UAW, Biting the Hand Which Feeds It

Forbes Magazine
July 4th Issue
Outfront
Autos
"Jobs Hunt"

The article about GM, their president and the company's future; "Wagoner's pledge to cut jobs is designed to get to a larger goal of his: to operate at full capacity. "

In 2004 GM employed 136K workers and needed just 86K to do the work. The company is currently suffering from very similar overly staffed factories and too much capacity.

The article gives more stats "...Assuming by 2008 GM is fortunate enough to keep its share of the market at 25% (this may be optimistic due to GM losing share every year) and that productivity gains shrink its Canadian and Mexican workforces by 10%, the company will have roughly 109K workers -doing what 78K could do."

This is the 5th article I have read on this topic of the GM predicament. GM is at a cross roads and no analyst or publication has yet to have the confidence and honesty with their readership to put the blame where it belongs. The UAW is honestly the primary reason why GM has too many workers. The UAW is causing GM to be in a environment with the inability to eb and flow with the market and then to compete against other automakers, namely Japanese autos.

Come on Forbes.. Come on The Wall Street Journal, Arizona Republic... you want to publish something truthful, yet controversial to sell more copies? Front page of your next issue, write an article with the title "UAW Cutting the Hand Which Feeds It."

New NAACP Chief, Promotes Entrepreneurship

The NAACP has chosen their new chief. Bruce Gordon, a retired Verizon executive is the spokesman of the organizations for the future. Go to Booker Rising for an article. But is Mr Gordon the leader of the organization's future?

It appears the NAACP has recongized the capitalism in this country is a tool for change for everyone. I believe there may have been a dialogue among the NAACP's 64 member board of directors as to what is going to serve the best interests of Black America more; 1) get more votes for more black political figures, or 2) the rising wealth of individual black Americans?
Whether this conversation actually transpired, or not, MoreThanCorn sees the a bright future for black Americans in leaders like Mr. Gordon. There is no excuse for not succeeding in our country. There are the lowest barriers to entry in the US compared to all other countries. The ownership society will benefit Black America, then benefiting us all.

Success for Black America is dependent on education as Booker Rising highlights in the Chicago Tribute Interview of Barrack Obama, Democratic US Senator from Illinois.

"Obama: On Race, The Senate, The Presidency"
Q--What's the most important racial issue facing the country now?
A--Education. There is no denying that while individual African-American students are doing wonderful and achieving at the highest levels, in the aggregate African-American students are still behind at every level. It's a legacy of slavery and Jim Crow and poverty. But it's not sufficient for us to excuse it because the economy is unforgiving. If we don't have African-American youth who are able to graduate from high school, attend college, get postgraduate education and compete in jobs that require math and science and high levels of literacy, then we can eradicate all the racism in the country and we're still going to be at the bottom of the socioeconomic index.

MoreThanCorn wants the same end result as Senator Obama and Bruce Gordon and this shows both our passions for economic success of Black America. Where MoreThanCorn and the Senator's views views differ is in the path of constructing the environment for black success. How to promote more education for black Americans. It is important the federal and state governments do not attempt to make a change.

Education is our bedrock, however not all will be successful at a university. There are numerous success stories of individuals who did not go to college or began high education and never completed. The path for everyone is not high school - college - graduate school as Senator Obama seems to imply. For a few the previous path is correct. These may be the "Talented Tenth," the highest educated, as black activist, WEB DuBois, wrote in the 1800's. But these 10%'ers are just some of the core leadership. For the masses of White, Black and Hispanic America, they will also need leadership and education of a different style. Further educational gains at the university level for some, community colleges, on the job training for others, trade schools.

I do not know whether it is more difficult to be successful as a non-degreed individual? To earn a job working for a standing company maybe. To start your own business, while it cannot hinder you, a degree is just a bonus. A diploma is a certificate of completion for a perscribed set of courses to learn, books to read and papers to write. Self education outside of a classroom, a "student of life" or maybe a new "student of entrepreneurship" is what seperates the company presidents from all other employees at those same firms.

