top three traders globally, behind Germany and
1950, China had high productive and quality with low wages.
That statement is no longer true in 2007. The country has
redefined it's character within middle class jobs. Wages are
going up slightly within China.
expert believes that not much help will be coming from Washington
D.C. The Big Three wants to be profitable but they're not
receiving any political support. The only help that might
come out of D.C. is some health care relief. Shaiken said,
"automakers need a political presence."
is a professor of education at the University of California
at Berkeley. He also heads the Center for Latin American Studies.
He is considered one of the country's best experts on automotive
labor, management and negotiations.
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