Can of Worms-Auto Industry

[DaveB]

By Steve Matthews
March 6 (Bloomberg) -- Debbie Medley landed a $15-an-hour
job at Toyota Motor Corp.'s engine plant near Huntsville,
Alabama, eight weeks ago -- a 50 percent raise from her furniture
retail job. ``You've got to pinch me to show me it's real,'' says
Medley, 43.
In January, Toyota advertised for 300 more workers at its
450,000-square-foot (41,800-square-meter) factory, where the
company is building its first V8 engines outside Japan. In four
weeks, 10,000 applications were returned, says Mark Brazeal,
assistant general manager.
In Alabama, whose northern border is some 650 miles (1,046
kilometers) south of Detroit, the automotive business is booming,
fueling one of the hottest U.S. labor markets. Toyota, Hyundai
Motor Co., Honda Motor Co. and DaimlerChrysler AG's Mercedes-Benz
unit are all expanding plants opened within the past decade,
attracted by $700 million in tax breaks given by the state and by
cheaper, non-union labor.
``Alabama wanted to diversify its economy, and it paid up to
do it,'' says Mark Vitner, an economist with Wachovia Corp. in
Charlotte, North Carolina.
Including parts suppliers, industry employment jumped 44
percent to 45,000 during the past two years, the Birmingham-based
Alabama Automotive Manufacturers Association reported in a survey
Feb. 17. Industry wages are double the state's average, though 16
percent less than Michigan's.

Local Hires

Alabama's unemployment rate dropped to 3.5 percent in
December from 5.3 percent a year earlier, the biggest decline
among the 50 states, the U.S. Labor Department reported Jan. 24.
The state's success comes while Detroit, the center of auto
manufacturing in the U.S., suffers from thousands of layoffs by
U.S.-based manufacturers.
Toyota, which is spending $500 million on the Huntsville
engine plant, will have 800 employees by year's end. Brazeal says
the Toyota City, Japan-based company has hired within a 50-mile
radius of the plant and is exceeding productivity goals.
In Tuscaloosa County, home of the University of Alabama, the
auto industry employs 8,000 people, more than in any other county
in the state. Stuttgart, Germany-based Mercedes-Benz, which
started production in 1997, recently completed a $600 million
expansion that doubled its employment to 4,000, spokesman Austin
Dare says.
Hyundai, which started production last May, has hired 2,700
people at a $1.1 billion plant in Montgomery, the state capital,
in Montgomery County, says spokesman Kerry Christopher. Tokyo-
based Honda has hired 4,500 workers and plans to take on 100
more, spokesman Ted Pratt says.

Spending Spree

The jobs are fueling a spending spree.
Larry King, 41, who has three children, contracted with a
builder for a new, larger $288,000 home outside Montgomery, nine
months after being hired by Seoul-based Hyundai. ``We had needed
it awhile but couldn't afford it,'' he says.
In Vance, Alabama, the closest city to the Mercedes-Benz
plant, 200 new homes have been built in the past three years and
240 more are planned over 18 months, says Mayor Keith Mahaffey.
Jacklin Vickers, 35, another Hyundai worker, bought her 8-
year-old daughter Adrienne a $500 Compaq computer. She is making
$20.34 an hour after 22 months, compared with the $12 an hour she
previously earned at a juice plant.

Michigan Loses

Alabama more than doubled its auto employment from 2001 to
2004, adding more such jobs than any state, according to the
Labor Department. Among the big losers is Michigan: The state
shed almost 20,000 jobs during that period, and Detroit's
metropolitan region had a 6.8 percent jobless rate in December,
surpassed only by hurricane-ravaged New Orleans, among metro
areas with at least 1 million people as of the 2000 Census.
Ford Motor Co. has announced plans to close 14 manufacturing
plants and eliminate as many as 30,000 jobs during the next six
years. General Motors Corp. will close 12 North American
operations and purge 30,000 jobs by the end of 2008.
For all the economic gains in Alabama, there has been a
cost: tax giveaways.
``We would be much better off for the states to get together
and say no more incentives,'' says Jim Couch, an economist at the
Florence-based University of North Alabama. ``It would be better
for taxpayers.''

Wages Trail

Alabama wages still trail the U.S. average. While automotive
jobs in the state paid an average of $68,531, that was less than
Michigan's $81,107 and below the U.S. average of $72,085 for the
industry, according to the Labor Department. Alabama's per capita
income is 84 percent of the U.S. average, according to the
Southern Growth Policies Board, a research group based in
Research Triangle Park, North Carolina.
More jobs are on the way from auto-parts suppliers -- and
perhaps automakers. South Korea's Kia Motors Corp. may locate a
$1.2 billion plant near West Point, Georgia, on the Alabama
border, attracted by dozens of suppliers that have already moved
to the area, says Rajeev Dhawan, an economist with Atlanta-based
Georgia State University. Alex Fedorak, a spokesman for Seoul-
based Kia, declined to comment.
``Alabama has developed a critical mass in the industry, and
it starts to build on itself,'' says John Robertson, an economist
with the Federal Reserve Bank of Atlanta.

