GM Trending Towards a Younger Workforce

story first appeared in The Detroit News

The new generation of automotive manufacturing workers at a General Motors Co. subsidiary here is focused on career and environment, and they want to work with cutting-edge technology.

That's part of what attracted many millennials — roughly defined as those born in the 1980s and 1990s — to help create an integral part of the future of the automobile: They're assembling lithium-ion batteries for the Chevrolet Volt extended-range plug-in and the equivalent cars the automaker sells in Europe and Australia.

The Brownstown Battery Assembly Plant, in a former warehouse with little to identify it as a GM plant, represents the Detroit automaker's youngest workforce. It is operated by a GM subsidiary, GM Subsystems Manufacturing LLC. And 45 percent of its hourly workforce is composed of 24-to-31-year-olds.

That's a huge contrast to other GM plants, where that generation, on average, represents 9 percent of the workforce. The average GM U.S. hourly worker is 47 years old.

About 70 hourly workers and 35 salaried workers assemble packs for the Volt that contain 288 lithium-ion cells manufactured by LG Chem. Trucks arrive four times a day to take battery packs to the nearby GM Detroit-Hamtramck Assembly Plant, where they go into the Chevrolet Volt, Holden Volt and Opel Ampera. Late next year, the Brownstown plant expects to start assembling batteries for the plug-in Cadillac ELR coupe.

Most of Brownstown's hourly employees have not previously worked for GM. Many, including the plant's youngest employee, Valerie Myaard, 24, of Flat Rock, had no auto or manufacturing experience. She started in May 2010 and now is a team leader, overseeing five workers.

Young seek new challenges

GM partnered with Scratch, a Viacom company, to help research young workers. It found they are quick to seek new challenges, are able to multitask and want to move up the career ladder.

Many Brownstown workers have held multiple jobs since the plant opened in 2010.

They also have worked together to develop the best and most effective ways of doing things. They determined where to set up components on a cart for assembly workers to use.

Even the plant's union shop chairman is just 27.

But attracting talented younger workers who see the auto industry as a career has been a challenge. It also is something Gov. Rick Snyder has said is vital to its success.

Jay Baron, president and CEO of the Center for Automotive Research in Ann Arbor, said in a statement that GM is just now starting to see a trend in the average age of the hourly worker in the auto industry.

Some workers thought a GM career was out of reach. Shannon Pearson, 28, of Taylor is one. She had family ties to GM and had a short-lived job at a GM plant in 2006.

Excited about technology

Many of the younger workers at Brownstown are relishing their roles working with new technology.

Brett Powell, 31, of Hartland, who has worked as a technician at the proving ground and worked for a small firm that manufactured electric vehicles, runs tests on returned batteries to find the cause of a failure.

Many at Brownstown have moved up the ranks quickly, including Tony Lamentola, 26, of Southgate. The college student previously worked as a porter and fast food restaurant employee. After starting at Brownstown in 2010, he was promoted last fall to team leader.

Lamentola said he likes being on the "forefront of technology" and sees the importance of getting young people involved in the auto industry.

Ford Reports Its Best-Ever Quarter in North America

story first appeared on usatoday.com

Ford reported a third-quarter net income of $1.6 billion, driven by its best-ever quarter in North America.

Pretax profits of $2.3 billion in North America more than made up for a $468 million pretax loss in Europe, but the drag left the net results down 1% from the quarter a year ago.

Revenue was $32.1 billion for the quarter, down 3% from a year ago, and operating profit was $2.2 billion.

While Ford remains very dependent on North America, the company said it reported a profit in Asia and Africa, and remained in the black in South America.

Ford this month had said its losses in Europe this year could exceed $1.5 billion -- up from a $1 billion forecast that surprised analysts in July. Some of the additional loss is related to costs to its plan also announced this month to shutter three operations in the U.K. and Belgium, starting next year. Ford is cutting 5,700 jobs in addition to offering 500 salaried buyouts.

It could take automakers years to right themselves in financially troubled Europe, and the costs will be staggering. Art Wheaton, auto expert at Cornell University's Industrial and Labor Relations School thinks it will cost Ford $1 billion to close those plants.

Wheaton says because of tough actions sooner instead of later, Ford will come out on top in Europe.

The U.K. plants close next year, and Ford plans to shut Belgium in 2014.

The earnings per share of 40 cents beat Wall Street expectations of 30 cents, and surpassed 34 cents a year ago.

The company narrowed its guidance for U.S. auto sales this year to 14.7 million. Until now, Ford gave a range of 14.5 million to 15 million.

