GM & gas wars: 'We're as well-positioned as anybody'
So says the General top sales analyst, who in one sweeping statement essentially confirms what General Motors Corp.'s critics -- including my Toyota Prius-loving father-in-law -- have been saying for years: Detroit is fixated on its big pickups and SUVs, even as it has vastly improved its cars, their designs and their fuel-efficiency.
"We've been promoting our trucks more than we should have," Mike DiGiovanni, GM's top sales analyst, told a conference in Warren. "We're going to shift our marketing toward fuel economy and hybrids."
Sheer genius, as a reader, Gary S., pointed out to me today: "Oh, so now GM is figuring out that gas prices might affect truck sales? I'm just this middle class small-town guy, no genius by anyone's account, and I kinda sorta figured out -- oh, maybe three years ago or two years ago? -- like everybody else (except apparently the execs at GM) that energy prices were heading up and up, and smaller, more fuel-efficient vehicles would be in demand."
Would make you want to weep if it wasn't so infuriating because Mickey D., as he's known to his friends, has it right: GM is well-positioned. It just prefers to cede the fuel-economy high ground to Toyota. Why is beyond me.
Here's a company that has spent the better part of 15 years playing catch-up to the standard in its industry (that would be Toyota). It has watched the Prius hybrid become a synonym for market savvy and anticipation. It has gutted through global restructuring after global restructuring, labor contract after labor contract. And, still, it doesn't acknowledge the reality of wrought by higher gas prices? Still, it has trouble telling its story?
What $4-a-gallon gas and the knowledge that a goodly chunk of every fuel dollar goes to support the likes of Hugo Chavez, Vladimir Putin and Iran's mullahs doesn't change, then peer pressure and the changing needs (and tastes) of aging baby boomers will. The trends have been obvious at least since 9-11, and have accelerated in the past couple of years.
That GM is acknowleging it now -- in a news story that runs the day its newest critic, probable Democratic nominee Barack Obama, is in Michigan for the first time in 10 months -- tells you why the General (and Detroit's other two companies) keep finding themselves in deep holes. They don't know when to stop digging.
Stop the presses! Obama is coming to Michigan ... to learn?
Illinois Sen. Barack Obama, a representative of the industrial Midwest who's so far shown scant understanding of it, is skedded to step foot in Michigan Wednesday for the first time in 10 months.
If nothing else, see this move for what it is: A recognition by the likely Democratic nominee's campaign that, yes, Michigan is key to winning the White House in November. Second, that the presumptive GOP nominee, John McCain, has a chance to be the first Republican since Ronald Reagan to actually take the Big Mitten. And, third, that Obama has some fences to mend and some learning to do when it comes to the Detroit-based auto industry.
To wit: That GM, Ford and Chrysler do field fuel-efficient vehicles; that GM and Ford already have gas-electric hybrid powered cars and SUVs in showrooms; that -- thankfully -- the retrograde, anti-regulatory forces that have ruled the executive suites here for 30 years or more have been routed by reality. Namely, that oil prices are likely to stay closer to $100 a barrel or more than sink to $50 or less; that California-driven sentiment to more heavily regulate greenhouse gases and fuel efficiency may be expensive and inconvenient, but it's political inevitability; that Detroit is paying a political price for its wholesale retreat from states outside the industrial Midwest and for losing market share.
News flash to Sen. Obama: Detroit gets all this. And Detroit also knows that the only way to survive through the next administration -- whoever it belongs to -- is to embrace a multi-powertrain world by offering killer small cars and crossovers, hybrids, core SUVs and large pickups and, yes, even diesels.
Crappy near-term financials notwithstanding, this is not his uncle's auto industry anymore. Sure, the Big Three brass can show him around and offer briefings (if he'll listen). So could United Auto Workers President Ron Gettelfinger -- and he doesn't need Macomb County's own former Rep. David Bonior, manager of the failed John Edwards campaign and self-appointed representative of Michigan autoworkers, to do it.
Obama's vision for America presaged in today's Germany
Or so says Gabor Steingart, senior Washington correspondent for Der Spiegel, in the weekend edition of the Wall Street Journal. Is he a little snarky? To be sure. Does he offer an arresting reality-check that folks should consider as they weigh the likely Democratic nominee's vision for the future? Yep.
I spent four years living and working in Germany at The News's European correspondent. Great place; wonderful infrastructure; marvelous food that belies dated caricature. But there's an expensive trade-off for all that efficient wonderfulness, as Steingart ably describes:
"I've been in the U.S. for a while, but if I remember my home country correctly, all the German comforts come with a price. My grandma has paid 10 percent of her salary to the public pension system, and her employer has matched the contribution. For our health insurance everyone has to sacrifice 7 percent of his or her earnings, which again is matched by the company. Fashionable windmills go along with extra taxes for fuel. A gallon of regular gas in Munich or Berlin costs -- fasten your seat belt -- more than $8."