[perchjerker]

and Michigan leads the country in unemployment and Wayne county (Detroit area) leads the country in foreclosures.

guess we should just lock up the state and take a pay cut and move down south since thats where this country is heading, to lower wage jobs. not everyone can afford to go to college even if they wanted to.

[Crappie Kid]

Sounds like good news all around. More jobs.

[Hank Williams Jr.]

Great, looks like the South has won, now let's see if we all will will have it made? You know, just like good ol boy Hank Williams Jr. sings about.

One could easily imagine they are celebrating down south like a bunch of arabs in the middle east at a George Bush idol burning party. Instead of a BUsh idol they probaly have some sort of a Yankee idol who's wearing a UAW shirt going up in flames...can hear it now, "dem der Blue state Yankee's ain't nuttin but a bunch of overpaid no good slave freeing arrogant pricks anyway, all of em'and now we gots their jobs, yuck,yuck,yuck..yeehawww!" It's high time for a new trailer and some dentist work. Close down the stills, the auto industry is here and we gots us a new way to pay the bills!

Good for them, it's about time we get more foreign investment in this country...it's whats good for America right? I can't wait until GM goes bankrupt, don't need them anyway with all this new foreign investment, right?

[overpaid]

Well, if GM employees would work for $15hr vs $28hr, GM might be able to keep the doors open. I'd love to have a $15hr job.

[Costs]

How much did it cost the states tax payers to get these jobs?

Sounds like these workers need to form a union!!

I wonder how long it will take till they do become union?

Perchjerker, Have you noticed how DaveB just loves uneducated, desperate people? I wonder why??

[Wack Arnolds]

If your looking for $15 bucks an hour then move down south to this new foreign automotive haven or better yet there are many McDonalds that are offering up to $12 bucks an hour to start where the economy is strong or there is not enough under edukated workers to fill the jobs that seemingly no one wants. Quit complaining about overpaid UAW workers, motivate yourself, do some research, set your compass and head in that direction. Likely in 6 months you'll be climbing the corporate ladder to trainer or assistant manager if your worth your grain of french fry salt. With that in mind there is hope and you will be surely topping the $15 mark in no time....

Just remember the key is to always further the sale, as in "Would you like fries with that?" "Would you like to try a extra value meal?" "How about Biggie Size?" And always throw in a Sir or Ma'm for good measure..

Stay the course and you'll be on the fast track, you'll be going from a snazzy uniform to a clown outfit in no time!

[overpaid]

Well, and I too can understand having to lower your standards of living after having that kind of income for all those years. Not easy. But..tis better to have a $15hr job than none at all.

[WoW]

For example, GM has increased its monthly pension benefits since at least 1953. A retiree with 30 years of service is eligible to receive a pension of $35,400 annually, said Kevin Duff, a GM senior consultant on pension and savings plans. That's higher, Duff noted, than the average yearly wage of an active manufacturing employee in the United States in 2005 -- $35,028 , according to the Bureau of Labor Statistics.

[Costs]

What would you rather be, A retiree from GM or Toyota?

[Choices Choices]

Yes, but with the booming service sector of the economy, ask yourself this, why in the heck would I want to go to work in a factory and do the same thing over and over everyday for the rest of my life? Plus get told at the end of the day I am needed to stay over or else, on Friday when I am planning to go fish, get told not so fast there is work on the weekend to be done, but, but, but... then all they will say is leave and you lose your job so on so forth. (without the voice of the union this will become the norm, as instant as astronauts used to mix up a batch of Tang)

I'd rather serve happy meals and have a flexible schedule with some form of health insurance, not to mention the perk of free food including McRibs (mm' good)...who knows they might even throw in some skooling for languages of the world. Since the way it looks in the future most of the paying customers will be foreigners checking up on all their state side investments, stopping in for a sample of one of the great tastes of America.

I can see it now, "Employee of Month," club here I come. I'm already learning to say Cheeseburger in 5 different languages! Can't wait to get a reserved parking spot!