As expected, the results were stronger than the second quarter when Ford reported a 57% drop in earnings of $1.04 billion with losses in Europe that reached $404 million. Pretax earnings were $1.8 billion.

South America saw modest operating income of $9 million, below a year ago.

In Asia-Pacific and Africa where Ford is investing heavily to get a bigger foothold in the market, especially China, the automaker had a $45 million pretax profit compared with a $43 million loss a year ago.

Ford's shift to smaller cars should get credit for much of Ford's success, says Jesse Toprak, senior analyst at TrueCar.com. He says North American sales indicate improved profitability for the company.

On Monday, Chrysler reported a third-quarter profit of $381 million, up 80% from a year ago.

General Motors is scheduled to report its earnings Wednesday.

Michigan Economy Up After Mild Winter

Story first appeared in The Detroit News.

Bolstered by the mild winter and continuing weakness in housing, the auto rebound is spreading to other parts of the Michigan economy, boosting economic conditions to their best level in six years.

According to a new Comerica Bank estimate of the state economy, the recovery is starting to reach beyond Detroit's Big Three. That trend also is reflected in the February jobs report released Wednesday, which showed that during the past 12 months the state added as many jobs in business and professional services as it did in manufacturing.

Another piece of encouraging economic news released Thursday was the state's announcement that personal income in Michigan grew at the strongest rate since 2000, just before Michigan entered its decade-long "one-state recession."

Comerica's index measures nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits and motor vehicle production.

All seven of those improved in January, sending the index up 7 points, to a level of 98, the highest since January 2006.

Despite potential threats, including higher gas prices and defense spending cuts, Dye sees the economy emerging from its halting recovery to a stronger expansion.

While the economy got a bit of a boost from the mild winter, which kept home heating and other bills down and left more money in consumers' pockets, there's more to the current improvement than warmer temperatures and short snowfalls.

With auto sales recently topping an annualized rate of 15million vehicles, consumers seem to be unleashing some of the pent-up demand they've been holding in since 2007. The auto industry also benefits from the lack of any significant improvement in the housing market. With home values down and still dropping in most of the country, consumers aren't shopping for new homes.

Experts see rising gas prices as a threat to auto sales for the Detroit carmakers, now that they're offering more fuel-efficient models. The experts added that they see gas prices easing and dropping to $3.60 to $3.70 a gallon by summer.

And while higher gas prices may trim some pickup and SUV sales, car sales won't be lost to the foreign nameplates as in past periods of increased fuel prices.

For Automakers, Strong Sales in October

NY Times

DETROIT — October was the best month for new-vehicle sales in more than two years, outside of the government rebate program in mid-2009, and General Motors surpassed expectations, but still lost market share in the United States ahead of its public stock offering.

G.M. said Wednesday that its sales rose 3.5 percent last month from a year ago, compared with a gain of about 13.4 percent for the industry over all. G.M.’s market share fell to 19.3 percent from 21 percent a year ago.

The Ford Motor Company said its sales were up 19.2 percent, and Chrysler reported a 37 percent increase from a mediocre October 2009. Several smaller companies, including Hyundai, Kia and Subaru, set new October records, with increases of at least 25 percent.

Toyota was the only major automaker to report a decline. Its sales fell 4.4 percent. The industry’s seasonally adjusted annualized selling rate was projected to hit at least 12 million for the first time since September 2008, when auto sales began to collapse. Sales bottomed out in early 2009, but automakers have struggled to gain much traction since then.

“Signs are there that the recovery continues and that it will be sustained,” Don Johnson, G.M.’s vice president for United States sales operations, said. “We don’t see a big risk at all of a double dip.”

For all of 2010 so far, G.M.’s sales are 5.7 percent higher than in the first 10 months of 2009, when the company shed four brands after a brief trip through bankruptcy protection. Excluding those brands — Pontiac, Saturn, Hummer and Saab — G.M.’s sales are up 22.1 percent this year.

G.M. executives will highlight the company’s rising sales as they begin a traveling “road show” to court investors starting this week. The company is expected to initiate its initial public offering in mid-November, allowing the federal government to begin selling its 61 percent stake.

Ford, which avoided bankruptcy, said sales were up 25 percent for its trucks and 23 percent for its passenger cars, but only 10 percent for its utility vehicles. The company sold 3,846 of its new subcompact car, the Fiesta, with 62 percent of buyers replacing a non-Ford vehicle.

“The consumer is crawling back, particularly in the more affluent and higher-quality credit segments, which could provide upside to our 2011 outlook,” Brian A. Johnson, an analyst with Barclays Capital, wrote in a recent note to clients.

