Weather in Myrtle Beach
The weather in Myrtle Beach, South Carolina is expected to be in the low 80's through this weekend. Have no fear non-attendees, your union representatives will be toiling in a windowless conference room for your benefit.
Monday, October 15, 2007
Ford Contract Proposal:
More Buyouts - Less VEBA
According to the Detroit News, the ongoing Ford-UAW contract will likely depart markedly from the "pattern" set by the GM deal. GM's VEBA doesn't kick in for two years. Ford doesn't have that kind of time, so Ford is expected to offer less and demand a faster phase-in for the VEBA. In exchange, Ford has put on the table a bonus structure that rewards union members for future performance in a manner that more closely mimics the incentives for management. Another round of buyouts is expected to allow the company to integrate 7,500 ex-Vistion employees.
More Buyouts - Less VEBA
According to the Detroit News, the ongoing Ford-UAW contract will likely depart markedly from the "pattern" set by the GM deal. GM's VEBA doesn't kick in for two years. Ford doesn't have that kind of time, so Ford is expected to offer less and demand a faster phase-in for the VEBA. In exchange, Ford has put on the table a bonus structure that rewards union members for future performance in a manner that more closely mimics the incentives for management. Another round of buyouts is expected to allow the company to integrate 7,500 ex-Vistion employees.
GM Gets Praise for New Products, Especially Hybrids
Hybrid SUVs and Flex platform are Big Deals
Time magazine this week joined a chorus of praise for GM's recent and upcoming new products. Later this year, General Motors is expected to introduce a "two-mode" hybrid version of the GMC Yukon full-size SUV. The all-new hybrid system is reported to deliver (2008 scale) EPA ratings of 20 city and 22 highway, about a 40% increase in fuel economy. At the same time, the truck still has V-8 performance and can tow 6,000 lbs. The new Yukon comes hot on the heels of a redesigned Cadillac CTS that has received rave reviews and last year's hits, the Enclave/Outlook/Acadia 3-row crossover SUVs. Next on deck is a redesigned Chevrolet Malibu (and a freshened Pontiac G6) and a redesigned Pontiac Vibe.
The big hype will come in 2009 when the Chevrolet Volt is scheduled to appear. The Volt is a plug-in hybrid that uses lithium batteries. Even more radical is that the Volt will be the first car built on a new architecture, the Flex or E-Flex platform that can accommodate almost any power source, from batteries, to hybrid, to hydrogen fuel cell. Opel, GM's European division, even came up with a concept car called the Flextreme that craps Segways.
Judging from future product plans, GM is taking a "it ain't over till the fat lady sings" approach. Chrysler and Ford seem to be auditioning big women wearing viking helmets.
Hybrid SUVs and Flex platform are Big Deals
Time magazine this week joined a chorus of praise for GM's recent and upcoming new products. Later this year, General Motors is expected to introduce a "two-mode" hybrid version of the GMC Yukon full-size SUV. The all-new hybrid system is reported to deliver (2008 scale) EPA ratings of 20 city and 22 highway, about a 40% increase in fuel economy. At the same time, the truck still has V-8 performance and can tow 6,000 lbs. The new Yukon comes hot on the heels of a redesigned Cadillac CTS that has received rave reviews and last year's hits, the Enclave/Outlook/Acadia 3-row crossover SUVs. Next on deck is a redesigned Chevrolet Malibu (and a freshened Pontiac G6) and a redesigned Pontiac Vibe.
The big hype will come in 2009 when the Chevrolet Volt is scheduled to appear. The Volt is a plug-in hybrid that uses lithium batteries. Even more radical is that the Volt will be the first car built on a new architecture, the Flex or E-Flex platform that can accommodate almost any power source, from batteries, to hybrid, to hydrogen fuel cell. Opel, GM's European division, even came up with a concept car called the Flextreme that craps Segways.
Judging from future product plans, GM is taking a "it ain't over till the fat lady sings" approach. Chrysler and Ford seem to be auditioning big women wearing viking helmets.