[costs]

And this,


<Alabama wages still trail the U.S. average. While automotive
jobs in the state paid an average of $68,531, that was less than
Michigan's $81,107 and below the U.S. average of $72,085 for the
industry, according to the Labor Department. Alabama's per capita
income is 84 percent of the U.S. average, according to the
Southern Growth Policies Board, a research group based in
Research Triangle Park, North Carolina.>

[WHat]

> Spending Spree
>
> The jobs are fueling a spending spree.
> Larry King, 41, who has three children, contracted with
>a
>builder for a new, larger $288,000 home outside Montgomery,
>nine
>months after being hired by Seoul-based Hyundai. ``We had
>needed
>it awhile but couldn't afford it,'' he says.


OK, this guy makes 15 bucks an hour and is able to finance a 300K house, not to mention feed 3 kids??? Sounds like our banker friend Dave B. is setting up his own version of "Cop Land," for non union autoworkers, you know getting them some "special financing". How long before this guy defaults or is calling up Gettlefinger to step in to ease the pain. :rotflmao:

They never have been known for their intellect in dem der parts...

[jerry bark]

><Alabama wages still trail the U.S. average. While automotive
>jobs in the state paid an average of $68,531, that was less
>than
>Michigan's $81,107 and below the U.S. average of $72,085 for
>the
>industry, according to the Labor Department. Alabama's per
>capita
>income is 84 percent of the U.S. average, according to the
>Southern Growth Policies Board, a research group based in
>Research Triangle Park, North Carolina.>


the interesting thing here is that the "average" in alabama is 68,500 but the line guys are making $15 and hour?? that's 30K a year if they take two weeks off to go to canada.

i wonder who's making the big money up on top?

i don't think that alabama is a collective bargaining state, one of the reason these plants are being built there, so no UAW anytime soon down there. Time will tell.

re: michigan,

well we have been living and dying by the auto industry for too many generations. sooner or later we will have to admit that the horse we rode ain't gonna take us no further. the gov. (j. granholm) seems to recognize this and is trying to promote diversifying the industrial base here. we need that to happen to avoid these "down times" that we have as we lead the auto industry into its slumps and trail it on the way out. back in '79 the slogan was: "the last one out of michigan please turn out the lights."

cheers
jerry

[perchjerker]

yea, I saw that too.

no wonder we are saving less now than anytime since the great depression.

[DaveB]

I thought you guys would have some fun with that.


1) the average pay is still rather high -how they get there? I havent a clue. If they are starting at $15 an hour, maybe they are over $20 in a 2-3 years. That is $40k and it isnt bad.

2) I dont know this for sure, but do not assume that $13000 less of annual salary in Alabama is less money that extra income in Detoit. I could move to NYC or Chicago and make 40% more doing the same work as I do in MN but couldnt afford it.

Alabama=lower real estate values, lower heating bills, short commute times, lower entertainment expenses. That $15 an hour starting can go a long way. Heck, $10-15k can get you a decent 3 bedroon house in N Dak.

3) People talk about all the manufacturing jobs going to Asian. So now you are complaining that Japanese manufacturing jobs coming here and GREATLY increasing the standard of living for Americans? How do you justify that?

4) Regarding the tax breaks. Sure they cost the tax payers money. But, what sort of return does a automotive plant that employs 5,000 people net vs a sports stadium? Both benefit the people of the area, but the plant will pay for itself (5000 people X $15,000 extra income X 7% = $5,250,000 in the 1st year alone).

IMO, this is great news. Anytime peoples lives improve, it is good for America. It is more evidence, usually unreported, of great jobs being created in America. The economy is great. Unemployment is low. Incomes are up. The economy is growing (many predict GDP growth to be through the roof for 4Q 2005 when reported on 3/30, highest in 10 years).


So, for those of you that were upset when you read this, WHY?

[DaveB]

Who says this guy is making $15/hour? That was the starting pay for someone w/ no experience. They AVERAGE was over $66k. That can easily cover a mortgage on a $288k home in a state w/ low property taxes.

[Blackmacs]

What costs more, tax breaks for companies or paying unemployment, welfare, drug counseling and all the things that go along with poverty? What I'm saying is that I think it's smart for a state/city or other government agency to give tax breaks to draw in companies to provide employment opportunities. Otherwise these same companies are going to continue to go to other countries. If towns can lure a company in and provide hundreds or thousands of jobs I say go for it.

[66k]

15 dph wages plus benefit package?

[nonunion]

I visited the Spartanburg, SC BMW plant a few years back. I had sold them some construction products, and spent several weeks at this plant. I believe the majority of employees there started out in the $15 range. I can tell you from spending some quality time at this plant, these were some of the most satisfied employees I have ever been around. This was a very fun work environment to be in. This plant was absolutely state of the art, and so clean you could eat off the floor. The cafeteria in this place was emaculate and had all sorts of options at a very resonable cost. These people were VERY happy to be where they were. This was 6-7yrs ago, and now these employees are probably up to $18-20hr, with performance bonuses and 401k's. The cost of living is probably 60% of what Detroit's cost of living is. I can tell you there will be no unions in that plant for awhile. If companies treat their employees like gold, they build trust and loyalty, and employees their are first. So, UAW in the south. I doubt it..