Jesse Toprak, vice president for industry trends and insight at TrueCar.com, which tracks vehicle sales and pricing, said the improving performance of automakers showed that “a recovery is under way,” even though the growth had been slower than anticipated.

“If the trajectory continues in the same path, we could have a strong finish to the year,” Mr. Toprak said.

October US Auto Sales to Be Highest in 2010: Ford Exec

CNBC

Ford Motor President of the Americas Mark Fields said October U.S. auto industry light vehicle sales will be near 12 million vehicles, which would be the highest monthly sales of the year.

The October sales rate shows the U.S. auto industry is slowly recovering, Fields said.

"My prediction is something around the 12 million range," said Fields, referring to a seasonally adjusted annualized rate for sales.

Fields was speaking to reporters after announcing Ford will spend $850 million for improvements to at least four Michigan Ford plants, spurred by $400 million in state tax relief.

If U.S. industry sales come in near 12 million on an annualized basis as Ford expects, "that would be another evidence point that the economy and consumers are slowly coming back," said Fields.

The U.S. auto industry experienced annual sales topping 16 million for most of the past decade, until 2008 when sales began to fall and in 2009 when they reached 27-year lows.

Last week, J.D. Power and Associates said 2010 annual sales would be near 11.5 million, up from 10.4 million vehicles in 2009. But it cut its 2011 sales forecast to 12.9 million from a previous forecast of 13.2 million vehicles.

"We had a good, balanced month in terms of our products," said Fields, which he said would continue what he termed a good mix of pickup truck and car sales in recent months.

Last week, Barclays said Ford's third-quarter earnings to be announced on Tuesday will be boosted by strong sales of profitable pickup trucks, including heavy duty pickups.

The plant improvements will mean jobs for about 1,200 people, Fields said. Of those, 900 will be hourly workers and 300 will be salaried. The salaried positions will mainly be engineers and at least 200 of the hourly workers are now laid off and will be called back to duty.

Fields said it was too early to tell how many hourly positions will be new hires working at the new, lower wage near $14 per hour. That would be about half of average wage of most hourly workers represented by the United Auto Workers union.

UAW Workers protest Leaders

The Detroit Free Press

Orion plant's 2-tier wage deal draws members from 3 states

 

Union members who protested at the UAW's headquarters in Detroit on Saturday said they are worried that a contract for General Motors' plant in Orion Township sets a precedent that will be used to broaden the use of a lower, tier-two wage at other plants.

More than 100 UAW workers and retirees came from Indiana, Ohio and across Michigan to protest against UAW leadership, who they believe are out of touch with members' concerns.

"I am hoping that they feel some type of embarrassment that we have to come out to Solidarity House in order for them to hear our message," said Nick Waun, 31, of Lapeer, who works at the Orion plant and helped organize the rally.

Planning for the demonstration began after workers were told Oct. 3 of a deal between the UAW and GM that calls for 40% of the workers at the Orion plant to be paid the lower wage, which is about half the $28 that tier-one workers make.

Waun said that if he refuses an offer from GM to transfer to the Lordstown, Ohio, plant, where the Chevy Cruze is built, he would remain laid off and retain his right to be called back to Orion at the lower second-tier wage.

"I am not going to turn it down, because I can't afford to give up my income," Waun said.

In an interview Saturday, UAW President Bob King explained that the UAW and GM reached the special local agreement so the Orion plant -- which had been selected for closure last year -- could make a subcompact car profitably. That small car had previously been slated for production in South Korea.

"We have made it very, very clear that this is only for a small car," King said after speaking at a political rally for Democratic gubernatorial candidate Virg Bernero in Warren.

"If we brought a truck into Orion, that would be at the traditional wages, so this is not going to go to other plants unless we are able to bring a (subcompact) car into Ford or Chrysler that we don't currently have. We might look at something similar for that situation. But as far as traditional products, those are going to stay under the current agreement."

King said workers have a right to appeal the agreement but argues that the Orion Township agreement was consistent with the UAW's national labor agreement.

"Ultimately, we will have a plant, and if General Motors does very well ... then we will have the opportunity to make gains in the future for our membership," King said. "If you don't have a plant, then you can't make the gains."

Despite efforts by the union and GM to paint Orion as a special circumstance, concern remains.

"This is a precedent," said Gregg Shotwell, co-founder of the Soldiers of Solidarity, a UAW dissident group. "This indicates where the UAW is heading going into negotiations in 2011."

Gregory Clark, chairman of UAW Local 23 in Indianapolis, sees parallels between the Orion deal and the situation his workers faced at a GM stamping plant in Indianapolis. Last month, workers there defeated a union contract negotiated with a potential plant buyer that would have cut unskilled workers' wages almost in half.

