The one hand that has been tied behind the backs of GM, Ford and Chrysler is now free. For years, the three automakers have been complaining about their inability to compete with the likes of Honda and Toyota because they’ve been shackled by a labor agreement that forced them to keep plants open, pay exorbitant wage rates and carry the burden of ever-rising healthcare costs the likes of which were comparable to what most U.S. states seemingly pay to support their populations.
In a significant change of pace, the UAW stepped up to the plate and convinced its membership to agree to offloading some of the healthcare obligations onto the union itself, along with establishing a two-tier wage system and an impending reduction in the number of workers eligible to remain in the “jobs banks” that have hobbled the industry for years. The union, meanwhile, won unprecedented job guarantees and a moratorium on plant closings through the 4-year term of the contract.
Analysts proclaimed the contracts are a critical piece in laying the groundwork for Detroit’s three to finally be on par, cost-wise, with the foreign competitors—cutting as much as $1,000 off the cost of building each car and truck. That’s a huge crevasse to cross and does eliminate a huge cost disadvantage that had been building for years. Detroit’s automakers need to kiss the ground that UAW President Ron Gettlefinger walks on as he achieved a task that would have been impossible only a few short years ago and, most surprisingly, without too much pushback from his rank-and-file. They collectively saw the writing on the wall. Now it’s up to Detroit’s three to get their acts together and develop the products everyone has been waiting for. There’s no more room for the excuses that have been the fallback for the past few years.
Chrysler LLC was the first automaker to show its willingness to reverse its troubled fortunes by killing products that have been withering on the vine for the past few years—Chrysler Pacifica, Dodge Magnum, Chrysler PT Cruiser Convertible, and Crossfire—and laying off thousands of hourly people at plants that have been building too many copies of other products which have been propped up by huge cash incentives. Sources also indicate Chrysler has sped up redesigns of some of its most crucial products in an effort to regroup. Additionally, GM has gone ahead and made cuts in the ranks at several of its plants to get vehicle output more in line with market demand, resulting in slightly higher retail profits.
Those are good signs that things might turn around, although it is still unclear what Chrysler will do to replace some of the vehicles it is scuttling and how quickly the redesigns will come. Detroit now needs to focus its attention on reducing speed to market and developing exciting, innovative products that people will want to buy. Plowing the dollars saved and generated as a result of these new contracts into advanced technologies that will improve vehicle design, development and manufacturing will help rebuild the industry. It’s not going to happen overnight, even though the amount of time it takes to develop a new vehicle continues to shrink, but with an optimistic eye toward the future, hopefully Detroit will be more relevant in the years to come.