[u r clueless]

>Who says this guy is making $15/hour? That was the starting
>pay for someone w/ no experience. They AVERAGE was over $66k.
> That can easily cover a mortgage on a $288k home in a state
>w/ low property taxes.

Dave B.

Here we go again that "B" has got to stand for Bubble! Apprently it isn't a tranparent bubble either. What part of this guy has been with Hyundai of Seoul for 9 months did you not read or intererpret??? Unless they have a 6 month trial period for hourly workers where you get bumped an extra $5.00 or make that $20.00 per hour it's likely he is still working for around the 15 dollar mark, so says the rest of this feel good propoganda article you shared (Thanks by the way :)

No way no how, could someone afford a house of 288K on those wages, not a banker like yourself, but just estimating a payment of $1600 for the month, mortgage alone, and one of those dead end interest only mortgage loans to boot. At 15 bucks an hour this guy is probaly clearing something like 1800 a month after taxes, not even including 401K contribution, paying for health care etc. etc. etc. Maybe it is a 2 income family, so say his wife also works for Hyundai, well then maybe they could do it, but man they would be strapped. But it's indicative of the American way of today, mortgage yourself to the brink, put groceries and day care on credit and live for the day. Then again our "conservative," controlled federal government is doing it why shouldn't they...

Your starting to seem more and more like a guy who only believes what you want to hear and see what you want to see of the world through rose colored glasses or is it a rose colored bubble??? Either that or you have been totally brainwashed by conservative talk radio and the Fox news network.

[DaveB]

Where in the article does it say that guy is only making $15/hour?


The average is $68k. I assumed that he was hired for much more than the entry level rate of $15/hour. He is probably making $60k+.


You are correct, at $15/hour that is roughly $30k per year and even a $150k mortgage would be tight.


What is also not stated is what he might have owned already. Bought a home in 1990 for $50k is now worth $150k and he use $150K for a down payment on a $288K home. Now, even at $15/hour, it isnt crazy.



Again-I am still waiting for someone to point out a problem w/ new prosperity.

God Bless America.

[cxtx]

Good posts DaveB and nonunion. Having lived in Houston for two years and having dealt with the construction trades down there, I can tell you, you won't be seeing unions anytime soon. It is a right to work state. Workers were happy. Cost of living is lower. Weather is better. Not near as many taxes. Business is booming. It is a self fulfilling prophecy, so to speak. Opportunity breeds opportunity and so many other businesses and industries feed off of it and benefit from it. Schools will be better. Gov't services will improve. So the company gets a tax incentive to build there. Most times, they are time limited so at some point, the company will have to ante up. All the workers are still paying taxes that they would otherwise would be using up on welfare, unemployment, etc. I can see why the union mentality is killing industry in the rust belt states and it is a sad state of affairs.

Yes, you can make a good living at an hourly job in this day and time and not belong to a union. Get over it.....

Another positive for the these down south companies, most new workers have finally been weened off of pension plans and these companies won't be saddled with huge, unfunded pension obligations. Let the workers manage their own retirement funds with 401(k)s and IRAs.

[RH]

>>
>
>Again-I am still waiting for someone to point out a problem w/
>new prosperity.
>
>God Bless America.
>
>

No problem with new prosperity ever, always good. The issue you fail to bring up is all the new disparity for others, in other locations in America. What we've got described here is a classic case of rob Peter to pay Paul. In the end Paul and more importantly us all (middle class working stiffs) are going to end up with less.

You realize it comes down to wages and benefits when you start talking being competitive on the global scale. Buildings, machinery and bodies perform just about the same no matter where they are located on the globe. So as Americans this means, no more company funded pensions, healthcare, insurances, etc. IN the end it's just so some global corporate greed mongers are the only ones that are truly going to prosper.

At this point people are still buying that this whole global economy is based on a prediction that when the standards raise across the globe we (US citizens) will all prosper. What has been failed to be realized by most that considering the instability of the world as far back as recored history which boils down to just plain inherent human nature, that is as likely as immaculate conception taking place on high school prom night. Especially considering the only free market in the world is the one right here in the good ol' USA.

[perchjerker]

you nailed it perfectly.

I already responded (1st response) but I guess Dave just ignored it.

You put it in a much better way than I could have.

[DaveB]

You guys are mixing apples and oranges.