It is all so much more complicated then what can fit in any research paper or dissertation for economics. The use of words like "socio-economic", "economic justice" Some of the smartest folks today may be researchers, the A and B students may be teachers, the B and C students may be the company founders. All will have their chance for success. Fundamentally, hard work and a risk are what breed individual success and grow economies.

Amber Alert's Future, The Multiplying Effect of Communication

There has been a pattern recently in the national media. Typically patterns of mass media have been not for the better. My examples would be the over indulging coverage of Michael Jackson and his molestation trial, the runaway bride, Scott Peterson and even Terri Schiavo. The media certainly did not continue to cover these topics from the abundance of new material everyday. Far from it. I remember for both the Peterson and Jackson trials, there would be no new information for days, but CNN, Fox, NBC, CBS and others would still have back to back to back shows with these trials as topics of discussion. Bad trend.

Good trend; The attention the media has taken to the missing children stories. On my drive/commute to work each day in Phoenix, AZ there are the over head signs on the interstate to post traffic problems ahead, pollution reminders and Amber Alerts. Since September 2002 there have been 18 Amber Alerts in Arizona. The success rate for finding them? 100%. It does not take an actuary to figure out this system works.

The media is in an amazing position to help. Fox News will often have Amber Alert segments when a child is missing. Obviously the media is not able to cover every missing child, but even if they are covering 1 missing child at a time in their news, I think they are doing a big part.

This coverage serves all interests;
The Child - If Fox News or CNN have 5 million viewers at any given time during the day or night, and an Amber Alert is flashed on the screen with a picture and short clip on the dissappearance of a child, this in essence recruits 5 million sets of eyes to be on the lookout.

The Viewer - I would think everyone who cares enough to turn on the news would be interested in most any missing child story. The satisfaction of seeing a missing child found is rewarding to the viewer even though they do not know the child, live in a different state with no personal connection to the child or family.

The Media - They are driven by ratings because ratings bring revenue. The media knows "The Viewer"may be more interested in missing child stories as any story. The media wants to capitalize on this, therefore they show the Amber Alerts. Here we have an example of how the dollar will produce an immeasureable service to the community.

This good story does not stop there. The Amber Alert system is still in it's infancy. An article which paints a good picture of where this is heading is; http://www.fcw.com/article84565-11-14-04-Print. The article dated 11/2004. Sign up for the Amber Alert through the link below. You can sign up right now to receive a text message on your cell phone, a page on your pager or an email. These mediums are turned into Amber Alert signs instantly. If there are 2 million cell phones in greater Phoenix, there would be 2 million more eyes and ears recruited. The benefit here, is this number of people are contained in a geographic arena surrounding the where the kidnapping originated.

Per the article, " According to the Amber Alert portal, time is the enemy when it comes to finding abducted children. Seventy-four percent of kidnappers who kill abducted children do so within three hours of taking them. Message system technology combats the time barrier with real-time information."

Go to AmberAlert911 right now and volunteer to be jacked into the child finding network! We could be a "first recoverer." A missing child, the media, and the public... a symbiotic relationship.

Be sure to hit 'reply' at the bottom of this post to add your name to the list of those who already have signed up. The goal is to inspire 100 more sets of eyes and ears.

What do Abercrombie and Toyota have in common?

The Wall Street Journal
Marketplace
Friday, June 17, 2005

Two articles with different subject matters also share one common theme. Increased customer service directly influences the happiness of customers and an increased number.

"Dealers Dilemma" , by Norihiko Shirouzu &
"Abercrombie & Fitch Tries to Be Less Haughty, More Nice", by Stephanie Kang

"Dealers Dilemma" with a cartoon by Gary Clement depicts a large GMC and Pontiac dealership next to a Nissan storefront. Mr. Clement draws not a single customer in the expansive GMC showroom, the sole salesman asleep and spiderwebs growing on the 'G' of GMC. The Nissan showroom is much smaller but is full of engaged customers.

The article discusses the overcapacity for floor space at the dealerships selling GM product lines and the undercapacity for Asian autos. In short, GM sales are down but the showrooms are built to sustain large inventories, while the Nissan, Toyota, and Honda showrooms are too small for the demand.