Union Politics may KO Chrysler Contract
The Chief of the UAW bargaining committee that negotiated the tentative contract with Chrysler, LLC. that was announced last week now says the contract isn't good enough, and he's lobbying union leaders to vote against it.
According to Bloomberg.com, the union official Bill Parker, from Sterling Heights, Michigan is in somewhat of a power struggle with union head Ron Gettelfinger, and he's urging union leaders to vote against the deal in a vote scheduled for today. His chief objection is that the contract does not have any of the future work guarantees that the GM contract includes. Also, there's no guarantee that temporary workers will be offered permanent status.
If I were a UAW member, both of these items would be a big deal to me. While I don't expect that Chrysler will cave on guaranteeing future cars for any given plant, it seems to me that they should give in on the point about the temporary workers.
As an outsider looking in, it seems to me that the UAW-GM negotiating team did an excellent job at not only striking the best deal available, but also working through the political problems to sell the contract to the rank and file. (Although I didn't post on the subject, the GM deal was approved last week by a comfortable margin, though locals at a few component plants (without future work guarantees) rejected the deal.) In comparison, the Chrysler deal seemed rushed. The five hour "strike" was a joke. Whereas strategic leaks prepared the way for a positive spin campaign for ratification, there was no such preparation in the Chrysler deal. Even now, I haven't seen a copy of the proposed "white paper" contract posted on the web, and if I were a Chrysler UAW member, I'd be suspicious that somebody is trying to put one over on me.
Tune in for more information.
The Chief of the UAW bargaining committee that negotiated the tentative contract with Chrysler, LLC. that was announced last week now says the contract isn't good enough, and he's lobbying union leaders to vote against it.
According to Bloomberg.com, the union official Bill Parker, from Sterling Heights, Michigan is in somewhat of a power struggle with union head Ron Gettelfinger, and he's urging union leaders to vote against the deal in a vote scheduled for today. His chief objection is that the contract does not have any of the future work guarantees that the GM contract includes. Also, there's no guarantee that temporary workers will be offered permanent status.
If I were a UAW member, both of these items would be a big deal to me. While I don't expect that Chrysler will cave on guaranteeing future cars for any given plant, it seems to me that they should give in on the point about the temporary workers.
As an outsider looking in, it seems to me that the UAW-GM negotiating team did an excellent job at not only striking the best deal available, but also working through the political problems to sell the contract to the rank and file. (Although I didn't post on the subject, the GM deal was approved last week by a comfortable margin, though locals at a few component plants (without future work guarantees) rejected the deal.) In comparison, the Chrysler deal seemed rushed. The five hour "strike" was a joke. Whereas strategic leaks prepared the way for a positive spin campaign for ratification, there was no such preparation in the Chrysler deal. Even now, I haven't seen a copy of the proposed "white paper" contract posted on the web, and if I were a Chrysler UAW member, I'd be suspicious that somebody is trying to put one over on me.
Tune in for more information.
Friday, October 12, 2007
UAW/Chrysler Have a Deal - A Secret One
If you blinked you missed the strike, which lasted all of about 5 hours on Wednesday. Now there's a tentative deal, but two days later, there's not much info available on what the deal includes. Here's a link to what the Detroit News has published, but don't feel like you have to click on it, because it doesn't say much. Yeah, there's a VEBA, but at 55-60% funding as opposed to the GM deal which funds at 70% if everything goes right. Yeah, there's a two-tier wage scale, but nobody is saying what those wages are. Yeah there are job guarantees, but not for any particular plant. For my UAW-LSP readers - what about legal services? No information.
I'm guessing the UAW has put a clamp on disclosure of the terms while they spin up the hype machine in anticipation of a ratification fight. There's no question the union had to give up substantial ground, and they were working from a weak bargaining position. The rank and file is not likely to be pleased. It looks to me though, that this fight may have been lost when Chrysler was spun off from Daimler Chrysler. The resulting entity was undercapitalized, with an aging product line and very few replacements in the product pipeline. Chryslerberus was not in a position to guarantee replacements for given plants when the replacements have not been designed or projected.
