TODAY WE BEGIN OUR DISCUSSION ON GM, FLINT MICHIGAN STRIKE AND THE CONSUMER. WHAT REALLY CAUSED THE STRIKE IN FLINT, MICHIGAN AND TO HELP YOU ANSWER THE ? “WHO REALLY WON????” – GM,UAW OR CONSUMER.

 

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MY MOTTO IS “PRACTICE, PRACTICE, PRACTICE”

“REHEARSE, REHEARSE, REHEARSE”

 

LETS TALK THIS MORNING ABOUT GENERAL MOTORS, THE FLINT MICHIGAN STRIKE IN MAY, 98 AND THE CUSTOMERS WHO BOUGHT GENERAL MOTOR  CARS IN 98. WHO REALLY WON ? AND I THINK ITS IMPORTANT THAT WE KNOW THE MAN JOHN SMITH THE FORMER CEO MADE PRESIDENT AND COO AND RICHARD WAGNER IS NOW THE PRESIDENT AND CEO.

 

GO TO THE NOTES ON GENERAL MOTORS, FLINT MICHIGAN STRIKE AND FINANCIAL ANALYSIS.

 

February 27, 2001

 

Good Morning;

Since we do not have a guest today Joan Crockett from Allstate, and who she has designated Tuesday, 24 April Marcie Molek, Vice President of Education.

 

Last Sunday night, we had the Walgreens team was at my house, except for Diana Herzer was absent, one of her teammates said she was working, and another said “she went out of town” but when I looked at the commercial she was featured in the commercial. I would say it was quite good. Providing Rochelle you should cut out some of the commercial- it isn’t really needed.

 

On Thursday we have the S&C Electric company President and CEO to the Estey and I met with the S&C team and they are really ready. I mean ready.

 

There is a few pages in your packet and make sure you read it before Thursday. Large companies are small companies first and they grow into large companies. As Microsoft was once small but they became large.

 

Let indefinitely go back to the discussion we had last week about General Motors and the UAW.

 

When we talked about the present chairman John Smith before he gave up the CEO to Richard Wagoner as President and CEO but he made a fantastic appointment (look at page 6,7,8 when he sought out Gary Cowger who we referred). Last Thursday when we referred to Gary Cowger who talks like he really is from Kansas, and he chopped out of high setup.

 

 

Let’s review a few facts about General Motors. 

The question again is : who won?  Did GM, the UAW, did the customer?

 

·       GM is the world’s 3rd largest company

·       #1 in manufacturing of automobiles

·       Sales last year= $183.6 billion

·       Net profit= $4.45 billion

·       Stock price is presently $54.12

·       The stock price reached a high of $94.625 on April 28, 2000

·       Return to stockholders= $6.14 per share

·       $2.5 Billion worth of stock has been purchased by GM in 1999 and even more in 2000

·       Its competitors are Ford, Daimler-Chrysler, and other Japanese companies

·       The United Auto Workers in the Flint area number 161,000 GM workers

 

During the strike, General Motors lost about 227,000 cars that normally would have been produced in the US and Canada.  The strike affected 26 assembly plants.  The UAW strike at the General Motors stamping plant in Flint, Michigan, workers employed belonged to the local UAW.  GM provoked the strike after it had depleted its new car inventory. 

        GM has piled on incentives in April and May, estimated to be $1620 per car.  Over the Memorial Day holiday, GM removed dies that provided for the plant that were needed to start production of its new full size truck.  This enraged the union and caused workers to walk out.  Even by the standards of GM, this is known from time to time to shoot itself in the foot.

        This action may have been used as a cover up for the high cost of incentives, which would have prohibited GM from hitting their estimated profits for that quarter. 

        Some say GM caused the strike because they had given too many incentives.  They were so high, there was no way they could reach the profits Wall Street had estimated.

