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November 19, 2009
Strange Bedfellows Who Kick in the Night
Did you know…
- the United Auto Workers had 425,000 members employed by General Motors in 1979 and today has 40,000?
- UAW members earn $33 per hour while non-union car workers in the American South earn $15 per hour and auto workers in Mexico get $6 per hour, but have the same productivity level?
- in the US and Western Europe there are 800 cars per 1,000 adults, while in China and India it is only 50 or 60 per 1,000 people, rising to 400 per 1,000 in the next decade?
- up to three million jobs were at risk in the US a year ago in the possible bankruptcy of Chrysler and GM, then the chain reaction onto auto suppliers?
China and India Do Frugal Product Engineering: This is the real long term source of competitive advantage, not low wages. Ghosn said, “Our engineers in the West have lost the instinct. The engineers in China and India do “just necessary” engineering, enabling them to design a $3,000 car that makes a good profit.
Structural Cost Advantage Eliminated; Revenue Advantage Remains for Foreign Cars: The restructuring of Chrysler and GM has leveled the playing field on the cost side, by eliminating debt obligations including cutting health care expenditure. However, the revenue challenge is that a comparable Chrysler product sells at a discount to a Nissan or Toyota product.
Twelve Percent of Car Fleet Can Be Electric in 2020: Ghosn said that his electric entry, the Nissan Leaf, to be introduced in the US at the end of 2010, has 25,000 inquiries by interested buyers. He noted that eight percent of Americans say they want an electric car as their next vehicle. With 100 miles between re-charges, the car will appeal to an urban or suburban owner as a second vehicle. He believes that hybrids and cars fueled by natural gas will also have their place.
Total Jobs in Auto Production to Rise, But All in Developing World—Rattner and Ghosn agreed that the present level of production capacity in the US, around 15 million vehicles, will be justified once the country recovers from recession. In the restructuring of Chrysler and GM, about 40% of their total production was closed down. Ghosn said that “Europe has not yet reduced capacity. It is more about job preservation in Europe,” he said. “Car makers instinctively try not to send jobs outside of their home country. They see themselves as integral parts of local society.”
Separation of Church and State—Rattner provided an excellent rationale for the US Government’s passive posture on the GM board of directors. “We don’t want the US Government to be deciding which plants to close or investments to make. This call was made by President Obama.”
Given the continuing government involvement in the auto industry-- and not just in the US, the French Government owns 15% of Renault and provided three billion euro in financing a year ago--it is incumbent on the car companies to behave and communicate differently than in the past. The command and control culture, so evident in the Congressional Hearings last December on the auto bailout, needs to be replacing with an engagement model, encompassing:
- Auto leaders should practice ‘private sector diplomacy by advocating for environmentally advanced technologies and innovation.
- Treat employees as critical allies to be informed consistently so that they can, in turn, spread the latest information about their progress and new products, key differentiators, value, quality etc.
- Partner with civil society as well as Government in product development, establishing and acceptance of standards with, for instance, modes of electric outlets for re-charging cars.
- Act as good stewards of the public’s money, by demonstrating they recognize the needs of stakeholders, not just shareholders.
Posted by Edelman at November 19, 2009 4:39 PM |
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Comments
Interesting finding on the UAW, I was wondering if one of the reasons for the drop in membership was because the growing innovations in the auto industry?
Posted by: Charlie Campbell at November 22, 2009 12:44 AM