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.
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
Edmund’ Bill Visnic takes on the latest Harbour report, which finds North American auto plants running at an average of 58 percent capacity (even Europe, the global whipping boy for intractable auto overcapacity operates at an average 81 percent). Despite the recent downsizings across North America, the Harbour Report still estimates that 3.5m units of annual overcapacity remains in the US and Canadian auto manufacturing footprint, equivalent to 14 unneeded assembly plants. A rise in sales levels to the previous 15-16m mark could help the situation according to the report, but increased plant flexibility will be the factor that automakers can actually control. Even so, if 15-16m annual units don’t come soon, North America could be looking at more plant closures and job losses.
These are the ten vehicles that NHTSA says are made from 90 percent domestically-produced components [via cars.com]. Notice a common thread there? Yes, the correct answer is Ford involvement, but according to cars.com, the task of crowning a “king of domestic content” isn’t as simple as NHTSA’s number.
India is supposed to be the world’s next growth market. For one company, this is already more than true: For Japan’s Suzuki. The Maruti Suzuki joint venture owns more than 50 percent of India’s market. And soon, Suzuki will build more cars in India than back home in Japan. (Read More…)
Brazil beats America! Over at well-known Brazilian communications giant Globo, they are reporting that little ole Brazil has overcome big ole USA in car production and has taken 5th place worldwide. Can this be true? It depends on how you look at the numbers… (Read More…)
Speaking at the same Detroit conference on the auto bailout that Steve Rattner and Ron Bloom attended, the Center for Automotive Research’s Sean McAlinden proclaimed the end of Detroit’s era of unsustainable high wages. In 2007, said McAlinden, building a car in North America cost GM about $1,400 more per car than it did Toyota, thanks largely to a $950 health care charge. Since then, GM’s bailout and renegotiated wage and benefit contracts with the union have actually brought GM’s hourly compensation to just under what the CAR says the transplants pay. The AP reports that McAlinden’s estimate of GM’s average hourly worker salary is $69,368 while the transplant average is $70,185. Better still is McAlinden’s prediction that
between 2013 and 2015, Toyota could even be paying $10 more per hour than GM unless the Japanese company reacts and lowers wages.
And all it took was giving the UAW a $17.5 stake in the new GM!
AutoblogGreen‘s Sam Abuelsamid earns a tip of the blogger’s hat today for making sense of a fascinating nugget in a Times of London piece on the Nissan Leaf. The revelation by Nissan EV honcho Andy Palmer to the British paper that Leaf battery packs cost £6,000 (about $9k) to produce could have been missed, buried as it was near the bottom of the story. Not only did Abuelsamid catch it, he calculated that the Leaf’s 24 kWh lithium-ion battery costs break down to a staggeringly cheap $375 per kWh. How cheap is that, relatively speaking? Apparently cheap enough to send Li-ion startup A123 Systems’ stock to record lows according to the WSJ [sub]. More price-comparison context and some insight into how Nissan might have beaten those costs down after the jump.
GM’s restructuring of its Opel division has long been seen as one of the greatest threats to The General’s US taxpayer-supplied cash pile, and the bleeding has now officially started. Reuters reports that GM has agreed to pay four hundred million Euros ($532,000) for worker termination benefits as it closes operations at its Opel plant in Antwerp, Belgium. The 2,600 employees who once built Opel Astras at the factory will be out of work by the end of the year, with about 1,250 planned to be terminated by June. The Flemish government has until September to find a new investor for the plant location; if it is successful, and the new tenant rehires the former Opel workers, GM could be off the hook for some of their termination costs. Considering that Europe has some of the worst auto overcapacity around though, the odds of another automaker taking over the plant don’t look good. Which means the fate of Opel’s Flemish workers, and the health of GM’s cash pile are likely in the hands of a non-auto industry investor. Meanwhile, with Opel planning on cutting 20 percent of its European capacity, the bleeding is only just beginning. But hey, is there a better use for American tax dollars than paying off European workers to the tune of $205k per job?
We’re really trying to put together a world-class manufacturing team. We’re trying to create a Spartan army of expertise.
Tesla CEO Elon Musk give Automotive News [sub] his most inspirational metaphor for Tesla’s effort to ready production of its $50k Model S sedan. And though Musk is quick to call outsourced production “wishful thinking,” the vehicle’s transmission and battery cells as well as “wiring harnesses, skeletal mechanisms for the seats, and glass for the windows” will be supplied by outside firms. Musk says that sourcing for 80 percent of the Model S’s components has been narrowed down to one or two companies, and a plant location in Southern California will be announced shortly. But, he notes, the factory deal isn’t done yet. Or, as Musk puts it:
It hasn’t yet been finalized. We’ve almost fully negotiated the deal, but it has not been signed yet
Anonymous sources tell the always on-point pickuptrucks.com that Honda will not be replacing its Ridgeline pickup when its lifecycle ends after the 2011 model year. Honda is refusing comment on the Ridgeline’s future, but did tell AL.com that production will continue through 2011, and that “as of right now, we have no plans to discontinue Ridgeline.” But from a sales perspective, Honda might do well to let the unibody pickup die of natural causes. Though the unconventional Ridgeline came close its initial sales goals of about 50k units per year for the first three years of its life, by 2008 sales had dropped to 33,875. Last year the sales drop snowballed, with a 51 percent volume drop to 16,464 units. So yeah, we’ve been noticing that Honda seems less than completely enthused about its tentative attempt at the truck market. The end could well be near. Hilarious counterpoint to Howie Long’s video (above) available here.
Malaysia is an economic boom-town, and a country of 28m people. Import duties on foreign cars can run as high as 300 percent. According to unconfirmed rumors, this is to protect the two local makers, Proton & Perodua.
Many foreign car makers have tried to get a chunk of that protected market. One of them is Volkswagen, which does a booming business next door in China. (Read More…)
Chrysler fan site Allpar.com got its paws on a list that it says depicts Chrysler’s upcoming production plans. If true, this list confirms that many of Chrysler’s refreshed products won’t be hitting the streets until 2010 is nearly over, and that the debuts will come thick and fast. So don’t expect much to improve in the way of sales for Chrysler until at least December. Even then, every other TV ad will have to be for a Chrysler, Jeep or Dodge if the firm hopes to educate the buying public about these re-launches. The chances are good that Chrysler will survive until December, barring any supplier issues, recalls or further sales dips. Come December, when we have seen and driven this new generation of Fiat-refreshed products, we’ll have an idea of Chrysler’s chances of survival until 2013, when the next wave of fully Fiat-developed projects arrive. This should be interesting.
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