        GM was not the only one whose motives were possibly suspect.  Others attributed equally cynical behavior to the UAW workers in the Flint area.  The Union was about to hold its annual convention in Las Vegas.  Some observers say this was simply an ego trip of its leadership to outstretch the strike to gain support from the rank and file members to advance their possibility of going on strike for very egotistical President Steve Yokich.

 

Issues

·                   One of the major issues of the strike was GM’s plan to discontinue the “pegged rate” system.  Under this system, employees were allowed to collect full pay once they had produced a certain number of parts.  Sometimes, this meant employees only worked 6 ½ hours, including a ½ hour lunch break, and got paid for a full 8 hours of work.

·                   John Smith announced plans to build new factories overseas that rely more heavily on suppliers to assemble pieces of vehicles and less on GM employees (this is called “Modular pieces”)

·                   Closing of Flint plant

·                   Proposed selling of Delphi

 

GM Strike:  “Who Won?”

 

Highlights of Agreement

·       The company and union agreed to, as Yokich put it, “sit down and find a different way of doing things” to avoid future conflict.  Shoemaker expressed hope that the procedure will “prevent these confrontations from developing”

·       “We put together a framework we think will resolve all issues at Dayton,” said Shoemaker, and the issues that could have caused strikes at the other three locations were resolved.  In answer to a question, Shoemaker said there was no guarantee locals not covered by this agreement couldn’t strike, but at this point, the union doesn’t believe that would happen.

·       GM replaced the huge 27-ton dies it had secretly removed over the Memorial Day weekend.  The dies are needed to stamp out parts to GM’s hot new pickup truck;  until the company made that provocative move, the Union had been hopeful that a strike could be avoided.

·       Shoemaker concluded by “thanking GM workers across the country for all their support.  They understand the issues,” he added.  “These are the same kind of issues they face in their local unions on a daily basis.”

“I cannot believe support the strikers got from organized workers, laid-off people, even people not involved in organized labor,” added Cal Rapson, UAW director of Region 1C, which spans the Flint area.  “And in the two locals, the support was just tremendous.  GM thought they’d wear them out, but they didn’t.  Their attitudes were, ‘we’ll last one day longer.’ And we did it, we lasted one day longer.”

UAW represents skilled trades and production workers at the Big Three US Auto makers

                General Motors             Approx.         215,000

                Ford Motor Co.                          110,000

                Chrysler                                            60,000

General Motors chairman John Smith announced Aug. 10 plans to build new factories along the lines of some experimental overseas plants that rely more heavily on suppliers to assemble pieces of the vehicle and less on GM employees.

        Previously it was widely assumed that the UAW resistance meant such ideas couldn’t be applied to US.

        When asked about it, John Smith said, “that will have to evolve.  It needs to be worked out with the union.  But its a great idea for the union to be involved.”

 

General Motors streamlines global automotive business - wagoner named president and COO

 

GM announced on October 6, 1998 the creation of a single, unified global automotive organization designed to allow the company to respond quickly and decisively to local opportunities in all markets around the world by fully leveraging the corporation’s global capabilities.

 

The new GM Automotive Operations will be led by G. Richard Wagoner, Jr. as President and Chief Operating Officer.  He will also become a member of the board.  John F. Smith, Jr. will continue to serve as Chairman and Chief Executive Officer.  Harry J. Pearce will continue in his role as vice chairman.

 

The new global organization will comprise four regions and will be supported by a consolidated GM Automotive Strategy Board, which takes the place of several current boards, councils and alliances.

 

According to Smith, formation of the new GM Automotive Operations is a major step in a series of corporate streamlining measures that began in 1992 when North American Operations was established and the purchasing function was consolidated on a worldwide basis.  The new GM Automotive Operations is a matrixed organization.

 

Smith said, “The new GM Automotive Operations is the culmination of our efforts to become a fast and lean global force that will reward innovation and customer responsiveness.”

