GM Chrysler Merger?

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    Gary Cone

    A lot of peoples lives are about to be devastated and a lot of you
    that have spend many years of your life trying to make things
    better are about to have your work thrown away. I wrote the
    following to the governors of the states most affected and to the
    Premier of Ontario who is also greatly affected. I don’t pretend to
    know all the answers, but it’s time to cry foul about the three issues
    I list here. If you agree, contact the leaders of your state or
    province. If you disagree, put your ideas out here or on my blog.
    the full text is @ Open letter to Governors Strickland (D – Ohio), Daniels (R –
    Indiana), Granholm (D – Michigan), and Premier McGuinty (Liberal –
    Ontario) – The Buck Stops Here (please)Your economy stinks and it is getting worse. It is in no small way
    being influenced by The Big Three US Automakers. And it is about
    to be made dramatically worse. This is either going to be because
    GM or Chrysler or both go bankrupt or they merge. Merge is a kind
    word, it is really that Chrysler will be bought and the lives of
    people who have dedicated their careers to Chrysler will be
    devastated.First, let me say that I agree with Governor Granholm that the
    merger is the lesser of the two evils and because that is true, it is
    what is going to happen.Why is this happening? I know people will point to Wall Street and
    the financial crisis and the corporate greed and all of today’s
    headlines and there is some truth to that, but the truth is that both
    of these once great companies have been in decline for a half of a
    century and today’s headlines are the corporate equivalent to bird
    flu – the weakest of the population die. Period, end of story. The truth is all of the indicators have been there and every one of
    you has examples in your area of companies that have done the
    opposite. Think Toyota and Honda. What is different? Three factors
    – 1) Toyota and Honda have a local supply chain to a much greater
    extent than the Big 3. The Big 3 have “saved” billions by going to
    an Asian supply chain. Wow, some savings. What they have really
    done is avoided the hard work of building a competitive supply
    chain locally. You, nor the leadership of the Big 3 can do anything
    about the sins of our forefathers, but you can make sure that any
    concession is you grant in the future guarantee the rebuilding of
    local supply chains. Read The Machine that Changed the World if
    you are unclear about the concept.2) Toyota and Honda don’t have the “legacy” costs of the Big 3.
    True, but this should have been “pay as you go” and it wasn’t. GM,
    Ford, and Chrysler are on the hook for promises made decades ago
    and not funded or funded and lost in high risk investments. Toyota
    and Honda are paying a living wage to their workers; in fact you
    will find they are preferred employers everywhere they go. You, nor
    the leadership of the Big 3 can do anything about the sins of our
    forefathers, but you can make sure that any concessions you grant
    in the future come with a guarantee to “pay as you go” and low risk
    investment.3) The cost of the leadership overhead. This comes in two forms,
    number of layers of management and executive compensation. Go
    look at the org charts of GM and Toyota, notice any difference in
    the number of levels? Five is ideal and has been documented
    thousands of places. The Big 3 (still) have a lot more. Executive
    compensation – G Richard Wagoner Jr. Total Compensation: $8.5
    million 5-Year Compensation Total: $22 million – Alan Mulally $2
    million base, $18.5 million bonus – Robert Nardelli reportedly $1,
    but let’s see what happens at the sale. Sorry Rick, Alan, and Bob – I
    believe that you deserve to be paid well but that’s obscene while
    you are presiding over the destruction of people’s lives that have
    dedicated their lives to your companies. In a reflection of Toyota’s
    team-oriented approach, its executive pay is paltry by U.S.
    standards. Analyst Ron Tadross at Banc of America Securities
    estimates the total annual compensation of Toyota’s CEO at under
    $1 million – about as much as a vice president at GM or Ford Motor
    Co. makes. At the risk of being rude, it’s time to stop the bullsxxt.

    Governors Strickland, Daniels, Granholm, and Premier McGuinty;
    you are going to be asked for concessions by these companies.
    Think about the concessions you should be demanding of them.
    The Buck can stop here (in the mid Americas) and also not in just a
    few hands.Gary



    Keep us posted on how this turns out.  I’m very curious.



    Gary C
    I think your questioning of top execs pay is absurd. GRW jrs pay is not even a blip on the radar. GM spends $2+BILLION in advertising a year, with 9% of that in online advertising. This year they cut that budget by 200 million. One plant with a thousand employees has a base salary of 1.2 million a week. WHY, Union Labor. If you want to point fingers, don’t point at top exec’s or wall street. Point out the Labor Unions that have forced these companies to the brink.
    The only thing I agree with you on is Layers of Top Execs is too deep, But in case you haven’t read the papers over the last year, GM and Ford both have made substantial cuts in these areas. But once again the amount of capital gain is a pimple on an elephants butt.
    Toyoto and Honda work there people to death, Salaried people work on average 60-70 hrs per week. Quality pay for Quality of Life, SUCKS.
    What has happened is two things. One, Transportation cost and cost of raw materials have outpaced the ability to increase price of goods sold, (Two)This coupled with increasing oil prices and fear of recession has flattened or even decreased sales. Leaving absolutely no room to grow the market in different areas.
    Also your comment that GM will buy Chrysler is wrong. Chrysler is owned by Capital Management a private equity firm. GM’s stock has fallen $43 a share and is now less than $5 a share. Chrysler being held by a private firm no longer needs to report finances (Wall Street Journal-10/31). Also GM was placed on Negative Credit watch Thursday by the Standard & Poors rating firm. If a merger happens it will be Chrysler taking the rains, Not GM
    So I guess to answer your question, NO I don’t agree


    Gary Cone

    You have governors of five states going to the fed to provide
    financing for the deal. It’s going to happen.Thanks for your take on the other items – good food for thought.


    Zoltan Minsky

    What really needs to be merged is labor classifications, which result in structural inefficiencies that saddle assembly plants with excess cost, and poor quality.  Watch the typical supervisor in a Big 3 Assembly plant for a day and you will see that they spend 80% of their time in non-value-added activities that revolve around poor workmanship, poor attendence, poor attitudes, and poor behavior, all of which is protected by the union contract to the point of absurdity.  Then go visit Toyota or Honda and you will see supervisors and line employees actually working together to improve quality and productivity.  I’ve seen both first hand, and there is a STRIKING difference.  A merger just postpones the inevitable if the underlying root structural issues are not fixed. 


    UofM Fan

    Aren’t you the kicker for University of Michigan?You would think that the Big 3 would stop hiring all of those people
    with bad attitudes. Boy are they dumb.


    Zoltan Minsky

    Yes, I am the kicker for UofM, and I’m totally exhausted from kicking so many extra points this year!



    Very well put.  As a former Chrysler employee (now THANKFULLY working for Daimler since the split), I lived your message for 10 of the last 11 years.  The Big3 have played the game of “trade the top managers” for years.  These individuals come into the organization for a short while, spin their version of redemption and savior, then leave the organization in worse condition than they found it.  They have been headed for bankruptcy for years — a merger just buys time.  However, each quick fix gets shorter, and our American ecomony (and the lives that it represents) is made the worse as a result.  Something for Nardelli to ponder when he cashes his check…



    If you’re still working in automotive… congratulations you’re stupid.  The writing has been on the wall for decades.

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