These are NEW JOBS from Asian or European companies in the US. You cant compare the benefits (the do have health care-I am sure of that, the rest, not sure) of these jobs to the benefits of Ford or GM. You need to compare it to the jobs that were available in Alabama.

Why is this even a story about the auto industry?


I got the expected (and desired) response from you guys without even saying a thing.

This story is about great jobs from a foreign parent making lives better for thousands of American who were in a depressed part of the nation.

It is NOT about unions, Ford, GM, etc. It wouldnt matter if they were making vacuums, lures, tables or what not.


Opinions? Thoughts?

[cxtx]

I'm with ya...but unfortunately, the union mentality prevails in many.

There is NO incentive for these companies to build in Detroit or pretty much anywhere in the Northeast or upper midwest. The company is going to build where they can make their product at a profit, plain and simple.

Company sponsored pensions are dionosaurs of the past. What good are they if the company goes bankrupt or can't fund it and then turns it over to the Feds. who then only give you 30-40% of what you were supposed to get. Much better off taking care of your own retirement via 401(k) or other avenues and have at least some control over your retirement money. Additionally, most companies these days that sponsor 401(k)s also contribute on your behalf.

[nonunion]

Well said cxtx. And I must say that I am not against unions. But I will tell you that the Corp culture in todays world is much more focused on the EMPLOYEE first!! Which creats Loyalty, and HAPPY employees!! Rather than the old Union vs. Corp. mentality. Because of that focus on employees...ie, creating better performance bonuses/ incentives, better 401k plans, and little things like wellness programs, reimbursed education...and so on, and so on, creates Happy, more focused employees that acctually CARE about their companies and how profitable they are!! Not pitting the companies against employees as unions have and do. I know several union employees that make huge money, but HATE their jobs and bosses! It's a constant battle for them. New corp philosophies are changing that! And that is how MY company operates, and that is what I observed in this new BMW plan. Total excitement and dedication as a team. Even though they made less money to start, they new what the long term picture was all about! Talk to the N.W. airlines employees that posted on this site, a pretty much disgruntled bunch.

[chadk66]

I lived in Alabama for awhile. Very low cost of living as compared to northern states.

[FlyingV]

But, does Alabama have walleyes?

[smokin]

> But I will tell you that the Corp culture in todays world is
>much more focused on the EMPLOYEE first!!

No sir, I must beg to differ! The modern day corporate culture of the omni present multinationals is focused piercingly on one thing; #1 Earn a consistent and increasing profit to ensure a return to it's shareholders (period).

The feel good credo of employee "first" which is usually spun in some sort of wall poster initiative like Development Potential of our #1 resource "our employees, is only on the cover of the nice shiny packet they give you on day one. Not saying there aren't some good make tha great companies out there to work for, but make no mistake, when the true first rule can not be attained, whether within the control of the employees or not, they, the employees will be the first to feel the pain in an effort to protect the shareholders investment.

One need to look no further than our staggering trade deficit to see the effects of the race to make more more and more money for the shareholders. Considering it is now possible to outsource just about every job and profession imanginable to lower cost labor markets abroad. The only employee who is safe is the guy or gal that cleans a fixture such as the toilet...in that case they might as well be the MayTag repairman!

Now sir, may I ask what it is you have been smokin'???

[chadk66]

only a few hours from greers ferry, arkansas.

[Opinion]

>I thought you guys would have some fun with that.
>
>
>IMO, this is great news. Anytime peoples lives improve, it is
>good for America. It is more evidence, usually unreported, of
>great jobs being created in America. The economy is great.
>Unemployment is low. Incomes are up. The economy is growing
>(many predict GDP growth to be through the roof for 4Q 2005
>when reported on 3/30, highest in 10 years).
>
>
>So, for those of you that were upset when you read this, WHY?
>

Being tuned into the bigger picture, have a hard time beliveing all is hunky dory in the USA. Seems to me for every "new" job created a better higher paying job is being lost. Not to mention and simply put running up record budget spending and meanwhile incurring record trade deficits are absolutelty not good for the future and are acting as opposing forces opening up a black hole to future despair.

To draw a comparison related to a personal standpoint which most should be able to relate, this is the equivalent of having an unlimited credit card and an unstable job that can barely keep up with making the minimum payment. If you keep spending on the card like a mad man and working less or making less products to market, eventually you have spent more than you will ever earn, and the end result is for obvious reasons not good!

Like the person who makes 15.00/hr with the new truck, new boat, $288K house, new clothes so on so forth, who has put it on credit or is mortgaged to the max he has lived for the day and not the future. That is precisely what is going on this country today thanks to 6 years of mis-management. Hard to belive that the people running the country can call themselves conservatives or republicans. Unless we are talking about judges and religion then maybe I'd buy that, otherwise they are bankrupting one of the greatest nations in world history.