Could Jerry York and Alan Mulally have been separated at birth?
I ask because the published suggestion by the sidekick to Ford Motor Co.'s newest major shareholder, Kirk Kerkorian, seems to be sympatico with the thinking of the automaker's CEO: Sell Volvo Cars when the credit markets revive and let Mercury die a quiet death, so long as Ford can figure out how to placate its Lincoln-Merc dealers.
Not that Mulally would say any of that publicly. Before the credit markets began swooning last fall and then slipped into the deep freeze, Ford was receiving interest in Volvo from rival automakers and private equity shops alike. And Mercury has been on the glide path to join the automotive graveyard for at least the last couple of years.
Perhaps never before in the annals of Kerkorian's multiple plays for Detroit's automakers have his chief automotive adviser, Jerry York, and the CEO of his latest target been on the same wavelength. Until, that is, York walked into Mulally's office a month ago. There, Detroit's bete noir in the investment community confirmed his assessment of Mulally: That Ford's CEO is a simplifier, is focused on clear objectives, is impatient with petty politicking and is driven to extract value. Like York, Mulally also is largely unconstrained by the sentimental attachments and ego trips that have pushed Ford and the Detroit auto industry to the edge of the proverbial abyss.
You could say York's apparently off-hand prediction that Ford will peddle Volvo within 18 months is the another piece of evidence that Kerkorian's 5.7-percent stake -- assuming he gets his 20 million shares through his tender offer -- is neither friendly nor passive. Or you could say that he's merely saying publicly what Mulally is thinking but can't -- at least not yet.
DTW mayoral scandal -- the gift that keeps on giving, nationwide
This weekend's Wall Street Journal, arguably the most influential newspaper on the planet, offers yet another exhibit in the case to prove why Detroit is a national laughingstock.
"Detroit's scandal is about more than sex," the headline reads, accompanied by a photo shot in the editorial page conference room of The Detroit News. Lots of background to folks familiar with the story -- and a few mistakes, such as the suggestion that Mayor Kwame Kilpatrick's turnaround strategy hinged on his ability to woo General Motors to a new riverfront headquarters or Compuware to Campus Martius or three casinos downtown. He did nothing of the sort; his predecessor, Dennis Archer, did the heavy lifting on those plays.
What matters is this: "Every indicator of economic and civic renewal has trended in the wrong direction since Mr. Kilpatrick became mayor," writes Shikha Dalmia, a senior analyst at the Reason Foundation and former editorial writer at The News. "There is not a single year in which Detroit's unemployment rate -- currently at about 15 percent -- has been lower than in 2001, the year before he took office. Income tax revenues last year were $27 million less than three years ago, a testimony to the city's contracting tax base. Meanwhile, high school graduation rates are an abysmal 25 percent, and homicide rates an astronomical 47 per 100,000, the highest among comparably sized cities."
Encouraging, eh, even allowing for the fact that Kilpatrick's tenure at City Hall has mostly coincided with the harshest retrenchment the Detroit-based auto industry has experienced in its 100-plus year history? And the mayor says Detroit would become a city in chaos if he leaves before his term ends? Hardly.
Detroit's political culture is badly in need of a thorough restructuring. It needs a mayor with credibilty, a plan and unblemished by repeated ethical and legal scandals, some small and others large and allegedly criminal; a City Council that actually represents blocks of voters instead of serving themselves by serving at-large; an end to cozy contracting that extends far beyond the city limits and reaches deep into the monied suburbs; a school district that educates and functions for the students and their parents instead of bureaucrats and teachers marking time until retirement.
Viewed from the outside, so much of official Detroit and the way it does business with itself, its unions and contractors is far removed from the accepted ways of doing public business in this century. The mayoral scandal is only one manifestation of the syndrome. Even if it ends with his resignation or plea bargain or conviction on eight felony counts or exoneration, it will remain until it is rooted out elsewhere.
Kilpatrick's support in the business community, based in part on his ability to land the big projects, push deals through the city's Byzantine bureaucracy and deliver concessions from city unions, is weakening by the day. Pistons great-turned-Detroit industrialist Dave Bing has publicly called for Kilpatrick to do "what is best for the city." Jon Barfield, a respected African-American CEO who employs 600 in the city, echoed those sentiments a day later.
For them, as well as many others in business and the city's everyday life who I hear from on a daily basis, Kilpatrick's swirling scandal is a searing metaphor for the spiral that is pulling down Detroit right now. They're right.