"It is definitely a pattern. ... They will whipsaw Orion against the next facility," Clark said.

"If they can do this to the Orion workers, they can do this to everyone," said Gary Walkowicz, a bargaining committeeman from UAW Local 600 in Dearborn. He also fought to defeat modifications of Ford's national contract last fall. At Orion, UAW officials have said that they don't expect any workers who make the standard $28 wage to be forced to accept the lower, second-tier wage. However, that depends on nearly 300 workers with 29 years of experience accepting early retirement, and on some workers transferring to other plants.

X Prize Marks Fuel-Efficiency Spot For Future Cars

NPR

Team Edison2's Oliver Kuttner (left) and Brad Jaeger, one of the team's professional race car drivers, with the Very Light Car that won the mainstream class of the X Prize competition.

 

 

 

Oliver Kuttner and his team of designers have seen the future of fuel-efficient cars topping the dreamed-of mark of 100 miles per gallon. This week, the Edison2 team is being rewarded for its vision with half of the $10 million X Prize.

To get into the Edison2's four-seater gas-powered vehicle, dubbed the Very Light Car, passenger and driver climb in through a window — just like a racecar. That might not be so easy for Grandma. But Kuttner, who's 6-foot-4 and weighs 250 pounds, has no trouble jumping into the driver's seat for a victory lap around Charlottesville, Va.

More than 100 competitors also jumped at the chance to compete for the Progressive Insurance Automotive X Prize.

The prize will be shared among three teams: two from the United States and one from Switzerland. The honor is awarded to teams that create super-fuel-efficient vehicles with mainstream potential.

A Car You Can Push Around

The top prize-winning car is called the Very Light Car with good reason. It weighs just 840 pounds. You can push it with just a finger or two. The aerodynamic car looks like a futuristic egg suspended on four small wheels.

Kuttner says the car has just the basics.

"It has a heater. It has some basic ventilation. It accelerates briskly enough not to hold up traffic. But it's just a modest car," Kuttner says.  But it does get over 100 mpg.

A Sneak Peek At The Winning Car

As Kuttner drives around the streets of Charlottesville, the car hugs corners and stops on a dime. But the real test for the competition occurred over the summer at the Michigan International Speedway. There, the team's professional race car drivers ran it through safety tests used by Consumer Reports on mainstream cars.

"I think these cars are very much in their development stages," says David Champion, Consumer Reports' director of automobile testing.

He says car engineers still need to iron out kinks with braking, emergency handling and acceleration.

"But they really showed the passion and the drive and the ingenuity of these engineers to produce these cars that were extremely fuel efficient," Champion says.

Peter Diamandis, CEO of the X Prize Foundation, says the goal of the competition is to change what people want to drive.

"This is a prize to show the public that you can have a car that is beautiful, affordable, fast, safe and, 'Oh by the way — it can get over 100 mpg or the gas equivalent.' And why would you want anything else?"

Designing For Mass Appeal

Competitors had to demonstrate that their vehicles have mass appeal for consumers and mainstream automakers.

"So if anything is going to have an impact, it's got to scale," says Felix Kramer, the founder of CalCars, an advocacy group for plug-in hybrids. "And it's got to reach the large automakers as well because it's very rare that you get a new auto company coming in."

Electrification

Kramer says most automakers are looking to bolster their fleets of electric cars — a trend that was certainly on display in the winner's circle for the X Prize.

The other winning teams include X-Tracer from Switzerland and Li-ion Motors from Charlotte, N.C., which will get $2.5 million each for designing electric cars that won top prizes in the alternative category.

The X-Tracer's vehicle, called the E-Tracer 7009, had the highest fuel efficiency rating in the competition, measuring an equivalent of more than 197 mpg, according to the official X Prize results. The car accommodates two passengers in a design that looks like a motorcycle with a cab on top of it.

Team Li-ion's Wave II two-seater also earned a high fuel efficiency rating — the equivalent of more than 171 mpg.

Carrying The Lessons Forward

Inside the Edison2 workshop in Lynchburg, Va., a production team of more than a dozen uses recyclable and low-cost materials to make the company's cars.

"If we as a society want to use less energy, we must design cars that can be sold for, let's say, $20,000 and deliver this unprecedented level of efficiency," Kuttner says.

He says he thinks Edison2's winning vehicle — the Very Light Car — could sell for this price if it ever reaches the mainstream market. That's still a ways down the road. But their engines are revved up.