The Chrysler of 2007 looks a lot like the American Motors of the late 1970s. AMC was reduced to rebadging the Gremlin as the "Spirit" and putting 4WD on the Hornet and calling it the "Concord". In the end, they weren't fooling anybody. In 1979 AMC was purchased by Renault, which saw value in Jeep and wanted to enter the American market. Things didn't work out, and in 1987, Renault's interest in AMC was bought out by a resurgent Chrysler. Renault has been doing well in Europe in recent years and is looking to re-enter the U.S. market. It would be ironic if Cerebus sells Chrysler to Renault.
If you blinked you missed the strike, which lasted all of about 5 hours on Wednesday. Now there's a tentative deal, but two days later, there's not much info available on what the deal includes. Here's a link to what the Detroit News has published, but don't feel like you have to click on it, because it doesn't say much. Yeah, there's a VEBA, but at 55-60% funding as opposed to the GM deal which funds at 70% if everything goes right. Yeah, there's a two-tier wage scale, but nobody is saying what those wages are. Yeah there are job guarantees, but not for any particular plant. For my UAW-LSP readers - what about legal services? No information.
I'm guessing the UAW has put a clamp on disclosure of the terms while they spin up the hype machine in anticipation of a ratification fight. There's no question the union had to give up substantial ground, and they were working from a weak bargaining position. The rank and file is not likely to be pleased. It looks to me though, that this fight may have been lost when Chrysler was spun off from Daimler Chrysler. The resulting entity was undercapitalized, with an aging product line and very few replacements in the product pipeline. Chryslerberus was not in a position to guarantee replacements for given plants when the replacements have not been designed or projected.
The Chrysler of 2007 looks a lot like the American Motors of the late 1970s. AMC was reduced to rebadging the Gremlin as the "Spirit" and putting 4WD on the Hornet and calling it the "Concord". In the end, they weren't fooling anybody. In 1979 AMC was purchased by Renault, which saw value in Jeep and wanted to enter the American market. Things didn't work out, and in 1987, Renault's interest in AMC was bought out by a resurgent Chrysler. Renault has been doing well in Europe in recent years and is looking to re-enter the U.S. market. It would be ironic if Cerebus sells Chrysler to Renault.
Wednesday, October 10, 2007
Could GM's VEBA be DOA?
Objections at the SEC to $4.4 Billion IOU
Workers and a retiree have filed objections at the Securities and Exchange Commission to the issuance of a $4.4 Billion "convertible note" that is a core part of the Voluntary Employees Benefit Agreement or VEBA that was negotiated with the UAW as a means to fund retiree health care. The objections cite failure to disclose the risks inherent in GM's financial condition, and the risk the note would be wortheless if GM files bankruptcy. According to the Detroit News, despite the objection the VEBA is likely to be approved by the US District Court in Detroit.
Objections at the SEC to $4.4 Billion IOU
Workers and a retiree have filed objections at the Securities and Exchange Commission to the issuance of a $4.4 Billion "convertible note" that is a core part of the Voluntary Employees Benefit Agreement or VEBA that was negotiated with the UAW as a means to fund retiree health care. The objections cite failure to disclose the risks inherent in GM's financial condition, and the risk the note would be wortheless if GM files bankruptcy. According to the Detroit News, despite the objection the VEBA is likely to be approved by the US District Court in Detroit.
Chrysler Strike Deadline 11:00 AM Today
Collective bargaining between the UAW and Chrysler, LLC., is expected to continue right until the deadline for strike, 11:00 AM today. What's going to happen then is anybody's guess. Unlike the GM-UAW contract, there have not been leaks suggesting the parties are very close to a deal.
Chrysler dealers are awash in inventory for everything except the 2008 minivans. Chrysler has already scheduled temporary shutdowns for six plants. Just yesterday, Chrysler announced layoffs of thousands of white collar workers and contractors.
