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June 03, 2008

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Chuck Williams

Jim,

Does the union really have a leg to stand on? Consider the economic realities tied to the housing collapse in the USA, the out-of-control rise in world oil prices and the ever strengthening Canadian dollar. It's almost a perfect storm that could wipe out mass production of pickup trucks, large SUV's, general duty trucks etc. for a generation of consumers. And that goes for anyone making a truck; Toyota, Nissan, Chrysler, Ford, all of them have to rethink their product strategy in light of what's happening in the economy.

More than 80% of the Oshawa plant's output is destined for the US market. The housing market collapse has inevitably wounded the general contractor and tradesman's ability to purchase or finance vehicles such as pickup trucks or SUV's. If they're not buying, then who is?

At the end of the day, General Motors has hitched their wagon to the dreams of a bygone era when big was best and brute was better for North American consumers. That just doesn't wash in today's reality.

Nobody's going to be able to sustain the expense of putting $200 a week into the gas tank of their V8 pickup truck or SUV. And that's going to be the case within the next 12 to 20 months.

Sez Jim: You're right. But few thought that this would happen, at least not this fast. And because it takes two to five years to develop a new product, it isn't something any car maker - GM, Toyota, any of them - can fix overnight. GM does have some good cars on showroom floors now - e.g., Chevy Malibu - and some high-tech stuff around the corner - e.g., Chevy Volt. But it will be a tough struggle. What really hurts for the workers is the fact that just weeks ago, the CAW had what they thought was an agreement to save those jobs; now they're to be gone. Not to mention various government grants over the past couple of years. The fuss that has resulted suggests that maybe we haven't heard the end of this yet.

Sue McPherson

Maybe a different kind of reasoning is needed, instead of the old way of survival of the strongest, and whatever happens to the weak, well let it happen. Besides, who says Ingersoll is lower down on the social level anyway. It's a thriving community, from what I see. They must be doing something right. When times are difficult, and they certainly are now, it could be a time to change one's way of thinking, to job-sharing and other tactics that will help a community survive in a cooperative way rather than its citizens being in competition with one another and with different cities to take all they can get and to hell with the rest.

Sez Jim: By Ingersoll, I assume you're referring to the GM-Suzuki joint venture plant in that town? One of the findamental poblems of the "steel car" industry is that the first vehicle down the line costs about two billion dollars - that's about what it costs to engineer, develop and productionize a new vehicle. The next 800,000 copies down the line cost about 49 cents each. A corollary to this is that once a commitment is made to build that vehicle and its assembly line, you're pretty much locked in. Various attempts to build "flexible" production lines only go so far. Chrysler's Brampton plant, for example, can make the Chrysler 300, Dodge Charger and Dodge Challenger (also used to make Dodge Magnum), in whatever proportion the market dictates. But all three are based on the same large-car platform. If big cars go out of fashion, then all of these would be in trouble. If someone could come up with an assembly line that could make, for example, the compact Equinox SUV (which they make in Ingersoll) AND Silverado, then we'd have something.

Bob DeVreeze

Jim: If you dont understand GM just read about Ford's Another new oversized box (Flex). A whopping 12.9 liters per 100k. Toronto to Barrie and back is a 40 dollar trip. No wonder after 30+ years driving a Ford I bought a KIA. At least they have some clue as to the times that face us.

Sez Jim: No question Ford has been slow getting small B-Segment cars to market. At least GM offers various Korean-built vehicles like Chevy Aveo. Ironically, Ford used to import Kias under both Aspire and Festiva nameplates. Ford's new B-Segment car is due in 2010, I believe, but unbelievably, there are no plans to build a hatchback version! They say there's no market for a hatchback. Sure, that's why there is no hatchback Honda Fit. No, wait - there is ONLY a Honda Fit hatchback. But there are no Hyundai Accent or Kia Rio hatchbacks. No, wait - yes there are. But there is no Toyota Yaris hatchback. No, wait - well, you get the point. I only wish Ford would.