Ford says Hatchbacks Rising from the Dead

USA Today

It's easy to come up with a list of things that most Americans hate. Dandruff, mosquitoes, liverwurst, income taxes, room-temperature beer, shiny polyester, to name a few. Then there are hatchbacks, which Americans used to like, but now generally hate. But that could be changing.

Ford reports that 60% of the buyers of its new Ford Fiesta minicar are opting for the five-door hatchback. By contrast, Ford says that only 8.3% of all cars sold last year were hatchbacks. Could the stubby-car look be on its way back?

It's not just Ford. Other automakers are creeping cars without traditional trunks into their market with some success. Kia Soul for instance is hot. Or Honda Fit, the car that Ford set out to beat with Fiesta.

In Europe, hatchbacks remain popular along with station wagons, another body type that Americans have spurned. Ford says it's also going to take a chance on the next Ford Focus, and offer a hatchback version here as well.

"American car buyers have grown accustomed to the convenience of hatch body styles after years of owning SUVs and crossovers," said George Pipas, Ford sales analyst.

As Ford continues to roll out global vehicle platforms like Fiesta and the next-generation Focus, the company is investing in flexible plant capacity. The flexibility will ensure Ford is able to react quickly to changing tastes, providing a vehicle mix – hatchback or sedan, base model or fully loaded – to serve varied consumer demands around the world.

Also heartening for Ford, the automaker says buyers are opting for more options in the smallest of cars, odd given that the sour economy would usually lead buyers to take fewer options. Half of Fiesta buyers, for instance, want leather upholstery.

Fiesta is just getting started in sales after a setback involving a production slowdown at the Mexican plant where they are made due to a quality-control problem. Ford never disclosed what the issue involved.

So we'll see. Once Fiesta sales start to roar, hatches may go pop.

Jalopnik: Obsessed with the Cult of Cars

Workers from a Detroit Chrysler plant visited by President Obama two months ago were busted today for drinking and smoking pot on their lunch break. Although they're now suspended, a former employee tells us it won't change a thing.

The Jefferson North Assembly Plant is Chrysler's flagship manufacturing facility. The plant, home to production of the all-new 2011 Jeep Grand Cherokee, was visited by President Obama in July — just five days before an investigation by Fox 2 Detroit began that unveiled auto worker's engaging in the blue collar equivalent of the three martini lunch. When President Obama visited this plant that's supposed to represent the "new" Chrysler, he told America

    "I believed that if each of us were willing to work and sacrifice in the short term — workers, management, creditors, shareholders, retirees, communities — it could mark a new beginning for a great American industry. And if we could summon that sense of teamwork and common purpose, we could once again see the best cars in the world designed, engineered, forged, and built right here in Detroit, right here in the Midwest, right here in the United States of America."

Unfortunately, a few of their employees look to still be stuck in old school stereotypes about organized labor.

The investigative report found a dozen employees were taking the 30-minute shift break they have at 11:00 am to drive to a public park and pound 40-oz beers, smoke weed, or do both at the same time. They then get in their cars, drive back to the plant presumably under the influence, and continue manufacturing cars.

Chrysler's Senior VP of Manufacturing, Scott Garberding, told Fox 2 saying they've suspended workers without pay pending the outcome of an investigation:

    I want to make it clear that we at Chrysler take it very seriously. For us this behavior is totally unacceptable and will be dealt with swiftly. In fact, we've already identified a few of the people involved in this incident. Each of them has been suspended indefinitely, without pay, pending further investigation.

Unfortunately, this may not do much to change the culture of auto workers, says one longtime auto worker who spoke to us about the video.

"The problem is not really the drinking per se. The problem is when it happens the UAW turns a blind eye," says the Detroit resident who used to work in automobile manufacturing but wished to not be identified because of his close family ties to the United Auto Workers and friends still in the industry.

"My first week on the job I was teaching some classes at this plant, and the breaktime bell goes off to wake up the guys so they can take a break," he explains. "The trailer [I was in] was parked up right next to the plant window and I see this head go by, and it was this guy snorting coke back there. That was my first experience."

Like many Detroit residents, his two uncles and father were all UAW members and auto workers. But whereas his dad and older uncle were well respected, his younger uncle would constantly show up to work intoxicated or not show up at all. Because of the respect other workers had for his dad and uncle he was never seriously punished or even sent to drug rehab for his own protection.

"Once my uncle passed away, my youngest uncle said 'I better retire' because he knew his older brother wouldn't be there to stick up for him."

"I remember seeing people get fired and would be shocked, and be like 'Oh my God' and some of the people who have been there longer are like 'don't worry, they'll be back,'" He told us. "Usually it was a few day suspension to put on a dog and pony show. They just turn a blind eye after a while.What some of these guys need is alcohol treatment programs."