Toyota sees their sales climbing very fast and this is effecting not only the sales (they could be selling more units) but it is also effecting all the activities post sale such as service, repairs and body shop. Customers are even telling Toyota there are not enough parking spaces at the dealerships. Toyota is doing something about these issues. They are pushing the dealerships for expansion, "...hiring of more sales and service workers, boosting the number of service bays, increasing spare parts storage, and building larger showrooms and parking and display areas." Toyota is concerned about customer service, so they are adding bodies. If they do this successfully, there products are already popular, they just need to get buyers into them. Sales will inevitably increase. Toyota is focusing on customer service to increase sales. GM is focusing on how to keep from losing more sales to Toyota. Asian automakers are in good shape for the near future.

The Abercrombie article also is discussing a customer service issue. Abercrombie attempted to go too lean with staffing in the last couple seasons and customers advised coporate, the sales staff did not seem to care. Abercrombie started turning sales around (per article;19% increase in sales, and 38% rise in net income for fiscal quarter ended April 30) after a number of changes. One was the addition of Bob Singer as president and COO.

"Mr Singer turned his focus not on the merchandise mix but on the store experience, starting with customer service. When he arrived at Abercrombie, some customer-service fundamentals were lacking: There simjply weren't enough people working in the stores, for example, he says. "

Now there are greeters at the front of each Abercrombie store...and posted in every section of the sales floor...Mr Singer has brought ina vice president of training for stores. Increased training has reduced 'shrink' or the amount of lost or stolen merchandise."

Both Toyota and Abercrombie realize they can only do more and sell more with the same resources for so long. The importance for any customer service driven business (name one which is not) is to keep the level of service exceptional and smiling customers. Toyota and Abercrombie executives know happy customers will return.

So Abercrombie took the risk, gambled with investing profits into more staff and training and their payoff was green well above their investment. Toyota is now beginning this cycle. If they make it happen, the sales and profits will increase. Market share will grow.

For any business and any Adam Smith fan, leaner and is usually better. However when the curve for lean meets up with diminishing returns, it may be time to add employees.

It really is all about profit. However to get the profits, the customers must return. They will only return with a positive past experience. It looks like a built-in check and balance in the free market.

Students for Saving Social Security

Via a post read from Absentee, there is a grass roots organization of college students for Social Security reform. They are Students for Saving Social Security and are pro-personal accounts. Be sure to go to the "Do The Math" section (bottom right corner of homepage). It is brought to you by The Heritage Foundation; Input a few pieces of information and compare the monthly benefits received at your retirement through the current social security system vs. Bush plan of personal accounts.

Take note; this calculator assumes a 'worst case' scenario where you make the same income from today through retirement. I think many of us competitive professionals would hope to have a promotion or two in the next 30-40 years. This would only increase our monthly benefit.

As MoreThanCorn sees it, personal accounts are a no brainer.

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.

Tabor Laws; Return of Unused Tax Revenue

Wall Street Journal
Friday June 17, 2005
Opinion
Review & Outlook (A14)
"America's Next Tax Revolt"

Per the article, there are "...20 states... working on a Tax Payer Bill of Rights (Tabor) to cap runaway spending and tax increases."

Tabor laws serve a number of purposes.
1) Requires state government to have a budget cap
2) Requires states to refund tax revenues collected above the budget

In paragraph 4..."The National model here is the Tabor law passed in Colorado 12 years ago. "...In six of the last nine years Coloradans have received tax refunds in the mail exceeding $3.2 billion, or about $3,000 per family over the period."

Paragraph 5 has the most telling fact...."real per capita state spending in Denver has grown more slowly....IOt's probably no coincidence that Colorado has also seen faster growth in personal incomes and population thien any other state over this time period."