State budget boss: 'The American Axle strike is killing us'
During his years in the state senate, Democrat Bob Emerson earned a reputation as a straight shooter, a loyal Dem whom Republicans generally believed would do what he said, who meant what he said and who brokered honest deals.
Which is what makes today's published comments of Emerson, now Gov. Jennifer Granholm's budget director, so telling, so true and, yes, so honest.
"The American Axle strike is killing us," Emerson is quoted as having told a group of Macomb County school officials. "I sent an e-mail to the governor, telling her it's a good thing my sixth-floor windows are sealed."
Am sure Emerson's pals at the United Auto Workers enjoyed reading those sentiments this morning, just before they picked up the phone, dialed Lansing and started issuing threats.
The UAW's strike against five American Axle & Manufacturing Holdings Inc. plants is shaping up to be a disaster -- for the 3,650 members manning picket lines for the past two months (and counting); for the AAM suppliers feeling the pinch from lost work; for the revenue line at General Motors Corp., AAM's top customer; and for the state of Michigan, which officially tries to deny that widely publicized strikes don't damage its appeal as a site for new investment when anyone with a brain knows better.
Am not at all sure, however, this collective self-mutilation engineered by UAW leaders will turn out to be a disaster for AAM and its founder, Dick Dauch, even if the walkout and its ripple effects once again reinforce Michigan's image as the last bastion of mid-20th century unionism. Dauch said Friday he's prepared to invest as much as $300 million in the five plants shuttered by strikers so long as he can get a "competitive" deal with the union.
If he doesn't, he can go somewhere else. That's precisely why these strikes are so self-destructive. AAM's contract in those five plants is the last vestige of its official ties to GM, broken 14 years ago when Dauch and his partners bought the decrepit Axle from the General.
Investment capital is more mobile today than any time in human history. If bargainers, for whatever reason, fail to reach an agreement, the casualty list will be longer than 3,650 UAW members, their families and, perhaps, some AAM stockholders. It will include the state of Michigan and its economic prospects, as Emerson rightly knows.
American Axle's immovable object v. UAW's unstoppable force
The UAW's strike against American Axle & Manufacturing Holdings Inc., to mark eight weeks and counting on Saturday, is getting uglier (and more predictable) by the day.
Today, as the company's directors were in town for a regularly scheduled meeting, the Axle said it had allowed its skilled trades to retrieve tools from the plants, a signal striking workers are itching to get some work -- any work -- to pay the bills. This after the Axle, in a comparatively rare move, publicly confirmed that union bargainers had rejected several contract proposals that would have been richer than union deals reached with rivals like Dana Corp.
Not good.
CEO Dick Dauch may be a lot of things, but a pushover isn't one of them. For decades, striking United Auto Workers members have been the unstoppable force that could steamroll just about any auto executive because the fear of losing production, losing revenue, losing customers and losing a chunk of their annual bonuses prompted them to capitulate, often promptly and always with someone else's money.
Dauch, a founder and major shareholder, has a lot more skin in the game. He's the immovable object, meaning the American Axle strike is shaping up to be the immovable object vs. the unstoppable force which. The UAW probably hasn't seen this much corporate resolve since, what, Caterpillar?
"This date has been on the calendar for awhile," a ranking American Axle insider told me today. "He has been planning this for years."
Relatively speaking, American Axle has cash. It has strong contracts with major customers, chiefly General Motors Corp. And it has facts on its side: Union bargainers already have granted rivals the kind of contract Dauch is seeking, albeit often during bankruptcy proceedings. He wants parity.
That union locals at key GM plants near Lansing and Fairfax, KS, -- home to the automakers hot crossover and Chevy Malibu, respectively -- are on strike (Lansing) or close to it (Fairfax) as the Axle dispute lengthens, tells you patience is wearing thin on the picket line and at Solidarity House. So is judgment. However local union leaders may say otherwise, these walkouts have the look and smell of thuggish sympathy strikes designed to force GM and its dwindling check book deeper into a resolution.
In theory, it'd be a mini Delphi. GM would agree to supplement lower wages as part of a grow down, the UAW would grudgingly accept and the Axle would get back to work. Makes sense, except for the fact that a) GM doesn't bear the same contractual obligations to Axle workers as it did Delphi workers and b) Dauch has expended a lot of PR air trying to convince the union and anyone else who cared that American Axle is not an automaker. Why, then, would it be inclined to hook back up with GM when it has other options?
Just asking.
