As we’ve noted before, Hyundai and Kia have been quick to exploit the weakness of the domestic auto industry by advertising their American-made cars as American-made cars. Now, they’re taking the attack to a whole new level, as Hyundai USA President John Krafcik tells CNN Money that his brand will build 80 percent of its vehicles in the United States by next year. If the Korean brand can actually achieve that goal, it would make Hyundai’s lineup the most American-built full line on the market. And though he insists that Hyundai doesn’t make decisions about production based on PR, Krafcik can’t help but twist the knife, saying
I’m going to build my three best selling cars in the US. Ford builds its best selling car in Mexico.
Did we mention that there is a steady drumbeat by Japanese companies that openly think about, or deny (with huge qualifications) moving more and more production outside of Japan? Did we imply that a lot of this noisy thinking might be targeted at the current Japanese administration with which the carmakers are as much at odds as a carmaker can be with an administration that comes with full union backing and is full of former union officials? (Oops, never mind.) Anyway, Japanese carmakers are accusing their government of losing the war of the soft currency (led by the U.S. that lets its dollar slide while accusing others of manipulating their currencies – a good offense beats any defense.) Now the rhetoric is getting less circumspect. Read More >
A report in Japan’s Kyodo news agency [via Reuters/Automotive News [sub]] must have raised a few eyebrows in Japan: thanks to a rising Yen, Toyota is reportedly eying an end to Corolla exports from Japan by 2013. Toyota has since emphasized that
it has made no decision to halt production in Japan of its Corolla automobiles for overseas sales but said it was always considering an optimum global production structure.
The yen hit 81 to the dollar today, both on Yen strength and dollar weakness. ( A Euro buys 1.41 dollars again – get ready for Eurotrash invading Manhattan.)
Toyota has already shifted the bulk of its Corolla production overseas: last year it built 815k Corollas outside of Japan, and only 235k in its home country (60 percent of which were exported). Still, Toyota has long considered stability in its Japanese workforce as core institutional value, and previous currency rises led to changes in design and quality philosophy rather than reductions in Japanese production levels. But then Toyota is no longer in a position to release currency pressure by targeting “fat” or “overquality” product the way it could in the early 90s. The “overquality” simply isn’t there anymore. Like everyone else, Toyota’s major competitive option is to move production closer to cheap labor and large markets.
I took some flack from TTAC’s Best and Brightest on Monday when I suggested that the UAW’s deal to give 40 percent of Orion Assemblys returning workers a 50 percent pay cut was “cowardly and despicable.” What I didn’t make clear enough was that I have no problem with the UAW working for a lower wage as long as the burden was spread evenly. Instead, the union has arbitrarily divided its existing workforce into the old guard “haves” and the relatively-recently-hired “have nots” as a ploy to make the union seem capable of profitably building subcompact cars in America. It’s bad enough to prop up the old guard by paying new hires less, but cramming down recalled Tier One workers is totally contrary to the very concept of a union. And I’m not the only one who finds the lack of solidarity and shared responsibility within the union troubling.
Former GM CEO Fritz Henderson is no longer a $3000/hr consultant for General Motors, reports Reuters [via ABC]. Henderson, who was paid $59,090 per month for 20 hours of work per month as a consultant, left that lucrative position after being hired by Sunoco to oversee the spin-off of its SunCoke Energy business. TTAC estimates that Henderson made over $400,000 since being fired as CEO by Chairman Ed Whitacre. We remain mystified as to what possible impact his consultancy had on anything, short of possibly preventing an embarrassing (but likely very dull) tell-all book.
When a country gets desperate, it closes its borders to imports. It’s a sign of surrender: We can’t compete anymore, so let’s close the doors. Closed borders rarely create jobs. In the contrary, they drive prices up, and everybody pays. Import restrictions are the most insidious tax a country can levy on its citizens. And they readily pay for it. Trade wars are an easy sell. Especially to people who cannot balance their checkbook. The price will be paid later. Read More >
Another day, another story on the ever-growing conflict between the UAW’s ownership stake in GM and responsibility to its members. Pre-bankruptcy, GM didn’t have to deal with the fact that the UAW is incapable of building fuel-efficient subcompact cars profitably. As a result, the outgoing Aveo was built and designed in Korea as the Daewoo Kalos, before being fitted with a bowtie and shipped to the US. But now that the General has promised to build the next-gen Aveo in Michigan’s Orion Township plant in exchange for nearly $800m in local tax credits (not to mention the political benefits of “saving or creating” hundreds of union jobs), it’s up to the UAW to square the circle and make the damn thing profitable. Which, according to Automotive News [sub] is just what they’ve done… by bumping 40 percent of the plant’s previous workers to the new “tier two” wages. Which is a nice way of saying “cutting their wages in half.” How is that possible?
The UAW’s 2009 amended contract with GM just before bankruptcy called for “innovative labor agreement provisions” that would allow GM to make a small car profitably in the United States.
Under those “innovative provisions” (which just happened to be conjured up when the government task force was elbow-deep in GM), Orion workers can neither appeal the decision nor go on strike over it. Either the UAW wants to be a union capable of building small cars profitably, or it doesn’t. Screwing less-senior “brothers” so politicians and union bosses can crow over the “green jobs” at Orion is cowardly and despicable.