MoreThanCorn believes state governments should be guided financially just as individuals, families and companies handle their own finances. What the State brings in, is what the State has to spend. Paragraph 9 & 10 read like this;

"Replubican Governor Bill Ownes who is pro-Tabor, has called for a "five year Tabor time out. Mr Owens complains that during the recent two year downtourn in Colorado actual revenue collections fell. The solution is to allow somewhat larger spending growth in bad economic times. Let the states build up budget rainy day funds during the boom years and then during recessions let them spend down these reserves... [this would] smooth out revenue cycles so state governmentds don't go through boom and bust as economic growth rises or falls. Many states nearly drowned..in the last mild recession because they had gone on a spendiong binge during the tech driven go-go years of the late 1990's."

Governor Owens and the author of the Journal article are trying to fix bad behavior with other bad behavior. It appears they are admitting the mistakes of state governments in the 90's for over spending. Governor Owens wants to end Tabor laws for "five years" (it would be permanent no doubt) and the author makes his own mistake by suggesting the government could keep the excess revenue.

Budgets are necessary to keep. If a single, working mother does not budget her finances, either the rent, electric bill or groceries are sacrificed. If a company does not budget, it's days will be numbered. In boom years everyone from the single mom, to the state government should be working off their current budget. If in mid year a recession begins, the mother may need to redraw her budget, so should the state.

Yes, reductions in social services or other programs are painful. So too is it for the mother and the family. The mother may already be riding the bus to work and have a subscription to the Sunday paper just for the coupons. Finding further reductions in monthly costs is difficult, however I know many families who always seem to find another way to shed cost. Any money the mother does not spend, in good times or hard times, could be saved if desired.

This last point is where the financial paths of the family and private enterprise begin to diverge from the public coffer. All money left over from state taxes each year should be refunded to the taxpayer.

The Heritage Foundation addressed the use of excess tax revenues under Tabor laws; "Budget surpluses could be split automatically between tax rebates and debt reduction." This is appropriate if the state government has debt. However once the debt has been paid down, the state should be held responsible to keep spending in line with the budget. Moving forward, the entire surplus could be refunded to the taxpayer.

Who earned the money? The taxpayer worked to earn their pay. Did the government work hard to earn the tax revenue? It was EFT'd from your paycheck before it ever was deposited. Who knows better how to spend your money? You or the state legislators.

The $3 Billion the Coloradons received back was their hard earned money. They deserve to receive it back. Their own use of the money, whether spending it back into the economy or investing (which is also injected into the economy), will promote further growth and job creation. An increase in per capita wealth will follow causing people to spend/invest more, indirectly spurring the most blessed and wealthiest of our fellow American bourgeoisie to increase their current manufactures or take risks with their extra money into new enterprise. All the above increase tax revenue for the state.

Had the $3 Billion been kept in a State bank account it would either a) spent on other projects or b) sitting in low interest accounts and not really helping the economy.

MoreThanCorn argues the $3 Billion would have increased the economy by not just the original amount, but the ripplies would have a multiplying impact. It can be argued a recession would not have come into existence at all, or at the very least the recession would be brought to a more hasty end.

It is critical the taxpayer understands this is their wealth being taxed away. This money is in addition to your yearly state and federal income tax returns. Those states without Tabor laws are states where the public are complacent with tax codes, ignorant of the economic choices or have been intentionally misinformed.

WORKING MEN OF ALL STATES,

TABOR!

Oil For Food - Annan May Have Known About Cotecna

Article by FoxNews today suggests UN Secretary General, Kofi Annan, may have known about future of Cotecna contract under Oil For Food Program. Cotecna is a company who employed the SG's son, Kojo Annon. The SG has denied any knowledge of the contract talks between the UN and Cotecna. The FoxNews article links an email from a Cotecna rep, Michael Wilson (a friend of Kofi) to other Cotecna associates following a supposed meeting with the SG. Read the article; http://www.foxnews.com/story/0,2933,159532,00.html

Until the above is proven true, MoreThanCorn is still a supporter of Kofi Annan. MoreThanCorn does not support the UN, however with the organization as it exists, summations can be made about their day to day decisions and activities. These same opinions can be drawn about those in positions of authority at the UN. As of today it is the opinion of the author the SG is responsible for what happens on his watch. However like any leader of an organization of thousands, it is not possible for the leader to head off all issues prior to their arrival. When mistakes or improprieties are found, it is the SG, CEO, or President's job to replace those committing the wrongs. Taking Mr. Annan out of his post due to the wrong doings of others below him is not necessarily the best answer to the problem. Terminating those who gravely erred is appropriate. The more quickly the problems are found and the wrong doers flushed from the UN, the more quickly the organization can get back to focusing the resources on constructive endeavors.