The UAW, to its credit, issued a statement disapproving of the activity. Unfortunately, it also didn't offer to do anything about it or seem in any way regretful for the worker behavior:

    The UAW strongly opposes the use of controlled substances or alcohol use on the job. This type of behavior jeopardizes the health and safety of all employees. We also recognize that, unfortunately, these behaviors exist in our society.

    The UAW and the Chrysler Corporation work together to keep our workplaces drug and alcohol free, and to encourage employees with substance abuse problems to get the treatment they need. The employees involved in this situation do not represent the vast majority of workers at Chrysler who do a great job making high quality vehicles in some of the most productive manufacturing facilities in the United States.

Sure, yeah, it does represent a danger to the other workers, but what about the people driving Jeeps built by drunk/high workers?

Like a lot of people in the industry, the former employee who spoke to us said he supports the UAW and the Big 3 but recognizes there's a major problem.

"I love the auto inudstry, i love everything about it... I grew up eating/sleeping breathing cars. I really just would like to see things change."

Just as the three-martini lunch is sadly no longer accepted in white collar America, so too, the pot-and-beer lunch is no longer accepted for blue collar America.

Autoworkers Adjust to Life Without Jobs Bank as GM, Ford Seek to Rebound‏

Bloomberg

General Motors Co. gave Kevin Dorey’s father a paycheck for 34 years, kept him working near home and let him out in time for his kids’ football games.

“‘It’s steady’ -- that’s what my dad always told me about General Motors,” Dorey, 44, said over chicken wings and beer at the Beef ‘O’ Brady’s sports bar in his hometown of Saginaw Township, Michigan. “For me, it’s been anything but steady.”

Kevin Dorey worked at three plants in three years until his most recent location in Orion Township, Michigan, which required a 90-minute commute, closed in November. Previously, he would have received full pay during the layoff while GM revamped the factory for a new car. The United Auto Workers agreed last year to give up that benefit, known as the jobs bank, and the paychecks stopped coming in July.

Less employment security, lower starting pay and stricter work rules signal a new era for the jobs viewed as a ticket to the middle class since Henry Ford’s $5-a-day wage in 1914. The changes also mean GM, Chrysler Group LLC and Ford Motor Co. are free of the obligations that helped sink the industry in 2009 and can make money with lower sales volumes.

UAW President Bob King said in June that he’ll seek to win back benefits and rebuild the union’s power when contract negotiations begin next year. Automakers may seek even more concessions as sales remain close to a 30-year low.

In the meantime, autoworkers are adjusting to a new way of life in an industry where deliveries fell to 10.4 million vehicles in 2009, the lowest level since 1982, the year Dorey got his driver’s license. Sales averaged 16.8 million a year from 2000 to 2007.

Distant Transfers

Pedro Gonzales accepted a transfer in May from a GM plant in Pontiac, Michigan, to one in Lordstown, Ohio, to avoid a long layoff and slipping to the bottom of the list of workers to be recalled under new union rules.

For two months, he and three other workers stayed in a hotel and a two-bedroom apartment, where he slept on an air mattress in the living room. On weekends, he drove more than four hours to see his wife, mother and five children before moving them to Ohio this month.

“The people here are nice, and the work seems stable, so I decided to stay,” said Gonzales, 42, who assembles instrument panels for the Chevrolet Cruze small car. “I don’t want to move my family again.”

Rejecting Transfers

Workers previously were able to turn down transfers farther than 50 miles from their plant and remain in the jobs bank, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan. There would have been 20,000 workers in the jobs bank at the start of 2010 if the program still existed, he said.

Laid-off employees with fewer than 10 years of experience now get partial pay for 26 weeks, while those who’ve worked longer can get paid for as much as a year. Workers then move to a transition support program, about equal to collecting unemployment, for an additional 26 weeks to one year, McAlinden said.

Wages also are declining, with new hourly production workers starting at $14 an hour instead of $28. The combined cuts reduced Detroit-based GM’s average labor cost to $58 an hour from $74 two years ago, McAlinden said. The new $14-an-hour workers, which could account for 20 percent of the labor force eventually, will drive GM, Ford and Chrysler’s hourly costs below the $56 for Toyota Motor Corp.’s most senior U.S. hourly workers, he said.

‘Solidly Profitable’

GM is now positioned to break even during troughs in demand, Chief Executive Officer Ed Whitacre, who will cede the title to Daniel Akerson next month, said in June. Ford, based in Dearborn, Michigan, will be “solidly profitable” in 2010, CEO Alan Mulally has said.

