Playing Hardball With The UAW

[Mish]

Playing Hardball With The UAW

by Mike (Mish) Shedlock

GM workers went on strike after negotiations broke down over job security. GM and the UAW had reached tentative agreement over health care issues but GM refused to budge on other issues. GM management seems determined to break the UAW in a game of all or nothing hardball. For now anyway the market seems to like it. Who can hold out longer?

[Jim Nickerson]

Re: Playing Hardball With The UAW

Welcome, Mish.

I've thought for a long time GM and Ford both need to go out of business--and that does not take into consideration all those who would not have jobs if the companies closed.

I just don't see how GM, F, or Chrysler will ever compete with Toyota as far as making quality products. I think people buy the American stuff because mostly they can get a car at the price of a monthly payment they can afford or because of some allegiance to America. The only cars I have bought this century have been because of reliabilty record and both were Toyota products, based on an auto insurance adjuster's (a friend of my wife's) experience with dealing with problems with cars.

None of this addresses the issue of your article. Who knows how it will work out? I think the workers will lose.

[Mish]

Re: Playing Hardball With The UAW

Jim I do not see any way the workers can win unless
1) they grant major concessions
2)GM starts building better cars

It takes both
Mish

[EJ]

Re: Playing Hardball With The UAW

Jim I do not see any way the workers can win unless
1) they grant major concessions
2)GM starts building better cars

It takes both
Mish

Full loaded hourly cost for GM vs Toyota is $74 vs $48. Both will have to compete with China over time where the fulling loaded hourly cost is now $3.50 an hour. China has been rapidly improving quality, enough so that they are making significant sales progress in Europe.

Say the China quality/cost gap with GM closes in five years at three times the current labor cost due to currency appreciation and higher labor skills requirements, and GM costs decline 50% due to currency depreciation and labor concessions. The cost differential will still be $37 vs $11, or more than three times.

The only way the US can win is for the US to do what it does best: invent the next generation of cars and build them better than anyone else. That will require major economic and political changes.

The post 1980 FIRE Economy industrial policy driven by financial, insurance, and real estate industries needs to be replaced by an industrial policy (tax subsidies and government/industry collaboration) to back the development of new automobiles (not to mention pebble bed nukes, and other energy related technologies). That involves repealing oil industry subsidies and the US military subsidy to maintain low cost Middle East oil. Oil prices need to be allowed to rise enough to create sustained market demand for the new cars, and that means major political changes in both the executive and legislative branches of government. While both political parties have to support oil and mil industrial to get elected, it has been convincingly argued that the current administration has been more supportive than any other in history so a change in 2008 may help.

[nksantabarbara]

Re: Playing Hardball With The UAW

How much of GM and Ford's problems reside in the fact that the Japanese have been manipulating their currency to sell at a discount and/or gain more profit to reinvest in their businesses? I bet it is responsible for at least 50% of their domination over the US automakers. I bought an Acura a year ago and it is the worst car I have ever owned in terms of reliability. Probably got a lemon, but I am hearing of many lemons coming from Japan lately. Of course my Toyota runs perfectly.

[bill]

Re: Playing Hardball With The UAW

The only way the US can win is for the US to do what it does best: invent the next generation of cars and build them better than anyone else. That will require major economic and political changes.

The post 1980 FIRE Economy industrial policy driven by financial, insurance, and real estate industries needs to be replaced by an industrial policy (tax subsidies and government/industry collaboration) to back the development of new automobiles (not to mention pebble bed nukes, and other energy related technologies). That involves repealing oil industry subsidies and the US military subsidy to maintain low cost Middle East oil. Oil prices need to be allowed to rise enough to create sustained market demand for the new cars, and that means major political changes in both the executive and legislative branches of government. While both political parties have to support oil and mil industrial to get elected, it has been convincingly argued that the current administration has been more supportive than any other in history so a change in 2008 may help.

When carbon reduction goes into effect, subsidized government support for energy alternatives will be a given. The Nuclear option will be one of the major energy alternatives supported by government policy and production feasibility. Producing political and environmental correct Nuclear energy will change industries and products. US car companies will follow this policy as they go threw major restructuring to meet new product ( http://www.greencarcongress.com/2007...nnounces_.html) demand. Many changes and new opportunities will be produced from the coming “Nuclear fire economy”.

http://www.bloomberg.com/apps/news?p...6ZE&refer=home

The Nuclear Regulatory Commission expects applications to build 32 new reactors from this year to 2009.

``There's an expectation that we will have greenhouse gas controls, which would increase the value of a nuclear plant,'' said Carl Pechman, a consultant with Power Economics in Santa Cruz, California.