Big Three Continue Competitive Faulter

As an addition to the 05/25/05 post about the challenges of The Big Three with competitiveness, Reuters published an article today.
http://www.foxnews.com/story/0,2933,158444,00.html

The article discusses plant effeciency in terms of total hours it takes to produce the average vehicle (from pieces to driving the vehicle to the train for shipment);

Hours Profit/Vehicle
1) Toyota 27.90 $1488.00
2) Nissan 29.43 $1603.00
3) Honda 32.02 (not listed)

This gave Toyota a competitive advantage; "Ron Harbour, Harbour Consulting's president, told a news conference that Toyota's productivity edge gave it a cost advantage of $350 to $500 per vehicle over U.S. manufacturers."

"While Harbour said Detroit's automakers were "very competitive from a manufacturing standpoint," he noted that they face a litany of revenue and product problems, and massive costs for pension and health care that equate to about $1,600 per vehicle."

Hours Profit/Vehicle
GM 34.33 ($2311.00)
Chrysler 36.98 $186.00
Ford (not listed) $620.00

Not a typo, GM lost an average of 2300+ dollars on every vehicle they sold.

One point missed in the article are other factors in Japanese manufacturers dominance and growing market share. A Washington Post article found by heydudewhoa gives one prominent answer; Union control of prices from pensions, health care and above market wages for UAW members.

The argument has been made about the lost wages of the UAW employees. "How are they going to find new work? How are they going to feed their kids? What do they do if their jobs are taken from them?" This is answered not by philosophy (though MoreThanCorn would be up for the debate), but by an example of a towns tough transition in the Post article.

I have included quotes from heydudewhoa and the Washington Post article;

(heydudewhoa) ...the article indicates that the rise of Asian auto manufacturers comes at the same time that textile plants are meeting their demise. In effect a lower-paying industry is being substituted by a high-paying industry:

(Washington Post) "The auto companies and suppliers account for up to 40,000 workers statewide, have invested billions of dollars and have caused the state to revamp its education and worker training programs, Deravi said. Rural Crenshaw County, for example, lost five textile mills in recent years to cheap foreign competition. Those jobs have been more than recouped, and at higher wages, by companies supplying the nearby Hyundai plant, said Doni Ingram, the county's economic development director."

All workers, including MoreThanCorn, must be prepared for our skills becoming outdated and useless. Education, career changes are the norm in 2005. We need to be more prepared for future tribulation. We can not sit on our duffs if we lose our jobs to competition overseas and let the answer to our problem arrive in the mail as a welfare check.

President Bush had a great idea. The nation needs to realize the importance in Community Colleges (and all other high ed institutions). These schools could be the backbone of retraining our workforce for the jobs of our future.

450 Economists

Read a poast today, Absentee, a publish stating the Social Security Choice issue is being lost. MoreThanCorn feels the message is being scuttled by the mainstream media.
a) Total Avoidance; no coverage in their papers and journals and/or
b) Buried Coverage; publishing on page 14 of 20 and 'below the fold'

On Absentee, view the list of blogs which post on SS Choice. It is truly important this does not fade. The names on the list of 450 economists who support choice of private accounts are respected; Namely Milton Friedman. Read his book Capitalism & Freedom. I bought my copy on Amazon for $3.00.

'You're Fired'; Annan Announces First Oil For Food Dismissal

Joseph Stephanides - head of the U.N. Security Council Affairs Division
interfering in the competitive bidding process for Oil-for-Food inspections.
Lloyd's Register Inspection Ltd. won the contract even though there was a lower bidder.

Resource; Associated Press, 06/01/2005

This is the first name of a long list.