American Auto Industry MUST Restructure

Boblutz by eschipul
A local auto dealer has an opinion piece in the Chronicle titled "Extend bridge loan to GM or the country will suffer" in support of an auto bailout. General Motors is using Paulson scare tactics with their "GM Facts and Fiction – GM Tells It Like It Is" site. From a PR perspective they lose ALL authenticity when they state things like:

And, due to supplier bankruptcies, domestic automobile production would
most likely fall to zero, even by international producers.

Really? Toyotoa and Honda who make cars profitably in the US will shut down as well? You lose ALL credibility taking such extreme positions. The Chron also has a great counterpoint on letting the automakers fail.

One article I read recently stated "US Auto Makers don't have a problem, US Owned Auto Makers have a problem." This is true.

The elephants in the room? Leadership and Labor. Labor says they have ruled out helping with the current crisis. If they won't even help themselves, why should we?

Here is the thing. High wages, 100% paid health benefits and a pension are things that the rest of America does NOT get. To ask American's to pay for your health care and pension is effectively using our tax dollars for your socialized benefits. Great for them, but not for my kids. The stats are painful:

…the average Big Three auto worker is paid
more than $72 per hour in wages and benefits ($150,000 per year,
compared to $48 per hour, or $100,000, for a Toyota worker), and where
union-negotiated work rules such as "job banks," a cute little
euphemism for paying large numbers of employees not to work, are

The counter point from a left leaning blog states on unions and auto manufacturer woes:

Unions do not deserve the blame placed on them by the right wing. In fact, unions have repeatedly made concessions to auto executives over recent years. Contrary to Kyl’s claim, new auto employees earn $25.65 an hour.

Did you see it? The part where they say "new auto employees". Employees who have been there a long time, the majority of them, still receive the $72 an hour in wages and benefits. UAW remains in denial – your success is tied directly to the success of the company.

How do we SOLVE the problem of the US Auto Manufacturers. A common sense blueprint:

  1. Bankruptcy Reorganization – this is a necessary legal first step.
  2. Eliminate the current executive team for the companies with pragmatists.
    1. Clawback provisions for all bonuses given in any year they did not make a profit. The goal of business is to make a profit. If you don't do that you failed. So be accountable.
    2. Renegotiate all management contracts for those you want to keep.
    3. Eliminate golden parachutes – no pay for failure.
  3. Replace the UAW leadership which has is not doing the membership any favors.
  4. Restructure employee contracts to:
    1. Pay for work only. No more job banks period. You work, you get paid. That's it.
    2. Pensions – reduce valuation on current obligations. New employees on self funded pensions or 401ks with minimum matching. We all know the auto worker pensions is going to roll over to the taxpayers anyway so do it now with as much transparency as possible, but also a lower payout.
    3. Eliminate job security – you have a right to work. And you have a right to lose your job if the company fails (see 2.1 above). This will make employees hold management accountable to innovate. And coincidentally its the deal almost every other worker in America has. We work, we get paid, nothing is guaranteed. Sorry. Life's not fair.
    4. Reduce average pay for ALL employees from $72 to $40 per hour. This brings compensation into line with American workers working for Toyota or Honda in the US.
    5. Employees pay 50% of all healthcare. If an employee does not participate in the expense they have no incentive to minimize costs.
    6. Stop lobbying AGAINST energy independence and higher fuel efficiency vehicles. This position is literally Anti-American. Our bailout dollars to lobbyists arguing against the long term health of our country is completely unacceptable.

Do I want the United States to retain its strong manufacturing base? Absolutely!

I am not against financial assistance of auto manufacturers, but first they must make the hard decisions that every other business makes. The days of CEOs coming in, giving the union everything they want, dancing off with their golden parachutes leaving the next one to "solve the problem" are over. Step up, be accountable, get it done.

Do I understand that unemployed workers are bad? That real families are hurt, that the struggle to find a new job is very difficult and that bankruptcy would irrevocably change the entire landscape of Detroit? Yes. Just as 9-11 changed the world, so too does this change everything. I wish it wasn't the case. But it is. May you live in interesting times.

Solution 1: New Management. New Lower Cost Contracts. No Guarantees. Build Good Cars.

Do that.

The photo?
Bob Lutz speaking to the PRSA International Conference. To one question he stated "Bankruptcy is not an option for GM" – sorry Bob, but it is. The GM leadership team has led the company down the path of the unthinkable. And this is what it looks like.