[FRED]

Re: Playing Hardball With The UAW

See also: NRG to Submit First New Nuke Application (Sept. 25, 2007)

[GRG55]

Re: Playing Hardball With The UAW

Seems the FIRE economy caused a lot of industrial manufacturers to become financial companies in drag. I wonder if Toyota has a mortgage business like GM's Ditech.com to distract management from its core business?

[Hellespont]

Re: Playing Hardball With The UAW

I used to work for GM, Chrysler and the largest OEM parts manufacturer in the world out of Japan.

Japanese car makers are making and designing more cars than ever out of North America, having basically built new assembly plants in right to work states over the last 25 years. The problem in car quality did not reside with the US worker, but in the culture of their companies. Although GM still acts like the largest most important company in the world, with a management style out of WWII, it did take important steps starting in the early nineties to train its work force in the best of statistical problem solving in manufacturing.

Since then, their methods and cars have improved immensely and compare very well to their foreign counterparts. What we couldn't figure out while we worked there is the incredibly bad car decisions that were made, the killing of their electric car programs, no really good diesel alternatives... I can't tell you the incredible frustration felt across the rank and file of the company.

The Big three held on to big truck programs for too long and did not allow innovation in their ranks. Even now, I drive by the Chrysler dealership and see all their new car and truck lines featuring 4 liter engines up to the Hemi. With $80+ a barrel today, I can't imagine what they were thinking 12-18 months ago when they were briefed about Peak Oil and starting planning these launches.

The only real value left in the big three that cannot be reproduced in China is their dealership network. In the future, look the big 3 (or Big 1) spinning off into pure sales networks as we process product made overseas. They want to completely outsource their assembly plants to even less qualified suppliers.

Chris, Montreal

[necron99]

Re: Playing Hardball With The UAW

I began preparing a long comment under today's article about the United Auto Workers, because EJ and others brought up the issue of nuclear power as a tangent. I thought it might be better to move that discussion to another thread. So it's now posted under "Education and Resources", because there was already a post about Peak Oil there, and I have lots of links.
http://www.itulip.com/forums/showthread.php?p=16626

Please comment about nuclear power over on the other thread.

I think this is very relevant to the iTulip investment community, because a large program of nuclear power construction will require a staggering amount of capitalization, in other words, investment. People could make a lot of money investing on the ground floor -- or, people could lose truly Titanic amounts of money, destroying their retirements, if the big new nuclear construction program turns out to be a market flop. A very typical iTulip conundrum for "contrary investors".

Here's my take, in brief...

I am in total agreement with the apparent consensus on cars:

The only way the US can win is for the US to do what it does best: invent the next generation of cars and build them better than anyone else. That will require major economic and political changes.

However when people start discussing nuclear power, I get a bit frightened. Since EJ apparently places confidence in pebble-bed reactors as part of a solution to energy independence and environmental problems... what does the iTulip community think about the cost and insurance problems associated with nuclear power?

It's never mentioned, but I assure you, from growing up in California, the original cause of the infamous California Power Crisis of 2000-2001 was our two nuclear reactors.
...[snip]... But California's nuclear energy costs are not an isolated incident. In 1986, the U.S. Department of Energy compared nuclear construction cost estimates to the actual final costs for 75 reactors. The original cost estimate was $45 Billion. The actual cost was $145 Billion!

Nuclear-industry P.R. guys claim that they have a handle on this problem now, and that cost compliance is much closer to the rest of the construction industry. But on the other hand, they've barely built any new plants in the last 20 years. I am deeply worried that if the United States embarks on a crash-course nuclear construction program in order to fix the greenhouse-gas problem, it will bankrupt us as a nation. As with any governmentally-favored project, we will end up getting profiteering and cut corners at the same time as overbilling, like the military getting billed for $15,000 hammers and $2,500 toilet seats. (Plenty of examples of those during the Iraq War.) Remember that construction commodities are shooting up right now, too, due to the weak dollar and China's expansion.

...[snip]... I think the age of centralized power generation is drawing to a close, just like the age of centralized economies (socialism and big-government capitalism) is drawing to a close -- and that bodes ill for nuclear power, since nobody but a big government can afford to build a nuclear power plant.

I am also curious about the iTulip community's take on the problem of insurance. It is well-established that liability costs for a nuclear accident are far beyond the ability of the free market to provide; to this day, nuclear plants can only be built with gargantuan insurance subsidies by the Federal government.

The Price-Anderson Act, [link leads to a PDF file], re-authorized in 2005 for another twenty years, basically states that each nuclear power provider company need only come up with $300 Million of private insurance, plus $98.5 million per plant -- in other words, in the case of a major accident at a single nuclear plant, private insurers are only on the hook for less than $400 Million in public damages (health claims, reparation costs, environmental cleanup costs, etc.) This has been estimated at less than 2% of the actual cost of a major accident.