Again like living on a credit card, all seems well and good until the end of the month comes and it's time to pay the bill. We will be paying for the sins of today for many years to come...

[DaveB]

Your analogy is a little off.

Comparing an unstable job to the aggregate US economy that has been strong for a long long time is unfair.


It is comparable to someone who has seen their income grow from $8k to $80k but has also seen their debts grow from $1k to $10k. BTW, he has been "employed" for over 200 years and has been kickin butt all over everyone else for nearly 90 years. He also has the ability to give himself a raise whenever he wants.

[nonunion]

Smokin....

From Experience and Studies:

HAPPY EMPLOYEES = MORE PRODUCTIVE EMPLOYEES = HAPPIER/MORE SATISFIED CUSTOMERS = MORE PROFITS = BETTER BOTTOMLINE FOR SHAREHOLDERS.

This is a general rule of thumb, and obviously not every company has this philosophy, but I can tell you my company focuses and spends a great deal of money on this concept. And many others should.

My company was voted the 11th best small/medium company(400 employees)in the country to work at by "Best Places to Work" through an employee survey. They invited over 400 companies in my particulare category to apply. We have almost zero turnover, people are begging to work here. And I can tell you our success all stems from what they do for US to create a loyal, happy workforce. Unions have tried to come in here and the employees won't have any of it.

Now, you maybe right...as a whole, there probably many companies don't operate this way. But I can tell you from experience, it all starts in-house if you want to improve the Shareholders bottom line.

[smokin]

I whole heartedly agree! Now where can I get me some of that;)

[nonunion]

Right here where I work....but there's a waiting list. :)

[change]

I too once worked at a place like yours, and talked just like you.

But my how fast things can change, and did, when new management took over. Now i no longer think that because things are so good at my place it must be every where else. Enjoy it now while it is good,because when things change, you won't stand so tall above other workers.

Thats my expirence.

Once on top of the world.

[nonunion]

I do work for a great company and I hope to retire here. Your right THINGS do change though. Although since this philosophy is sooo in-grained here, I would hope the tradition would pass on with new management...who knows. It's a unique company, and I think it would be almost impossible for that to change here. We're to spoiled to let it happen....but never say never.

[nonunion]

Too often companies hold the thinking...the customer comes first, well not so here, because they know with out Happy employees, they will not get happy customers. Ever call a customer service line and get some guy that you could tell hated the fact you called and could care less to help you? Well, his attitude shaped your feelings towards the level of service you were getting...why? He probably hated being there and couldn't wait to go home.

[wagon]

Auto suppliers rocked

Bankruptcies ripple throughout industry in transformation that will separate weak from strong.


T he auto supply industry is transforming with breathtaking speed, opening a new front of scary change for Detroit and its automakers.

The bankruptcies of Delphi Corp., Tower Automotive, Collins & Aikman Corp. and, last week, Dana Corp. are not the end of a long, painful shakeout. They're the beginning of an upheaval that will separate the weak from the strong, endanger more jobs, usher more private capital into town and potentially destabilize the intricate web connecting suppliers to Detroit's automakers.

"This industry is ripe for creative destruction," Metaldyne Corp. Chairman Tim Leuliette told me Tuesday. "And it's going to happen. Sixty percent of the auto industry is doing pretty good, 40 percent isn't. The 40 percent will either fix itself or get run over by the 60 percent."

A crisis of confidence is building as speculation about "who's next?" throws around names of perennial heavyweights -- Detroit's American Axle & Manufacturing Inc. and Southfield-based Lear Corp., to name two -- even if their balance sheets don't justify mentioning them and the "B-word" in the same sentence.

"Lear's not going to file Chapter 11 anytime soon," Lear Chairman Robert Rossiter said in an interview. "We have no plans to do it. We've never discussed it. Never were we in financial difficulty, and we're not today. We don't think it's as hopeless as everybody does out there. People have got to calm down and use some common sense."

Meaning the industry's major suppliers aren't all in danger of going bankrupt, closing their doors or selling out to private equity shops looking for candidates to buy cheaply, restructure and sell three years or so down the road at a tidy profit.

Players like TRW, Johnson Controls, BorgWarner, Magna International and Metaldyne are profitable and expect to stay that way thanks to a diversified portfolio of customers and products. Others, like Troy-based ArvinMeritor Inc., have refinanced their debt and strengthened their cash position to prepare for tough times ahead.

Then there are the others who employ tens of thousands nationwide and define communities, their tax bases and working life.