With GM repositioning its IPO to target US retail investors, we find ourselves motivated to once again sound the alarm about one of the major drains facing The General’s taxpayer-provided cash pile: the restructuring of its European Opel division. Opel slated its Antwerp, elgium plant for closure earlier this year, but at the time GM was trying to find a buyer for the plant. In May we noted that automotive overcapacity on the continent made finding a buyer for Opel Antwerp a tall order, and sure enough, Bloomberg reports that a buyer has not been found. What Bloomberg leaves out of its write-up: GM is now stuck with the €400m ($530m+) bill to pay off all those unemployed workers. A half-billion here, a half-billion there… soon you’re talking about real money.
In 2007, the United Auto Workers came to a defining decision: rather than sharing sacrifice equally in the spirit of solidarity, the union divided its membership into two tiers. Tier one was the old guard, existing UAW workers who continued to receive relatively generous wages. Tier two was made up of all new hires, who were paid about half what their tier one “brothers” made. As the bankruptcy and bailout of GM and Chrysler brought the UAW’s internal divisions to the fore, second-tier workers have become more and more vocal about their second-class status. The excellent Changing Gears project (a “public media conversation about the future of the industrial Midwest”) speaks with several second-tier workers about the challenges and frustrations of earning half as much as their union brethren. In the words of one worker
There’s a joke within the two tier people, that if two two-tier people died in a fire, they’d say “one GM employee lost.” You feel like half an employee… It’s not like we have to wear a badge.. or drink out of a seperate drinking fountain, it’s just, you know every day that when you go in there, the life these people have made for themselves is something you’ll never have.
UAW boss Bob King is taking the fight abroad, visiting Fiat’s Italian plants in order to take a look at the World Class Manufacturing system that apparently has not yet sufficiently taken hold at Chrysler’s plants to be viewed there. But the visit isn’t purely social. King tells Reuters that
We’re going to be pitching to suppliers that they should come and locate here in Michigan.
Because clearly everybody wants to do business with the UAW. Heck, American supplier firms are falling over themselves to move production to Michigan, but King just thought it would be nice to give the Italians a first crack. On the other hand, Italy hasn’t exactly been free of auto-sector laborstrife itself. At least King can pitch Italian suppliers by explaining that, as majority stakeholder in Chrysler, the UAW makes Fiat-Chrysler’s US labor environment a lot less complex: all you have to do is keep the union happy. So much for Marchionne’s “culture of poverty.”
Are you a top talent in the international auto market? Looking for a job? Why not give Brilliance a call? They are looking for 70 top talents globally, Gasgoo reports. Ever since Brilliance’s former General Manager Liu Zhigang and several other executives deserted to Huaitai Auto, there have been major openings at Brilliance. Qi Yumin, President of Brilliance Auto said that these positions will be filled. Read More >
USA Today reports that Tennessee’s 2 Republican Senators, Bob Corker and Lamar Alexander and GOP congresswoman Marsha Blackburn received a rather frosty reception when they went to Spring Hill on Friday to toast GM bringing jobs back to the Ex-Saturn plant. They got booed and heckled. Why the frosty reception? Well, if you remember, Lamar Alexander and Bob Corker (along with the unnamed Congresswoman) were very vocal opponents against the bailout of GM and Chrysler. So, for 3 politicians to come back to their state and welcome back the very jobs which they would have been quite happy to see lost in the name of free market economics, probably stuck in the craw of the electorate. Namely, the UAW. Read More >
I don’t know how the US press is reporting it, but according to the UK press, California is on the verge of economic collapse. IOU’s were issued to public workers, lawmakers can’t agree on a budget and neighbouring Nevada has instigated an advertising campaign to lure businesses away from California. Governor “Ah-nuld” Schwarzenegger (who for the rest of the article will be referred to as “AS” as I can’t be bothered to write his name out every single time) is trying his best to bring business to “Cali”. He’s gone on a jaunt to Asia to try and drum up trade. And his press folk will announce even the smallest win. Read More >
A few weeks ago, I wrote about rumors circulating that the Saturn plant at Spring Hill, Tennessee may be coming back online as GM’s volume increases. Well, the rumors are getting stronger. Read More >
Bloomberg reports that Ford will not build its Kuga compact crossover at its Louisville, KY plant due to the falling Euro and UAW recalcitrance. According to the report
The promise of Kuga production in Louisville began to fall apart in November when UAW members rejected Ford’s request to match givebacks it gave General Motors Co. and Chrysler Group LLC. Ford’s U.S. rivals, which each reorganized in bankruptcy last year, were granted a six-year freeze on wages for new hires and a ban on some strikes until 2015… The euro has fallen 14 percent against the dollar since Ford reached a tentative deal with the UAW in October to build the Kuga in Louisville alongside its mechanical twin, the Escape. At the time, the dollar had declined against the euro, lowering the cost of U.S.-made goods. Since then, the euro has dropped amid concerns Europe’s debt crisis may trigger another recession.
Barclays analyst Brian Johnson explains
This is a reminder to the UAW that Ford’s U.S. cars don’t have to be produced in the U.S. Ford’s global architecture allows them to build anywhere. That’s good news if the U.S. has competitive labor costs. It’s bad news if they don’t
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