Dave

The quality may be high in Oshawa, but so are the costs, and they keep climbing. Over the past few years, the rising Canadian dollar has steadily increased the Oshawa labour costs relative to plants in the US.

You said... The way things are supposed to work in the big bad world is the strongest survive, the weak get culled.

If the workers want to save their jobs, they might try taking a massive pay cut to convince GM to close a different plant? Perhaps it's too late for that now, but they've had years to reduce their bloated labour costs. There have been warning signs about this for years. Sometimes, it's not the weak that get culled, but the fattest and most bloated!

Sez Jim: Labour costs are a pretty small component of the overall cost of producing a vehicle. Still, the deal was, you screw fenders onto pick-ups for thirty years, we'll put titanium hips in you and your children for life. When the off-shore companies went to non-union states or regions of the country and made different deals, that bargain was violated. Especially in the US, where companies are required to provide for their retirees, unlike virtually every other country where society assumes that role. The fact that the new factories had nothing but young people working there who didn't need titanium hips, gave them an advantage that no older company could possibly overcome. Society as represented by governments have chosen to abandon the older workers in favour of younger voters, which I think is unfair, and shameful.

allenparkpete

Jim,

You do have a point there about some U.S. flag waving but there might even be more to it than that. Oshawa and Silao (shocked they are closing that plant as well) were the herbs and spices tossed in the main mix of U.S. plants to make this more palatable for the UAW. Canada and Mexico had to share some of the pain and although I am no Buzz Hargrove admirer, he is absolutely correct to react the way he has. But I get the feeling given the way the GTA has grown in the past 35-40 years that GM being located in Oshawa sits on the wrong side of Toronto (due to congestion) and that factored into the closing. True, they have done a fantastic job in efficiency and quality there and I even have a relative that works in that plant but you get the feeling that location plays a part in the termination as well. Unfortunate. I see so many posters in other newspapers comment on saying..good riddance and tough luck... Truly pathetic people. I was layed off for a year and a half so I know what lies ahead for many workers and its not pleasant.

Dan Stavnicky

What do we expect? GM is an American company and will ultimately do what is better for Americans. I've always thought Canada should be building it's own cars. Good start with the Bricklin, but why not lead the way in Hydrogen or Hybrid powered vehicles with government backing.
Do we always have to take a back seat (pun intended) and then whine when we don't like an outcome we have no control over?

Sez Jim: I'm not sure the Bricklin was a good start! Prior to the Auto Pact in the mid-1960s, we did build our own cars. My Dad's last car was a 1954 Meteor, a Canada-only Ford. The Auto Pact essentially said the car companies could sell as many cars duty-free in Canada as they built here, but they didn't have to be the same cars. Hence, Canadian plants built one or two models, most of which were sold in the US. For many years we were in "surplus" on the Auto Pact - we actually built more cars than were sold here. And of course, the Auto Pact was in part the model for NAFTA, for better or for worse. The downside of the Auto Pact is that because there are no truly Canadian car makers, we don't get proportionally as many higher-level jobs - engineering, design - as we do the assembly line jobs. And now we seem to be losing those too.
We do have some expertise in hydrogen vehicles, mainly due to Ballard Power Systems in British Columbia. But of course, the auto division of that company is now owned by Daimler-Benz and Ford. Plus ca change...

Don Wells

Market realities seem to be being ignored by the critics of this decision---A 30+% drop in truck sales in the U.S.! Make more?
Ford is hiring to build its new products for those that want to stay in the auto manufacturing area! A year to find a new job plus up to 2 years severance? Adapt!