Suppliers whose business is heavily weighted toward General Motors Corp. or Ford Motor Co., with their production cutbacks and declining market share, are more vulnerable. Suppliers with too much debt coming due too soon are vulnerable, too.

Suppliers susceptible to prices for steel and resins are vulnerable because automakers typically aren't willing to share the burden of rising raw materials costs. Suppliers without enough cash to meet near-term demands -- what financial types call "a liquidity crisis" -- are quickly vulnerable, as the implosion of Dana attests.

"We're not in the business to make cars," Leuliette said. "We're in the business to make money making cars. Wall Street turned sour on this industry in the 1990s. It's not about market share. It's about earnings-per-share and returning that to shareholders."

Theoretically, yes. But not so much in practice. The past six months -- the Delphi and Dana bankruptcies, restructurings at GM and Ford -- illustrate a painful truth of today's auto industry:

What's broken isn't the car and truck business, because Asian rivals like Toyota and Honda are making huge profits here. What's broken, irrevocably, is the Made-in-Detroit model that public equity and debt markets increasingly consider irredeemable.

To wit: Just four days after Delphi filed bankruptcy in October, a Dana spokesman told the Toledo Blade that "bankruptcy is not an issue" for Dana. That may have been true then, but the fact that the company is now bankrupt illustrates how quickly apparently strong players can be swamped by harsh financial reality.

Potential losers aren't just Dana employees, retirees and shareholders -- who likely regret the decision to spurn ArvinMeritor's final offer in late 2003 to acquire Dana for $18 per share.

The financial troubles of suppliers can be visited upon customers like GM and Ford, imperiling turnaround strategies that depend partly on price reductions from suppliers. Would-be strikes -- threatened this month at bankrupt Tower Automotive and, perhaps, Delphi -- could halt production at the automakers.

Suppliers desperate for cash or those losing confidence in a company's ability to pay its bills could demand accelerated payment terms from their customers, a legitimate process that can make tight financial straits even tighter for a struggling company.

Think of it like a three-legged stool, and when one of those legs collapses, you're in bankruptcy court, endangering customers, plants and the wages, benefits and pensions accrued over generations. Dana is the latest casualty of this automotive perfect storm, and it probably won't be the last.

"We believe that the entire automotive value chain is just beginning a long restructuring process," John Murphy of Merrill Lynch wrote this week. "Dana's bankruptcy is likely just the tip of the iceberg given the burdensome high fixed cost structure facing the domestic auto industry."

Especially when suppliers deep into GM and Ford are seeing production schedules and prices being cut while raw materials costs go up, debts stay high, bond ratings drop and so do equity prices.

The net result is what we see unfolding among auto suppliers closely tied to Detroit's automakers -- a transformation driven by declining confidence in the public debt and equity markets. It creates opportunity for financially healthy public companies and private equity firms looking to park their cash behind the next big turnaround story.

"People are a little bit afraid of the auto industry, so finding lenders is difficult," said Al Koch, vice chairman of Alix Partners, a Southfield turnaround firm retained by Dana. "It causes a number of lenders to want to reduce their exposure to the industry."

He should know. As Kmart Corp.'s chief financial officer during its bankruptcy, he said companies slide into Chapter 11 because a sudden nasty surprise emerges -- a strike, an accounting scandal, the failure to access cash or the inability to negotiate new credit terms outside bankruptcy -- or the executives don't grasp the depth of their company's troubles.

"Each new (bankruptcy) that occurs places a lot of pressure on the community, places a lot of pressure on the Big Three who, through the last few years, have pushed a lot of price concessions on suppliers," Koch said. I don't think we've seen the last of the restructuring struggles."

[mac]

On a list of which cars would consumers buy again in the April 06 Consumers Report.

Most satisfying 47 cars listed 5 American brands

Least satisfying 20 cars listed 12 American brands

[Truth]

Good posts by all here; I think the US ought to BAN unions & union membership ASAP. Arrest those who defy the ban. Workers ought to be darn happy to have a job.

It's these same crybaby whiners that oppose our great President Bush. Take off the gloves and return America to its rightful owners, the people! Do the right thing for America.

[elder dinosaurs]

>Company sponsored pensions are dionosaurs of the past. What
>good are they if the company goes bankrupt or can't fund it
>and then turns it over to the Feds. who then only give you
>30-40% of what you were supposed to get. Much better off
>taking care of your own retirement via 401(k) or other avenues
>and have at least some control over your retirement money.
>Additionally, most companies these days that sponsor 401(k)s
>also contribute on your behalf.
>

Your new age philoshphy in general, all though yet uncharted and remains to be seen, well let me put it simply, SUCKS! A common sense reason pensions were set up were to insure "new blood," and consequently new ideas for companies that were in it for the long haul. What good are a bunch of 65+ workers going to to do towards productivity in an ever evolving world of business, while they are still working to put food on the table and pay for prescription drug coverage amongst all the other life expenses one may incur along the way?

