GM Will Eventually Revise Job Cuts Upward

The Economist
June 11-17, 2005
Pg 60,
General Motors "The Lost Years"

The Economist focuses attention on the news by President, Rick Wagoner, at the annual shareholders meeting of the 25k worker reduction in the workforce was well received by stock holders. However an industry analyst, Maryann Keller, "calculates that what Mr Wagoner outlined was little more than the workforce reductions GM already expected through normal attrition." Ms Keller says "There is nothing pro-active here. It does not bring their costs down to the point they'll match the competition."

The Harbour Report recently reported Toyota cut the number of hours to build an automobile by 5.5% (North American plants). GM made efficiency improvements as well, however, at 34 hours per vehicle, still relatively lackluster when compared with Toyota.

GM is also paying employees + benefits about $50.00/hour.

The reason for the 6 hours difference in turnaround time per vehicle? One reason could be the overall control the unions have on GM.

"The report also showed that, while the busiest of GM's plants ran at 139% of capacity with extra shifts last year, others operated at just 8%, because the union would not allow them to be closed. Toyot'as North American utilisation rate ran between 96 - 126%"

"More flexible union work rules would help, according to Ron Harbour, the report's author. But this is not just a union problem. It requires more flexible plant design and better, more flexible..."

Hold the press! One of the following transpired; 1) The Economist did not ask the right questions, 2) editted the interview improperly or 3) Ron Harbour is not familiar with Union/Manufacturer negotiations.

We contacted Brian Jones, a former UAW negotiator, who now lives in Indianapolis, IN. When asked the question, "Do unions have a determining factor in anyway to how the plants are designed or staffed?" Mr. Jones stated, the UAW would have agreed in advance with GM the number of workers to be employed by any new plant. Once GM determines what manufacturing is to be done at a given plant, the union would then negotiate with GM as to what processes will be automated and which processes will have more human intervention.

To the casual observer, having more humans employed is great. To anyone who has owned a business (especially a creation of a product), this is negative. If employing a labor saving machine will reduce overall costs, then the company MUST employ the machine. If the company does not, you can be sure the competitor will.

The jist.. the UAW determines which processes are to done by a human versus machine. This is how they can employ more human capital. This is not only less productive, but further jeopardizes GM's competitiveness. GM's market share has fallen 3% just in the last year (majoirty of this going to the Asian Three). The company can not continue to swallow this handicap.

MoreThanCorn agrees this is more then a Union problem GM is facing, however the depth of the Union factor is greatly underepresented.

GM will faulter further if it does not weaken the Union hand. These 25k jobs lost will probably be revised upwards before late 2008. GM needs to do what it can to survive in a competitive auto industry. The UAW may be the largest hurdle for GM.