Column: Current woes at GM and Ford can be traced to Roger Smith
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Wednesday, March 09, 2005
By Rick Haglund
Considered a visionary leader, retired General Motors Corp. Chairman Roger Smith also was tagged with a truckload of costly corporate sins in what some called his decade-long "reign of error" in the 1980s.
Smith took heat for crippling the economy of Flint by drastically shrinking GM's footprint in its home city. And he spent billions in a futile attempt to diversify the automaker by purchasing Electronic Data Systems Corp. and Hughes Aircraft Co.
GM later sold off EDS and Hughes. But the automaker is still suffering from Smith's failed fantasy of replacing much of its hourly work force with robots and computer-controlled machinery that would churn out cars and trucks without so much as a bathroom break.
The unsurprising result of Smith's plans for fully automated "lights-out" factories: GM faced an enraged work force as the automaker entered negotiations with the United Auto Workers union in 1990.
Robert Stempel, who succeeded Smith as GM chairman that year, decided the only way he could keep labor peace was to sign a historic pact that required GM to pay workers whether or not their plants were operating.
Ford and the former Chrysler Corp. also were forced to sign similar contracts, shifting labor from a variable cost to a fixed cost.
Those fixed labor costs are now making it extremely difficult for GM and Ford to cope with slumping sales.
Earlier this month, GM and Ford announced production cuts in an effort to clear out bloated inventories of unsold cars and trucks.
GM also decided to shut down its Lansing Car Assembly operation months earlier than expected, putting 3,000 workers on temporary layoff.
Analysts would like to see even more plant shutdowns as Ford and GM bleed market share. But the two automakers have been reluctant to do so because they must pay hourly workers whether or not the plants are running.
Here's how the deal works:
Laid-off workers are placed in a "jobs banks" for up to 48 weeks. Drawing unemployment benefits from the government and supplemental unemployment benefits (known as SUB pay) from the automakers, they earn about 95 percent of normal take-home pay, or 70 percent of gross pay.
Ford had 1,092 workers in its jobs bank as of Feb. 27. GM won't release its number.
After 48 weeks, laid-off hourly workers go back on the payroll at full regular pay, regardless of whether there are jobs for them.
GM and Ford have been trying to avoid these costly layoffs by goosing sales with incentives such as zero-percent financing and hefty cash discounts.
But those incentives have been losing steam in recent months, forcing GM and Ford to reluctantly cut production.
Top executives at those automakers no doubt wish that Roger Smith had forged a more cooperative relationship with the UAW.
Contact Rick Haglund at (248) 540-7311 or e-mail him at
rhaglund@boothnewspapers.com