Economics DO Matter for your Brand – Learning from GM

GeneralmotorsbrandofprogressGeneral Motors, the once might house of vehicle brands, is ailing.  Primarily in my opinion from poor economics.  They have been writing checks they can’t cash in the form of expected future growth (pensions, union agreements, etc.) and unrealistic forecasts while stepping away from pricing theory.  The bankruptcy of Adelphia left everyone wondering when GM would fail driving them to actually run ads countering the notion of a GM bankruptcy.  (image info below)

That said, strong brands could have helped GM prevent the pending train wreck futureliner crashThe Rieses have fun with the lack of consistent brand identify of GM product lines in their book "The Origin of Brands".  And Rance Crain is piling on with his latest article in

Automaker Considers Ad Campaign to Adress Bankruptcy Rumors
January 23, 2006, Rance Crain

General Motors is considering an ad campaign to dispel the widespread notion it might go bankrupt. “As much as I hate to do this, we’re probably going to have to do something proactively on the marketing side just to address that issue,“ GM’s marketing boss, Mark LaNeve, told The Wall Street Journal. “How you do that, I don’t know. It’s a tough thing because you really don’t want to go there.“

GM doesn’t need to go there. What it needs to do, in a forceful and surefooted way, is trumpet the new vehicles that are coming on line, talk about how it’s lowering prices across the board to be an attractive buy without incentives, and, in general, act like a winner. And please, no more whining about how it’s got to create a level playing field to compete. (more)

As for the top image, that is a screen shot of a web site that has images of the GM Futureliners from the 1930s linked from BoingBoing and a variety of other blogs.  I chose it because the irony of such forward future thinking crossed with the current situation for GM illustrates where they have stepped away from the heart of the brand.  From

The GM Futureliner It began with the Streamliner and GM’s 1936 Parade of Progress, the brainchild of inventor Charles F. Kettering. The show was a tremendous success. Redesigned in 1941 and again in 1953, the 12 Futureliners and its band of Paraders were ready to hit the road, set up shop in a town near you, and showcase the marvels of science. Of the original 12 built, 9 have been found, 2 are being used for parts, 1 is for sale, and 1 is being lovingly restored by a group of volunteers. [more inside]
posted by snez at 12:45 PM PST

For those of you interested in the future, consider attending the IABC event in Houston tomorrow with Dr. Peter Bishop.  More info on that in full microformat hCal glory.

Riding the Future’s Waves of Creative Destruction
Dr. Peter C. Bishop Futurist, and Associate Professor in the College of Technology and Coordinator of the graduate program in Futures Studies
University of Houston

Thu 26-Jan-06 11:30 AM to Thu 26-Jan-06 1:00 PM

GM to use OnStar for Social Software Integration – still pending

GmonstaremailI previously posted on General Motors and how I think they should use some of the OnStar data in a social software capacity.  Yes we can GET data, the question is can the group of humans share that data in a meaningful way.  The good news is per the advertisement to the left GM is now offering to email a summary of your data.  This is smart and good for the brand.

Specifically what I would like to see added from a social software data perspective is:

  1. Let people indicate if they want to share their mileage data
  2. For the people who specifically choose to share their data, open it up to the world so it looks something like this tag view from Technorati, except ranked by mileage.   (note the highest rank is at the top – then ask why)
  3. Consider opening the OnStar up as a licensed service to other manufacturers.  Go honestly toe-to-toe on improving gas mileageProgressive does this with insurance telling you even if they are NOT the lowest cost, which makes me think all sorts of warm-fuzzies about the Progressive brand.

GM use Onstar to tell us about our mileage and driving?

I don’t drive a GM.  But of course I see the commercials and news stories about OnStar.  Typically they read like this:

…arrested Friday evening after police located the dead woman’s missing car through its OnStar electronic tracking system… (snip)

HummerSo if you are really in a bad spot, or are dead, OnStar is awesome.  Your personal electronic tracking system.

Why can’t GM turn this into a bigger net positive?  I want a monthly email or personal rss feed with my mileage and vehicle performance.  Maybe allow me to allow them to choose to share the data about my imaginary hummer with the public like flickr does with photos.  We all know that mileage for cars as advertised is wildly off, so why doesn’t GM or another manufacturer be the first to be HONEST and start posting real live data?

Maybe a "monthly best driver" award for people who get the best gas mileage above the rating, and again this is only for people who specifically choose to sign up.  But if OnStar is IN the car, surely it can tell the mileage and report back on starts and stops to determine city/highway and then the actual mileage.  The data is nothing new, but make it a social promotion.  GM should become leaders at encouraging people to get good gas mileage and tout the success stories through this competitive advantage.

It might even help GM become knows as an environmentally friendly company (or not, just saying…)

Another by-product would be there are those people out there who would hack their GM cars to get better gas mileage so then they can have two categories.  Gas mileage for factory and gas mileage for custom eco-hacks of GM cars.  What great PR this would be for them.  People might even take their car in for service complaining of bad gas mileage helping GM improve further.

Just a thought on a rainy day.