Those improved prospects are setting up a fight during contract talks in 2011. Ford, the only U.S. automaker that didn’t file for bankruptcy or receive government assistance last year, is seeking parity with GM and Auburn Hills, Michigan-based Chrysler, which won a freeze on wages for new hires until 2015 and a prohibition on some strikes for five years.

The union wants automakers to restore some of the pay raises, annual bonuses and cost-of-living adjustments it surrendered to keep the companies afloat last year.

“It’s really important to understand and stress that all the auto companies were profitable and successful paying the wages and benefits they did when they had good product and product the customer wanted,” King said in an interview at the UAW’s Solidarity House headquarters in Detroit. He declined to specify which benefits he’d seek in the negotiations and said he didn’t think it was possible to get back everything the union gave up.

Union leaders likely will be successful in clawing back some compensation and benefits, said Bob Schulz, an auto analyst for Standard & Poor’s.

“It’s going to raise costs, it’s just a question of how and how much,” he said.

‘Time Warp’

Union leaders and workers looking to win back concessions are stuck in a “time warp,” said David Littmann, senior economist for the Mackinac Center for Public Policy, a research organization in Midland, Michigan, that promotes free-market principles.

“They want to make things the way they were, and they’re not,” Littmann said.

The jobs bank, which had a combined 25,000 Ford, GM and Chrysler workers at its peak in the early 1990s, was originally designed to retain trained workers who were temporarily displaced by productivity or business cycles. The program later became a symbol of the benefits union workers received as the U.S. government debated approving funds to save the industry.

“It became the welfare mother who drives a Cadillac,” said Harley Shaiken, a labor professor at the University of California-Berkeley. “It became the symbol of what was wrong with welfare.”

The program’s stigma and the nation’s 9.5 percent unemployment rate will make it difficult for the union to win back some benefits, he said.

Dorey, who said he was never in the jobs bank, said he probably will be on the second shift when production at the Orion plant restarts next year. He’ll start work in the mid- afternoon and won’t get home until 4 a.m., leaving the divorced father little time to spend with his 11-year-old son.

“He’s at that point where we do a lot together,” Dorey said. “If I’m working second shift, how is that even possible?”

GM Sees Biggest Profit in 6 Years

The Wall Street Journal

General Motors Co. is expected to post its largest profit in six years on Thursday, buoyed by stronger sales around the globe and higher prices on cars and trucks sold in the U.S.

People familiar with the matter said the company could earn in excess of $1 billion. GM Chief Executive Edward E. Whitacre Jr. gave an early indication last week that the automaker would report "impressive" results for the second three months of 2010 that will surpass the auto maker's $865 million profit it recorded the first quarter this year.

The company is not expected to surpass Ford Motor Co., which made $2.6 billion in the second quarter on the strength of its U.S. and global automotive operations as well as on profits from its finance arm. Ford, the healthiest of Detroit's auto makers, is helped by its profitable finance arm as well as strength in its global automotive operations.

Turning Point Possible

For GM, a second consecutive quarterly profit by would mark a turning point for GM, which essentially stopped making money from 2005 through 2009 and has been living off a $50 billion U.S. government bailout since last year.

The results are driven by improving sales in every region except Europe and sharply lower expenses as a result of last year's bankruptcy.

Meantime, sales in GM's U.S. market are becoming more valuable on a per vehicle bases. Consumers paid $32,584 on average for a GM car or truck in the second quarter, up 5% from a year ago and a 1.4% increase from the first quarter, according to car shopping site Edmunds.com.

"If you can make products people want to buy and they pay you more than they used to, you are going to make a lot of money," said David Whitson, an auto analyst with Morningstar.

GM's results will be under the microscope on Wall Street as the auto maker prepares a return to public markets targeted for later this year. The move will allow the U.S. government to begin off-loading the majority stake it acquired through last year's rescue of the auto industry.

GM will file registration papers for an initial public offering as soon as next week, in which the company will disclose its business plan, potential risks facing the business and financial state in detail.

Mr. Whitacre has said he is eager to cut ties with the U.S. government as soon as possible, saying the relationship—which led critics to dub GM as "Government Motors"—is a turnoff to potential customers.

The U.S. Treasury would likely start by selling a portion of its shares in GM, leaving the government with a substantial stake in the company after the IPO.

GM's sales in the U.S. are up 14% through July from last years' anemic level. The automaker's U.S. sales are delivering more revenue after the company culled unprofitable brands and models in last year's bankruptcy.