 

GM to crunch five marketing divisions into one

(Wall Street Journal, August 5, 1998)

        “General Motors Corp. will slash the bureaucracy behind its five marketing divisions, eliminating as many as 1,000 jobs and gutting the last major remnants of the corporate structure built by Alfred P. Sloan in the 1920s.”

        There will be just one marketing division for Chevrolet, Pontiac, GMC, Oldsmobile, Buick, and Cadillac.  Each division will no longer function autonomously, with its own vice president, and accompanying cadres of sales, marketing, and support personnel.  Although nominally subordinate to GM management, the divisions have been fiercely independent.  They have often competed against each other for customers and GM resources.

 

 

Effects of the Strike

 

·       1998 second quarter: GM reported a net loss of $196 Million

·       1997 second quarter: GM reported a net income of $474 Million

·       Net income for the six months ended June 30, 1998: $630 Million

·       Net income for the six months ended June 30, 1997: $1.2 Billion

 

GM has a Strategic Alliance with Suzuki

 

Flint Strike

Gary Cowger - returns to US from Chairman of Opel to repair labor ties in US.

 

The move includes appointment of Robert W. Hendry, currently President and CEO of GM’s Saab Automobile AB unit to the Top Job in the Open Organization while continuing in his Saab role.

 

The election of the supervisory board of Michael Burns, chairman of GM Europe (#1 Automaker’s pan-European umbrella organization) and the designation of Hans Barth, a VP of GM Europe, as chairman of the Opel supervisory board.

 

Clearly the parent company expended tremendous effort to extract Mr. Cowger from the Opel assignment.  He is to become GM’s VP for labor relations on Feb. 1, succeeding Gerald Knechtel, 57, who will retire after 35 years with GM and more than 6 years in the top labor post.  The timing is important because GM’s 3-year national contract with its principal US labor union, the UAW, is up for re-negotiation next summer, ahead of a mid-Sept. expiration.

 

Why was Cowger the man that GM Chairman John F. Smith had to have?

 

Cowger is know as a “shop rat” - a manufacturing expert in GM - not a labor relations expert.  Smith wasn’t explaining, but those close to the situation say he thought Cowger was the best person to deal with UAW president, Stephen Yokich.

 

After strikes in Flint this past summer forced a near-total shutdown of GM’s North American operations, and cost the company $2.1 Billion, management put a high priority on retooling the company’s historically fractious relationship with the UAW.  Officials say that they have made some progress in recent months, resolving several disputes that in the past might have turned into strikes.

 

GM considered a number of executives for the labor post.

 

Cowger’s record as a plant manager who had successful, sometimes innovative, relationships with labor set him apart from other individuals close to the situation.

 

Mr. Cowger solidified his reputation as a businessman by turning around GM’s operation in Mexico in the 3 years before he was sent to Europe last Jan. 1, as head of manufacturing.

 

Cowger left high school in Kansas City, KS with aspirations to be a professional baseball pitcher.  Instead, he wound up in GM’s management training program and eventually earned a masters degree in management from MIT.

 

He is known for making GM’s traditionally contentious Lordstown, OH plant efficient enough to earn new investment in the mid-1980’s; and for helping the Cadillac division dispirited Hmatramck, MI plant win quality awards in the late 1980s.

 

People who know him will, say Mr. Cowger is a tough, demanding manager who knows how to communicate with workers on the plant floor, as well as with top executives.

 

As president of GM’s Mexico operation he advocated open, direct communication with his workers learning Spanish as quickly as he could and insisting on using it even while not quite fluent.

 

When the peso crashed in Dec. 1994, shortly after he arrived, Mr. Cowger got his management team to map out a strategy to grab market share as the economy recovered.  It involved offering better customer service than rivals, and it vaulted GM from an also-ran 18% of the market to #1 with 30% today.

 

Mr. Cowger still speaks with a pronounced Kansas accent and still talks about his baseball career that never was.  But he does still play the game - attending fantasy camps put on by the Detroit Tigers in Florida.