The sad part, amid all these power politics, is that the 3,650 striking workers in Detroit and towns around Buffalo, N.Y., have mortgages, dreams, plans to send kids to college. They're trapped in a squeeze they didn't create and they can't, by themselves, end. But one way or another, they'll pay for it.
The Motown self-destruction chronicles: Chapter 1
Could it be that the mythical Pogo hailed from Detroit, considering his trenchant "We have met the enemy and he is us" riff?
Must have been. Consider Detroit's dailies today. Blaring from on the front page of the Free Press was an encouraging headline "GM hangs on to its share of market." Amid a deepening recession in the U.S. auto market that is shaping up to deliver the worst year for sales in about 15 years, the never-do-anything-good General closed the first quarter with 21.6 of the retail market, according to Power Information Network. Among the metal helping General Motors Corp. hold its own: The trio of crossovers coming from the Delta Township plant near Lansing.
But over on The News's front page stood yet more evidence of Motown's chronic self-mutilation. "Weakened union shows strikes still powerful tool," the headline said, beneath a picture of picket-carrying members outside GM's -- you guessed it -- Delta Township plant near Lansing.
Wanna know why Detroit Auto is where it is? Today's dailies pretty much tell you everything you need to know. And folks 'round here wonder why the rest of the country thinks this place is clueless.
City Hall's self-mutilation will drive more calls for change
Don't know LaMar Lemmons III, the former state rep pushing a plan that would abolish Detroit's 90-year-old at-large City Council and replace it with a council whose members represent one of nine districts. But I love the idea, whose time is long overdue.
So should anyone else with half a brain and some semblance of democratic decency -- both of which seem to be in short supply in the fevered chambers haunted by Detroit's legislative heavyweights.
Need evidence: A council that won't "hear" the mayor's budget address because he's under indictment? A president pro tem -- married to one of the longest serving members of Congress, Rep. John Conyers, who also chairs the august House Judiciary Committee -- who calls the council president "Shrek," utters childish phrases like "You're not my daddy" (and that's just in one meeting)? A council that does not have a single hispanic member despite the fact that the city's hispanic community is perhaps the city's only growing demographic group? A council whose past members have essentially challenged critics to a street fight (Kay Everett) and accused the mayor of trying to electrocute her (Sharon McPhail, now general counsel to her then-alleged tormenter)?
The likes of Elmore Leonard, the celebrated Detroit novelist, couldn't make this stuff up because it would be too absurd to believe. But it's real.
Anybody who understands the basics of representative government could see that most members of Detroit's City Council -- namely, those whose last names aren't Cockrel --represent little more than themselves. Barbara-Rose Collins showing up in council chambers wearing a tiara? Give me a break.
Lemmons' push to establish a more truly representative council would be a major step towards accountability. So would giving the vote to non-Detroiters who work in the city and pay income taxes. They're funding the charade, too, but are denied any official say in who gets elected. Institute those two reforms and you wouldn't recognize Detroit in five years.
Latest Chrysler-Nissan tie-up more than a 'second date'
Apologies to Nissan's Dominique Thormann, but I ain't buying this denial that the Chrysler-Nissan production swap deal doesn't herald deeper ties between the automakers.
Why? Not because Thormann, a respected straight shooter, isn't living up to his rep because I'm sure he is. It's because his boss, Wunderboss Carlos Ghosn, never takes a step without knowing where the next five will lead. It's also because Chrysler Chairman Bob Nardelli evidently is hungry to do production and cost-sharing deals with anyone who needs capacity and is willing to swap niche expertise for same.
Seems to me the only question is how many more "dates," to borrow industry guru Dave Cole's metaphor, the two will have before they're engaged.
The deal for Chrysler to build the next-gen Nissan pickup in exchange for Nissan building a Chrysler small car in Japan has been in the works ever since the Japanese wing of the Franco-Japanese Renault-Nissan agreed to build a small Chrysler car for Brazil. No, actually, this deal has been in the works ever since General Motors told Ghosn to get lost and Ford Motor wasn't buying, either -- at least not yet.
The attraction of an alliance like this has been clear for some time. Nardelli and his Cerberus Capital Management bosses in New York clearly are scrambling to knit together a network of alliances to meet various needs around the world when, it seems clear, Ghosn and the boys could service them quite nicely.
Need more access to Asia, China specifically? Nissan can help. A bigger door to Russia and eastern Europe? Renault, its new ties to Russia's AvtoVAZ and the Romania-derived Dacia could help? Brazil? Nissan. Powertrain and body engineering? Nissan. Diesel expertise? Renault.
And Ghosn? He gets North American truck expertise, the Jeep brand, an established distribution network and he brings a demonstrated ability to manage vast businesses cross-culturally because its about the process and the people in it -- not so much who's in control.
