Tuesday, June 02, 2009

While you were worrying about Chrysler and GM

Most of the news out of Detroit these days has concerned the bankruptcies of Chrysler and now GM. There are a lot of issues to sort out with all of this, but one thing that's especially problematic is this: the reality that the United Auto Workers will own large portions of both companies. But the problem may not belong to GM or Chrysler. The problem will belong to Ford.

Ford has decided to eschew the government bailout process and is attempting to solve their own problems. Ford has done better in recent months than either GM or Chrysler, but that's a relative term since all have been losing money at an enormous rate. But Ford has a problem that will eventually make a very interesting case study for the Harvard Business Review -- how does one compete in a heavily unionized industry when the union you bargain with has an ownership stake in your competitors?

Here's the question for the audience -- how do you think that's going to work?


Night Writer said...

Well, it's not likely to be pretty. Perhaps Ford will ultimately decide to let the union contracts expire and make a go of it like Honda, Toyota and Nissan do in the south. If this "recovery" continues there should be plenty of people willing to take those jobs.

What may be more interesting to watch, however, is the UAW become concerned with shareholder earning and the impact of labor costs on profitability. Of course, maybe it won't be a concern as long as they have the government to keep printing money and giving it to them.

Another interesting question is whether anyone would willingly join a union now, given what we've seen of the end game?

Night Writer said...

Per my previous comment, check out this analyses (from Newsweek, of all places) entitled "The UAW Busted?": http://www.newsweek.com/id/200194/page/1

Money quote:
So let's review: A shrinking union accepts stakes in shrinking companies. It promises not to strike. The governance system muffles the union's voice by restricting its board presence. It sounds like an arrangement a union-hater like Jack Welch would have cooked up.