The Federal Government -- that is to say, your tax dollars and mine -- are required to pay the rest of the damages. Ummm, that would be, 98% of the damages.

...[snip]...
I think two has been a charm for Iraq: the U.S. public is only now souring on the Iraq War, because we've done it twice and the results keep appearing to get worse. Similarly, two might be a charm for nuclear power: if we have a second major nuclear accident (terrorist or otherwise), after Three Mile Island -- a new accident which the government and the media can't downplay -- the public may very well sour completely on the idea of nuclear power, even in the face of Greenhouse Gas problems.

Hence, I feel this is an important discussion for the iTulip community -- because if the huge nuclear expansion proposed by the Bush/Cheney Administration, favored by nuclear power advocates goes forth, investors in nuclear power might make huge profits, or might be terribly burned. (Let's hope, not literally.) Even people who don't actively choose to invest in nuclear power, might be deeply involved, since these enormous capitalization pools for nuclear plant construction will likely be very attractive to mutual funds and so forth.

Even more links over on the other thread.

[GRG55]

Re: Playing Hardball With The UAW

... But California's nuclear energy costs are not an isolated incident. In 1986, the U.S. Department of Energy compared nuclear construction cost estimates to the actual final costs for 75 reactors. The original cost estimate was $45 Billion. The actual cost was $145 Billion!

Nuclear-industry P.R. guys claim that they have a handle on this problem now, and that cost compliance is much closer to the rest of the construction industry. But on the other hand, they've barely built any new plants in the last 20 years...

I gather that French nuclear engineering company Areva is having some cost and project timing issues with the reactor project currently under construction in Finland.

[jimmygu3]

Re: Playing Hardball With The UAW

The only real value left in the big three that cannot be reproduced in China is their dealership network. In the future, look the big 3 (or Big 1) spinning off into pure sales networks as we process product made overseas. They want to completely outsource their assembly plants to even less qualified suppliers.

Chris, Montreal

Great point, Chris. And welcome to iTulip!

[necron99]

Re: Playing Hardball With The UAW

Ooops, in my ignorance as a Junior Member, I did not dig deep enough into the "Economics" topic to find that there is a separate heading for "Energy" issues. My bad, very sorry. Rather than repeat my lengthy post about nuclear power, which I placed under "Education and Resources," I'm just going to put a link from Energy to my post.

I swear I looked around the forum in advance to see if anyone had posted anything similar already, but obviously I was not thorough enough.

(Any moderator has my permission to move or otherwise edit/change that nuclear power post, of course.)

To comment on nuclear power, please see:
http://www.itulip.com/forums/showthread.php?p=16626

Thanks, --necron99

[c1ue]

Re: Playing Hardball With The UAW

The only way the US can win is for the US to do what it does best: invent the next generation of cars and build them better than anyone else. That will require major economic and political changes.

To further expand on the previous comment by NKSB:

The market share losses by GM/Ford to the Japanese in North America were not due to invention.

From my point of view - the Japanese companies have been copying the features (hopefully licensing) invented by the German companies, reducing the cost, and deploying them against American cars.

The key is step 2: without BOTH the yen manipulation AND the national health care system in Japan, it is entirely reasonable that GM/Ford cannot compete.

My Japanese friends always argue that Japan has learned all there is to know from Germany, but my Audis argue differently as compared with the top-end Lexus - and Mercedes is the leader in the invention category in Germany.

It is hypothetically possible for the US to out-invent the Germans, but I think that this is not the only way to skin the cat.

[vlj]

Re: Playing Hardball With The UAW

...The only way the US can win is for the US to do what it does best: invent the next generation of cars and build them better than anyone else. That will require major economic and political changes.

Not to mention significant changes in both government regulation and consumer expectations. An example is:

http://www.autobloggreen.com/2007/09...-confirmed-at/

where required safety compliance added additional design constraints and much more weight to the vehicle. Admittedly, this is not your everyday consumer grocery-getter but would the consumer buy an electric or alternative fuel vehicle that has a top speed of 45 mph and a range of 45 miles?

Today's big blocker for newer technologies is the expectation of a general purpose vehicle that fits the bill driving across town or across the country. To really yield efficiencies, that will have to change where people have a "town car" and (maybe) a "travel car." This is an area ripe for new thinking and innovation.

Me? I've been doing the Green Alternative Thing for over 40 years ... I ride a motorcycle. 0-60 mph in 4 seconds and 70 mpg to boot is a wonderful thing.

VLJ