Wednesday, December 3, 2008

Reviving Detroit must start with the UAW

By: Jack Fitzgerald
December 2, 2008

At their Nov. 20 press conference, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said they wanted to help the auto industry if the industry helps itself.

They requested a plan for success from the Detroit 3 that would convince Congress that the domestic automakers can become and remain viable after the assistance. If the plan, due Tuesday, Dec. 2, shows that the Detroit 3 would be viable with whatever aid is necessary, Congress will reconvene.

Pelosi and Reid may have to reach out to UAW President Ron Gettelfinger because there will be no success without strong leadership from the UAW — think of the Chrysler loan guarantees of 1979 and UAW President Doug Fraser leading the way.

The Detroit 3 are in trouble because for more than 25 years, they built products that ranked poorly in Consumer Reports' ratings, cost billions in warranty and recall expenses and caused extraordinary losses of market share.

Detroit must produce competitive products to be viable. To do that, it has to start with a competitive overhead. That will require a huge change in the interaction between the UAW and the Detroit 3.

Cut pay and benefits

Toyota is the No. 1 competitor worldwide. The Detroit 3 must benchmark Toyota. They must install the Toyota Production System, work rules and job classifications — which will eliminate the paid positions of union officials in the plants that do no productive work. The Detroit 3 must use Toyota's pay scale for everyone from the CEO down.

That will mean lower pay and reduced benefits for directors, officers, managers and active and retired employees. And there must be no Jobs Bank or make-work projects for UAW members, who must run the plant as if they owned it.

Management must design the vehicles and the production process with UAW input, but the UAW must lead the effort on the shop floor to produce the highest quality worldwide. Quality is better than it was but not what it needs to be. Management and the UAW must unite in a partnership dedicated to that goal, just as they did at General Motors' Saturn plant in Spring Hill, Tenn., in 1990.

For four years, Saturn produced cars with top reliability scores as measured by Consumer Reports. Unfortunately, the plant reverted to a standard UAW contract, and Saturn's reliability scores suffered.

By contrast, the New United Motor Manufacturing Inc. plant in Fremont, Calif., is a great success. It has been a GM-Toyota joint venture since 1984. Currently, it builds the Toyota Corolla and Tacoma and the Pontiac Vibe. GM, Toyota and the UAW produce high-quality products that are very competitive. The vehicles earn high marks in Consumer Reports every year.

Get GMAC back

Toyota, Honda and BMW export vehicles from American plants. Why can't the Detroit 3 do that? Why can't we make inexpensive cars here and ship them to emerging markets?

Congress is offering to help if the industry will help itself. The UAW must seize this opportunity and run with it. Management will have no choice but to go along. Both will make considerably less in pay and benefits. But if they fulfill their responsibilities, they should do well and make more in profit-sharing. Plus a competitive company offers real job security.

Something that should not require additional action from Congress is the restoration and strengthening of the Detroit 3's captive finance companies. Cerberus must sell GMAC back to GM, and Chrysler must own Chrysler Financial.

I can't get the front page of the Nov. 19 Baltimore Sun out of my mind. There is a picture of a man sitting in his kitchen wondering what's going to happen to him after 32 years with GM. He's 52 years old. On the same page is a picture of the Detroit CEOs, each one a millionaire, asking Congress for assistance.

We must do all that we can to keep our people on the job. The UAW can and should lead the way.