Ernest Reed

Why does Buzz Hargrove and those like Jim Kenzie keep missing the point? The sole reason that GM continues to flounder is because they are paying for past stupidity in dealing with the UAW and CAW. There is no secret that when you are paying out more than you take in that you are not going to be in business for very long. Paying large salaries and hefty benefit packages out to thousands of workers, coupled with basically inferior product lines, you have a perfect recipe for failure. Instead of crying himself a river, as Hargrove does with a passion always, look in the mirror and ask the real reason as to why GM is failing. The answer is too obvious to no longer ignore...The Union! Anyone that says differently is only deluding themselves of reality. Simply put, you cannot keep paying out high wages and huge benefits and expect to compete; not in today's economic reality. There is but one word that the CAW simply does not utter, let alone understand; "concessions". If you are so concerned about lost jobs, come to the table with a solution Buzz, not complaints. As sad as this may be, it should not come as a surprise at all...It was inevitable.

Sez Jim: See my reply to "Dave", a few comments down this list.

Ron W.

Jim:

Despite all the reasons that have been discussed, decisions like this, for the most part, are ALWAYS flag-waving and politics. For example, what would be the repercussions to GM or any domestic automaker for that matter, from the local Senator or Congressman and government in general, if they decided that the BEST business decision was to close ONLY US plants because the plants located outside the country happened to be the most efficient and cost effective? The political fallout would be devastating considering the hundreds of millions of dollars in taxpayers money that is regularly handed to them to locate in some of these small towns? Their influence in Washington would be significantly diminished especially now since more and more pressure is being brought to bear on legislators in the US as millions of manufacturing jobs have disappeared in the last few years. In their feeble way, the industry wants to show that EVERYONE is sharing the pain. Unfortunately, because these decisions are made OUTSIDE of Canada, this is the price WE pay for being a branch plant economy.

Over the last few years these discussions concerning the domestic auto industry have been going on ad nauseum but the reality still remains if these corporations had people running them who had some vision (Toyota?, Honda? anyone) and thought about using their most efficient operations to their best advantage, they probably wouldn't be in anywhere near the predicament they are now.

Dieselhead

It's looking like GM is beset by fowl designs. They've gone from Ostrich to Headless Chicken. Whether this will hold is uncertain but it certainly looks pretty brainless from here in the cheapseats.
It's a shame that GM's Board of Bystanders couldn't have hired some fresh blood two years ago to start the process without making the panic moves seen lately. Ironically Ford is looking much better since they replaced their head guy. Not out of the woods by a long shot but at least they seem to have a path to follow.
If only there was some new product that could replace the lame duck fullsize pickup, something small, light and fuel efficient. Happy times for everyone.

Jim: Hindsight is 20-20 - even Toyota has a brand-new full-size pick-up that has big incentives on it in the US, so everyone got caught out on this one.


Billie Bob

The Union has destroyed the auto business for GM, Ford, and Chrysler. Based upon greedy profitable contracts of the 60's and 70's doesn't work in todays' global economy. Then, consider legacy costs that they have to pay to pensioned union slackers this makes it worse. Then to make it worse the products are not as good as Honda, Toyota, Nissan, and Hyundai. So, GM is basically a bankrupt company who is getting eaten alive by the imports.

If the Union wasn't part of the picture the company might be able to stay afloat. As a stock holder I've very concerned for the value of the company, and where my fortunes are exposed. For the immediate future I will be selling all my GM shares, this company is dead.

Sez Jim: Again, see my comments to Dave, a few comments down this list.

Cam La Civita

There was an article in the Detroit News about the plant closings. With the high cost of transportation, the US big 3 companies seem to be retrenching around their traditional Detroit base. They are obviously going to be smaller companies. I guess the rational is to maintain what plants they have (Detroit, Dearborn, Flint, Lansing, Ohio, etc)close to their major suppliers and cut down on the costs of transporting parts. There are other factors of course. The border situation probably favours the US plants as 80-90% of production goes to the US market anyway. The other factor is the high Canadian dollar. Oh, and what about the new low wage deals that they have in place for the UAW? All in all, very bad news for the Canadian autoworkers employed by the US big 3. Longer term, I see Oshawa in danger as well as Oakville and Chyrsler in Brampton. The Windsor mini-van plant probably is good for another 10 years or so. 10 years from now....we may not have an auto industry in Canada. BTW, some previous poster mentioned a Canada auto company? Really, is he serious? There is too much capacity right now. The world sure could use another auto company!