One of the basic premises behind a guaranteed pension and defined medical benefit was give a company your 100% in your first half of your working years by expending your ambitions and eagerness to learn and come up with innovations in the process (best suited tasks for a young mind and body). Then in your second half take on the persona of the "old bull," using what you learned in the first half to teach and foster the business for future growth with all the knowledge you attained earlier. In the end you will get to "retire comfortably," and be rewarded for what you had contributed during your years of service. Consider this mutual loyalty for the betterment of both, company and employee (not just a no name sell out when times get tough diversified shareholder).

Now we have an individual 401K and no medical coverage after retirement other than government funded medicare. C'mon get real and what a joke, it's a looming disaster since looking at the stats, Americans aren't saving a dime. Now is it any wonder why a pension would have been set up in the first place? Think the crisis of medical coverage for the elderly is bad now wait and see in the next 20 to 30 years, ain't seen nothing yet.

What is driving this you ask? Again, simply put GREED!

[RH]

>Your analogy is a little off.
>
BTW, he has been "employed" for over 200 years and
>has been kickin butt all over everyone else for nearly 90
>years. He also has the ability to give himself a raise
>whenever he wants.

Obviously you did not take history as an elective while pursuing your degree as a finance major.

Considering this, the time frame you describe with an uncanny arrogance of what that entitles in your opinion, realize is nothing more than a grain of sand in the hour glass of time. There have been many great societies that have risen and fallen since the begining due to this same human nature of short sighted thinking and taking into consideration only ones own personal interest.

No matter how advanced things may seem and how well off we all seemingly are in ones mind, in the end it is all relative. If you dispute this and as a prime example, Just ask the Romans!

[DaveB]

So was something that I said wrong?

He compared the macro US economy to one worker, I pointed out how this wasnt a good comparison.

You say that the USA has only been around for a fraction of history.....DUH. Thanks for you input Mr Helper.

[DaveB]

OMG someone has been brainwashed.

Yeah, people saving on their own is bad policy because people cannot take care of themselves.

Regarding pensions, another way to look at it is the big evil company being in control of your retirement instead of paying your more (they actually have to fund those pensions each year, it isnt like that money comes from thin air, I promise you that your pay is more of less based on a pension, that money isnt coming out of corporate profits) and letting you do it yourself.

[He]

So who is "he?" You know the one who has been around for so long, all 200 years and kicking butt for 90. The assumption was likely that you were reffering to Uncle Sam. Is this the case?

Thinking the point was to show that those that do not learn from history are bound to repeat it. In the case of the ROmans, when they eliminated their middle class, it was not long after and the whole empire crumbled. There's more to it than that, but in a nutshell there you go. A very similar situation to where the USA is heading today, again all in relative terms.

Mr. Helper

[DaveB]

The middle class is not shrinking-what is your source?


I wasnt saying that the comment was right or wrong, only that it was a completely unrelated topic that wasnt even being argued.

[Not]

The Roman empire is not at all comparable to America. Check your history books.

[Dumpman]

Please take a big ole greasy dump om this useless post!!!!!!!!!!!!! who cares

[wagon]

America cares "BUT"

S&P says time short for GM, Ford to fix problems

NEW YORK, March 8 (Reuters) - General Motors Corp. (GM.N: Quote, Profile, Research) and Ford Motor Co. (F.N: Quote, Profile, Research) face challenges as never before in their North American operations and time is running short to fix their troubles, Standard & Poor's said on Wednesday.

An adverse shift in the automakers' product mix, excess capacity and high legacy costs are at the heart of the automakers' poor performance, and turnarounds will be difficult, the rating agency said in a report.

[upnorth joke]

The Canadian Auto Workers (CAW) union, which has overpriced itself, is campaigning for billions of dollars of government subsidies for GM, Ford and Chrysler, but none for union-free Toyota and Honda. The CAW believes it is the duty and responsibility of pensioners and other taxpayers to maintain its members in their accustomed lifestyle. Failing this the sun won’t come up anymore lol.

[detroit tom]

I work with the Building Trades (AFL-CIO) in Michigan and I've been in over half the outo plants in the state. People would be aghast if they saw what goes on in these plants.

Hundreds of UAW sitting around doing nothing. Sleeping in the cribs, etc. They have no pride and no work ethic. All the do is complain and collect a check for which they do little service. They are the greediest, laziest, most miserable people on the planet.

They are a disgrace to unions everywhere.