There is a very real possibility of a worst-case scenario for the UAW here. The UAW strikes. Cerebus then uses costs of a strike as a justification for shutting the company down and selling it off piecemeal, a strategy that many people have said has always been Cerebus's plan for the company. The retirees get whatever has been set aside already, nothing more. It seems to me that it would be better to just continue working under the current contract until the company threatened a lock-outm then negotiate on give-backs. What do I know, I'm just a lawyer.
Collective bargaining between the UAW and Chrysler, LLC., is expected to continue right until the deadline for strike, 11:00 AM today. What's going to happen then is anybody's guess. Unlike the GM-UAW contract, there have not been leaks suggesting the parties are very close to a deal.
Chrysler dealers are awash in inventory for everything except the 2008 minivans. Chrysler has already scheduled temporary shutdowns for six plants. Just yesterday, Chrysler announced layoffs of thousands of white collar workers and contractors.
There is a very real possibility of a worst-case scenario for the UAW here. The UAW strikes. Cerebus then uses costs of a strike as a justification for shutting the company down and selling it off piecemeal, a strategy that many people have said has always been Cerebus's plan for the company. The retirees get whatever has been set aside already, nothing more. It seems to me that it would be better to just continue working under the current contract until the company threatened a lock-outm then negotiate on give-backs. What do I know, I'm just a lawyer.
Monday, October 08, 2007
Chrysler in the Crosshairs
UAW says contract or Strike by Wednesday
An interesting battle is shaping up between the UAW and Chrysler, LLC. The UAW set a deadline of Wednesday to either come up with a tentative contract or strike Chrysler. This will be the first contract under Cerberus management. Even though General Motors was fiscally overdrawn at the time of its contractual negotiations, GM could look forward to a fairly broad lineup of competitive new products in the pipeline. Chrysler is somewhat more solvent in today's dollars, but it's future product pipeline is really an empty cupboard. The prospect of a strike probably doesn't scare Cerberus too much. Even though we are only a month into the new model year, six plants are temporarily idled for lack of business. With Cerberus, the UAW will be dealing with private management who are very capable of, and possibly predisposed to, breaking up the company.
What can we expect from the new Chryslerberus contract? Expect lots of pressure on healthcare benefits for both active and retired workers. If there is a VEBA, you can expect that it will not be funded at the same level as the GM plan.
UAW says contract or Strike by Wednesday
An interesting battle is shaping up between the UAW and Chrysler, LLC. The UAW set a deadline of Wednesday to either come up with a tentative contract or strike Chrysler. This will be the first contract under Cerberus management. Even though General Motors was fiscally overdrawn at the time of its contractual negotiations, GM could look forward to a fairly broad lineup of competitive new products in the pipeline. Chrysler is somewhat more solvent in today's dollars, but it's future product pipeline is really an empty cupboard. The prospect of a strike probably doesn't scare Cerberus too much. Even though we are only a month into the new model year, six plants are temporarily idled for lack of business. With Cerberus, the UAW will be dealing with private management who are very capable of, and possibly predisposed to, breaking up the company.
What can we expect from the new Chryslerberus contract? Expect lots of pressure on healthcare benefits for both active and retired workers. If there is a VEBA, you can expect that it will not be funded at the same level as the GM plan.
Friday, October 05, 2007
Restrictions on Medical and Dental Care in
GM/UAW Agreement
Even though the Union hosted 30 minute presentations and published a 22 page summary of its new tentative agreement with General Motors, apparently there wasn't sufficient time/space to fess up to significant (but not earthshaking) reductions in health and dental coverage. According to the Detroit Free Press at freep.com, PPO and HMO plans will be sharply limited. Under the new default plan, union members and their family will now have a $25.00 co-pay per doctor appointment, with five appointments per year per family. The article mensions that dental HMOs will be eliminated, but it does not state that dental coverage in general is eliminated.
GM/UAW Agreement
Even though the Union hosted 30 minute presentations and published a 22 page summary of its new tentative agreement with General Motors, apparently there wasn't sufficient time/space to fess up to significant (but not earthshaking) reductions in health and dental coverage. According to the Detroit Free Press at freep.com, PPO and HMO plans will be sharply limited. Under the new default plan, union members and their family will now have a $25.00 co-pay per doctor appointment, with five appointments per year per family. The article mensions that dental HMOs will be eliminated, but it does not state that dental coverage in general is eliminated.