Pete

What I find amazing in this whole storm is that Mr Hargrove has always been quick to pressure the Ontario government to fund GM. I can not remember a single time where the CAW told GM to smarten up and start developing cars that the consumer actually wants. And Mr Wagoner's & Mulally's findings that gas prices only go up, well it doesn't take an economist to find that out. They could have simply glanced at their Japanese competitors or their own European subsidiaries to find out what customers look for.

Joe

Jim,

It amazes me how so many people have taken the bait. They seem to believe that the CAW’s refusal to accept a two-tier wage system is to blame for the closing of the Oshawa truck plant, yet GM readily admits that the reason is the market for the large full-size pick-up/SUV is rapidly shrinking. The reason for this is the high cost of oil. In 2003, a barrel of oil cost about $25 dollars and GM was selling in excess of one million large pick-up trucks/SUVs. Today, with the price of oil above $125 per barrel (and set to go higher), the demand for these large vehicles has been forecast to drop below 600,000. If I were to accept the logic of the pro two-tier crowd, acceptance of this proposed modified wage structure would save the Oshawa truck plant by somehow miraculously creating a sudden demand for these over-priced gas guzzling vehicles. But there is a slight flaw in that reasoning… the UAW ACCEPTED the two-tier wage structure recently, yet TWO of their truck plants are also scheduled to be shut down soon. So how, exactly would a pay cut (two-tier) keep this plant open?

Sydney

I do not understand what CAW leaders and GM workers thinking about truck plant closing and their future.
Why they do not understand big pick-up trucks are thing of past.
We, car buyers understand but those union members do not understand this.
And how about Big Three management?
What are they doing last 30, 40 years?
We see a lot Japanese, Korean and European cars in our streets, Latin America and Asia, but hardly any American made cars in the same areas.
VW, Toyota and Honda have grown huge world over, but Big Three have never learned enough what they have been doing not right.
Chrysler is even going to do even worse by importing Chinese cars.
Back in 70's, North American auto workers helped Japanese auto makers by annual strikes, remember?
Every time auto workers went on strike, North American car prices went up and poorly built Japanese car sales increased.
This cycle repeated almost ten years.
Mean while Japanese car quality surpassed ours, remember?
I do not know how good Oshawa truck plant is, even they say Oshawa factory builds the best quality trucks.
How good is not important now, because not many people buy big trucks any more, cetainly I don't even think of buying big trucks.
What CAW is fighting for? I do not understand them.

David

Hey Jim
It's funny how so many people(not you) like to to jump on the bandwagon and kick the giant and the giants' workers when they're down.These people losing their jobs are quite possibly losing them for life.Of course they are angry.Every single GM plant has been required to meet benchmarks in quality,efficiency and productivity etc..Oshawa truck has consistently met and exceeded these goals and was considered the benchmark for the other plants to try and meet.Surely the workers were partly responsible?
All these workers are understandbly surprised that the only plant to meet these goals was the one that was closed.Of course they feel betrayed.While it is totally true that the market for these vehicles is shrinking at an extremely fast rate there still is and probably will continue to be a market for them.So what does GM do?They get rid of the only workers that met and exceeded all of their criteria.
Is this good management? Maybe but I don't understand it!

glenn kitchen

With regards to GM closing the Truck plant and any other Canadian plants.
If a company was to close its top performing plant and keep open lesser plants. In a normal world this should send its stocks and shareholders into a free fall but it hasn't.Why because the people and groups who hold these stocks are overwhelmingly American and are so patriotic that as long as an American plant stays open they are happy and all business fundamentals go out the window.Many pension fund managers and mutual fund managers subscribe to the American Patriotism and ignore true fundamentals. As Canadian investors or holders of mutual funds we should tell them our feelings dump GM stocks

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