Even before the debate over federal loans to the domestic automakers, a number of TTAC editorials pointed out that a bankruptcy by one of the The Big Three would lead to a C11 by the remaining two. Bankruptcy allows the abrogation of labor contracts; an automaker in Ch. 11 proceedings would be able to lower labor costs significantly, putting the other car makers at a competitive disadvantage. [ED: one of Ford’s SEC filing made that very point.] Parts provider Checker (no cabs since 1982) tried to negotiate wage concessions from its employees’ labor union. But even with bankruptcy hanging over their heads, the union wouldn’t make the needed concessions. And so Checker has become the eighth major US auto supplier that’s filed for bankruptcy in the past year.
The 87-year-old company has 246 employees, with assets of $24.5m and liabilities of $21.8m. In 2007, Checker posted net sales of $63.4m. The bankruptcy filing cited both competitive pressures re: labor costs and its customers’ decreased market shares. Checker sells stampings and welded assemblies to all three of the domestic automakers; the domestics have lost about five percent market share from 2007 to 2008. I suspect that the 35 percent decline in overall sales for their customers is a greater factor in Checker’s troubles than their decreased market share.
Critics of government assistance to the domestic automakers called its supporters chicken littles for predicting a cascade of supplier bankruptcies should any of the domestics be forced into Chapter 11 or 7. With at least a third of domestic auto suppliers already financially distressed, it may not even take a failure of one of the large automakers to start that cascade.
The same day that Checker filed, Lansing based automotive electronics supplier May & Scofield closed its doors after Bank of America foreclosed on its U.S. assets.
I bet those those workers are really happy they didn’t give any concessions now! What you see here is the future of the UAW.
Most folks don’t realize that Checker was (for a short time) part of the Auburn-Cord-Duesenburg corporate empire, and the only surviving automotive portion of same!
I’ve always had a soft spot for the rational, tough, comfortable and interesting post-1955 Checkers that I grew up seeing (usually in the form of the Marathon family car, and damn few of them – maximum sales per year was 8792 per year (not month) in 1962 and a mere 2000 in their last year of production for the taxis and cars, 1982.
These cars remained essentially unchanged from 1956 through 1982, except for gaining a very minor facelift and quad headlamps in about 1959. In 1965, GM (Chevy) drivetrains replaced the Continental inline six and a V8 became optional.
We should be so lucky to have a dedicated taxicab available for use now, and interestingly, Standard Taxicab (a new independent company) has recently announced that AMGeneral, the Humvee manufacturer, is going to contract produce their plastic bodied dedicated taxi in Mishawaka, Indiana (at an old Studebaker truck factory) using GM (V6 truck) drivetrains. Hopefully they’ll be out on the roads within a few months.
Hope Checker survives. Interestingly, it was the union digging their heels in, back in 1982, which caused Checker to actually abandon their taxicab production. It’s not the UAW, though; I think it’s some steel worker union, sorry, can’t remember.
Checker’s in Kalamazoo, Michigan and so here we have yet another nail in Michigan’s coffin.
This is going to be the biggest year in the evolution of unions since the Truman admistration, both in the businesses they operate in and the halls of Congress with Card-Check.
Either we institutionalize these “classic” unions into our society at tremendous expense and pain to our economy forever (like eating a giant tapeworm on purpose), or these outfits evolve or die. This legislative year will see who wins in that war.
menno, I always enjoying your litle history lessons. Thanks for jogging my memory about the Cord/Checker connection. Yes, E. L. Cord was Durantesque in his appetite for gobbling up companies. Shipbuilding, Stinson Aircraft, American Airlines, radio and TV, real estate; he got into practically everything.
And thanks to you, Ronnie, for the report on Checker. I too remember occasionally seeing a family guy driving a civilian Checker. One had to be very resistant to passing fashion fads to drive a Checker. But as taxis, they a Caprice or Crown Vic.
This relentless shrinkage of Michigan’s automotive-related industry makes wonder: is everyone up there–government, labor, management–dedicated to resisting any givebacks until everything collapses around them?
Bummer. My band used to practice in a near-condemned factory building about two blocks north of Checker’s facility in Kalamazoo. On a different note, its a good thing Kazoo is home to so many great microbreweries…all of the recent lay-offs and liquidations in the area warrant some heavy drinking.
I am sad for the loss…..
But not being a ‘card carrier’ I wonder what really happened?
Would pay cuts have saved the company or was it doomed for many other reasons?
I know payroll is the largest expense but if the other parts of the business are s_ _ t what difference would it make?
Me thinks there was more going on here than meets the eye….
Ah yes the Checker Taxi Cab. As New York cabs, they were as much better than Crown Vics and Caprices, as ice cream is than hay for dessert.
Labor costs are one measurement of how good management is in using efficient tools, equipment, and procedures. If labor costs “over-center” and start cannibalizing the R&D and capitol investment funds, the company is in a death spiral.
Was labor eating the seed corn or did management fail the company? Labor seems to be saying idiot management is the problem, not labor costs.
Is this where I came in?
It remains to me a mystery why the UAW is playing this out so tough. In Germany we have strong unions, and the IG Metall (industrial labor union for metal workers, IGM) is one of the toughest. But even the IGM has in the last years agreed to restrictions in wage increases, increase of working hours or allowed companies to step out of the nationwide regulation and agree on local basis on cutting measures. Overall, this has helped raise competitiveness a lot. the UAW seems to ignore the point of competitiveness completely and seems to prefer bankruptcy for suppliers of the big 3. Misterious.
” … after Bank of America foreclosed on its U.S. assets”
Banks keep getting billions in free money while at the same time aggressively shutting down their customer companies. What is the deal with that?
Their earlier choices have been very poor, but the choice of the UAW not to concede right now may be rational.
If a company is beyond help, drowning them sooner rather than later leaves something in the pot to finance retirement plans and severance.
Growing up in the NYC area, back in the late 1970’s, I remember the Checker cabs well — my first cab ride was in a Checker. I also remember the filth, the crime, the TV whores that use to hang around near the entrance of the Lincoln Tunnel, and the dope fiends in Topkins Square Park. I once saw an addict shooting up in broad daylight in front of the park, my mother told me it was his “medicine”.
I can envision many viewpoints and opinions regarding unions and worker’s wages and management needing to create a profit and a multitude of other viewpoints and negatives and positives but looking at the economy and society etcetera at a huge macro-level and to condense a big bunch of stuff into one general subjective declarative rhetorical statement/question….
Why not just have the vast majority of Americans work and live at a a 2nd- or even 3rd-world level?
Patrickj :
January 20th, 2009 at 9:22 pm
Their earlier choices have been very poor, but the choice of the UAW not to concede right now may be rational.
If a company is beyond help, drowning them sooner rather than later leaves something in the pot to finance retirement plans and severance.
That is giving up on the chance of turning around a company.