Striking For Balance

Perry A. Trunick, chief editor,
[email protected]

“For years I thought what was good for our country was good for General Motors, and vice versa.” That’s the quote by Charles Erwin Wilson from his 1953 confirmation hearing to become Secretary of Defense. It is often misquoted as suggesting only that what is good for the automaker is good for America. In the context of the recent United Auto Workers strike and tentative contract, how does the quote play today?

A major sticking point for the union was retiree healthcare benefits. GM, and other US companies, are fast approaching the point where some will have more retirees than full-time employees as the current retirees live longer and the leading edge of Baby Boomers start retiring in large numbers. In that, it resembles the dilemma facing the US Social Security Administration. How did GM handle it? It will provide billions of dollars to the UAW to fund a voluntary employee benefit plan known as a VEBA which the union will manage on behalf of the retirees.

Another issue for autoworkers was job security, and here, GM will look at providing assurances it will perform manufacturing steps at current GM plants and will give some priority to assigning new models to existing US plants. (The Lordstown, OH plant which produces the Cobalt faces closure after 2009 if it doesn’t get another product.) With higher oil prices, a weaker US dollar, China under pressure to raise interest rates and revalue its currency, and other global economic factors that come into play in offshore outsourcing, are companies like GM already reconsidering some of their sourcing decisions? There is certainly social and some political pressure to “near shore” or bring some manufacturing back closer to the US home market.

With China, one of the benefits of starting with export manufacturing there was that initially China only allowed foreign manufacturers to produce goods for export, not for the domestic market. Those plants were a foot in the door for the time when China began to shift its attitude and allow foreign companies to develop domestic manufacturing capability. With cars especially, China may be fully capable of consuming all that a company like GM wants to produce there.

Another change in automaking is that production lines are more geared to assembly than manufacturing. Even some of that is done by vendors who deliver subassemblies, rather than components, to the line. This could allow automakers to reduce their workforce by attrition and still produce vehicles economically.

A number of other factors come into play, including concern for product quality for goods made in China and attitudes about the Made in China label. More North American content could be a plus.

Is the hard reality simply that GM was moving in this direction before the UAW provided a shove? And, aren’t other companies continually reevaluating their position to determine what mix of domestic and off-shore production makes sense? A weak US dollar promotes exports, so US-made goods may be the way to go for market reasons as well as economics. If we streamline the US-Mexico border crossing (as NAFTA already supports in providing for Mexican trucks to enter the US, and vice versa), might we repopulate the maquiladoras?

From a supply chain perspective, what’s good for GM may be good for the country. At the very least, it may be a leading indicator of what’s to come.

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