Michigan needs a Turnaround
by John G. Agno
Published on this site: March 9th, 2006 - See
more articles from this month
Ever since Henry Ford's revolutionary offer of $5 minimum
wage for a day's work, the State of Michigan has led the nation
in providing excellent wages and benefits to its factory workers.
This has allowed factory workers to live well, educate their
children and provide a high standard of living for most Michigan
residents. An overextension of progressively generous manufacturing
wages has now become a weakness in today's competitive global
economy.
The downward spiral of automotive industry bankruptcies has
begun to reduce wages and legacy benefit costs within Michigan
auto manufacturers. Of course, cost cutting alone will not
turnaround Michigan's automotive industry-driven economy. Perceptions of management, labor, political leaders
and educational priorities must evolve to generate the revenue
growth necessary through producing world-class products and
services.
For example, General Motors (GM) is tied closely to its biggest
supplier, Delphi, who is entangled in bankruptcy. The bankruptcy
court has told Delphi, GM and the union to come up with a
plan by August for getting Delphi out of bankruptcy. The whole
Delphi affair has angered UAW members. With union emotions
running
high, calling for a strike that doesn't make sense could happen.
A strike may be enough to push GM over the bankruptcy cliff.
GM is burdened by legacy costs of health care and other benefits
for a total of 1.1 million employees, retirees and dependents.
At the end of 2004, the latest date for which figures are
available, GM's pension funds (both inside the U.S.
and out) had $100 billion in assets - which is wealth belonging
to GM's employees, retirees and dependents. To that you can
add $19 billion that GM has banked for its employees. In contrast,
the shareholders of GM recently owned $13 billion in market
value. The bottom line is GM's hourly and salaried
employees, present and past, essentially own the company.
A GM bankruptcy would allow the company to reduce its liabilities
to a manageable size while continuing to sell its products.
Make good cars and buyers will come is a myth
Today, General Motors makes very good cars that few people
are buying. There are many reasons for this lack of revenue
creation and declining market share. The reputation of manufacturing
poor quality and unreliable cars is not easily changed, especially when this year's Consumer Reports lists
all top ten recommended automobiles made by foreign producers.
Consumer Reports rates GM's improvements as "inconsistent"
and ranks most of its cars as also-rans-even while J.D. Power
gives many of GM's cars top grades.
Buyers are smart and two-thirds of them do comparison
shopping on the Internet.
The lack of innovative styling of GM's stable of automobiles
has not engaged prospective buyer emotions. The lack of styling,
coupled with the perception that GM doesn't make cars as reliable
as those of foreign producers, results in a lack of buyer
interest. Most buyers are giving up on GM vehicles and turning
to foreign cars. Consumer memories are long and their motivation
for returning to GM small.
What's good for General Motors is good for Michigan and,
perhaps, the U.S.A.
Source: The Tragedy of General Motors, FORTUNE, February
20, 2006
John G. Agno, certified executive & business coach
Signature, Inc., PO Box 2086, Ann Arbor, MI 48106 Telephone: 734.426.2000 (US
Eastern Time Zone)Email: mailto:[email protected]The
most critical knowledge is self-knowledge. http://www.MentoringandCoaching.com
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