Thursday, October 04, 2007
September Sales Grades:
Honda: A
GM: B-
Chrysler: C-
Ford: DDD
Auto sales in September were a mixed bag, but Honda scored its best month ever, with sales up 13.8% from last year. That's what a new Accord and blow-out deals on 07s will do for you. General Motors eked out a respectable 3.7% increase without undue incentive spending. Chrysler sales were down 1.5%, not too bad considering the new minivans hadn't hit the showrooms yet. Some troubling signs for the Chryslerberus folks, sophomore year sales of the Dodge Caliber and Jeep Compass were both down over 20%. Chrysler has scheduled two-weeks downtime for the Illinois plant that makes the Compass and Caliber.
The biggest loser was Ford with sales down 21%, a DOUBLE DIGIT DECLINE - DDD. Keep in mind, this is a decrease from 2006, a year when Ford lost over $12 billion. Ford would like to attribute the decrease in sales to a reduction in planned fleet sales. (The car division was down 45%.) Still, retail car sales were down more than 15%. The brand new Taurus (unlike the old Taurus which was selling briskly to fleets last year) seems to be glued to the dealer lots. Ford just upped the incentive from $500 to $1000 because sales are below the Five Hundred's anemic levels.
The bottom line is that Ford is just now starting to feel the full effects of years on skimping on new product design. With almost all cars on the market being at least "good", Ford loses out whenever a competitor introduces "better". Ford is at least a year away from the introduction of its new F150 pickup line. The only thing new between now and then is the new Focus, a car that has been criticized for being a mere facelift of the old one. As will be discussed in an upcoming post, Ford is the next company up for UAW contract talks. It's going to be a rough year for the blue oval.
Sources
http://www.nytimes.com/2007/10/03/business/03auto.html
http://www.autoblog.com/2007/10/02/by-the-numbers-september-2007/
http://www.detnews.com/apps/pbcs.dll/article?AID=/20071003/AUTO01/710030372/1148
Honda: A
GM: B-
Chrysler: C-
Ford: DDD
Auto sales in September were a mixed bag, but Honda scored its best month ever, with sales up 13.8% from last year. That's what a new Accord and blow-out deals on 07s will do for you. General Motors eked out a respectable 3.7% increase without undue incentive spending. Chrysler sales were down 1.5%, not too bad considering the new minivans hadn't hit the showrooms yet. Some troubling signs for the Chryslerberus folks, sophomore year sales of the Dodge Caliber and Jeep Compass were both down over 20%. Chrysler has scheduled two-weeks downtime for the Illinois plant that makes the Compass and Caliber.
The biggest loser was Ford with sales down 21%, a DOUBLE DIGIT DECLINE - DDD. Keep in mind, this is a decrease from 2006, a year when Ford lost over $12 billion. Ford would like to attribute the decrease in sales to a reduction in planned fleet sales. (The car division was down 45%.) Still, retail car sales were down more than 15%. The brand new Taurus (unlike the old Taurus which was selling briskly to fleets last year) seems to be glued to the dealer lots. Ford just upped the incentive from $500 to $1000 because sales are below the Five Hundred's anemic levels.
The bottom line is that Ford is just now starting to feel the full effects of years on skimping on new product design. With almost all cars on the market being at least "good", Ford loses out whenever a competitor introduces "better". Ford is at least a year away from the introduction of its new F150 pickup line. The only thing new between now and then is the new Focus, a car that has been criticized for being a mere facelift of the old one. As will be discussed in an upcoming post, Ford is the next company up for UAW contract talks. It's going to be a rough year for the blue oval.
Sources
http://www.nytimes.com/2007/10/03/business/03auto.html
http://www.autoblog.com/2007/10/02/by-the-numbers-september-2007/
http://www.detnews.com/apps/pbcs.dll/article?AID=/20071003/AUTO01/710030372/1148
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