TOUGH CHALLENGE FACED BY DETROIT'S BIG 3 AUTOMAKERS
If they couldn't react to falling market share in the eighties & nineties by building a small car why will now be different? For the head of GM pride could be a strong motivator. Who wants to be remembered as the guy who bankrupted an American icon?
They can draw a big fancy plan showing how they're going to make some big changes. They might even be able to get the UAW to renegotiate their contract. After all, in bankruptcy, all cards would be on the table for them anyway. The auto workers will be asked to drop the demands that they get paid $75 per hour (effectively with benefits included) when the non-union auto workers at the assembly plants operated by Toyota, Nissan, Honda, BMW and others make much less. The contributions to the pensions are in jeopardy and the controversial "Job Bank," where idled-auto workers received most of their compensation is history.
The Clock Is Ticking • Time to Talk Turkey
The process has begun. What Bush did is tell all the Players that they've a few months to work it out or this whole deal will get done in Bankruptcy Court. I've heard bankruptcy judges can be very cranky. They hold very special power and when they make a decision it's not reversible, debatable, or appealable. You can't go on strike or walk off the job. The unions, the suppliers, the lenders, even the dealer network will all feel pain. Think clean sheet of paper.
Over 60% of GM's debt is about to disappear. Actually it will reappear as equity. The biggest thing that's disappearing is what few customers American car makers still have. All of this news of going out of business might create traffic and increase sales of a furniture retailer, but cars are the 2nd biggest purchase someone makes in the life next to their home. People shy away from a dealer and the brand they represent when they fear neither will be around to service what they sell. Parts availability is important and what you need to know about that is that parts are made by suppliers and they are more vulnerable than anybody in this type of cat and mouse game.
THE UAW WILL LOBBY OBAMA TO MODIFY THE RULES
The union thinks they should be excused from this Pain Game. They feel they're being singled out. They see the Republican administration playing the role of the Union Buster. They're hope is that Obama will modify the game to lesson the burden on their members. This is the mind set that got us into this mess in the first place. Ever heard of the old saw "Don't buy a car built on a Monday or Friday?" How about FORD stands for Fix Or Repair Daily?
If Obama tries to change what Bush has done then he'll face the wrath of the American taxpayer that is tired of Bailout Mania. This needs to be a new deal. All bets are off. The union better come to the table ready to humble their demands. The days of strikes and threats of work stoppages are over.
They need to look at the bright side. It's like losing a battle. The war is not over and they get to come back and fight another day.