The auto maker's strategy to grow sales in emerging markets is producing results. Thursday's earnings figures will likely show significant revenue gains in Asia, fueled largely by fast growth in China.

GM still has kinks to work out. A major restructuring of GM's European Opel unit is underway, but losses are expected to continue at least through the year.

Seeking Effective Strategy

GM is working to piece together an effective marketing strategy in the U.S., where its advertising has often failed to connect with consumers. Also in the U.S., GM's sales to individual customers declined 3% in July, reflecting in part the company's jettisoning of four brands. GM continues to depend heavily on less-profitable sales to rental and commercial fleets.

The auto maker also outspends the industry on discounts. GM spent $3,691 on incentives per vehicle in the second quarter, down $30 from a year ago, according to Edmunds.

Even so, GM's revenue in North America—which grew nearly 60% to $19.3 billion in the first quarter from a year ago—is on track to grow into the second half of 2010. The auto maker is still ramping up production to meet demand for some popular new vehicles, including a move to cancel the traditional summer shutdown in factories that will mostly be reflected in the company's third-quarter results later this year.

Ficano Goes to China, Brings Back Jobs

The Detroit Free Press

Wayne County Executive Robert Ficano first traveled to China in 2005 and will make his sixth visit in November, to court companies and investors interested in doing business in the jobs-starved Detroit region.

It's taken awhile for Ficano's efforts to pay off on a major scale, but last week's news that a Chinese group will buy the $2.1-billion-a-year, 6,200-employee Nexteer auto parts operation from General Motors is a big step forward.

Tempo Group, a Beijing-based auto supplier and key player in the Nexteer deal, was the first Chinese company Ficano lured to Michigan after meeting its owner, Tianbao Zhou, on that first China trip in 2005. Tempo opened a research center in Canton Township two years later.

Ficano told me last week that Zhou apologized to him because the Nexteer acquisition is in Saginaw, not Wayne County. "I said, 'Hey, don't worry about it. It's in Michigan,' " Ficano said.

Another significant aspect of the Nexteer deal is a concessionary labor contract with the UAW that paved the way for the sale. The five-year pact, ratified by Saginaw workers a week before the sale deal was struck, calls for a cash payment to UAW workers in return for giving up raises promised earlier, and a buydown provision to lower the wages of skilled trades workers.

When Ficano first talked with Tempo officials years ago, they were mulling whether to invest in Michigan or in Canada. "They were concerned about Michigan's negative labor reputation," Ficano said.

After Ficano told them Canada had strong labor unions, too, he arranged a meeting between Tempo executives and UAW Vice President Jimmy Settles. Settles convinced them that the union was flexible and could do what was necessary to deliver the productivity Tempo needed, at a wages-and-benefits cost that would enable them to compete.

Four years after that conversation, a big unionized Michigan auto plant is about to become Chinese-owned.

GM's Nexteer steering column operations will be sold to Pacific Century Motors, a joint venture between Tempo and E-Town, the investment arm of the Beijing municipal government. A ceremonial signing is planned Monday at GM's Renaissance Center headquarters; the deal is to close later this year. Purchase price was estimated by Bloomberg News at $450 million.

Last year, Tempo was a joint-venture partner in the $100-million acquisition of Delphi's brakes and suspension business, along with the Beijing government and another Chinese firm, Capitol Iron & Steel.

After a virtual halt to buzz about Chinese investment in the U.S. during the economic upheaval of 2008 and 2009, deals are now getting done, said Peter Theut, founder of China Bridge, a new Ann Arbor consulting firm focusing on trade and investment.

China has capital to invest, at a time when lots of U.S. companies are having a hard time getting bank loans.

It's funny how old hangups, whether they be about Michigan's labor climate or China's currency manipulation, can fade away when two sides need what the other's got.

Chrysler Adds 2 Car Payments to Incentives

USA Today

Chrysler is expanding an incentive program previously limited to its minivans that allows buyers of most models to return the vehicle within 60 days if they are not happy with it. The program also covers the first two monthly payments up to $1,000.

"With this pledge, consumers will have the confidence to know they made the right purchase or they can return the vehicle no questions asked," said Fred Diaz, CEO of the Ram truck brand and also Chrysler Group's top U.S. sales executive.

The program includes most 2010 Chrysler, Jeep, Dodge and Ram models.

The automaker's newest models, such as the 2011 Jeep Grand Cherokee, are not in the program.

Most automakers try to clear out current model year vehicles from July through Labor Day to make room for 2011 models, most of which are introduced in the fall. Chrysler dealers had 59 days of supply on their lots at the end of June, down from 71 days a year earlier, according to Ward's Automotive Reports.

Chrysler's sales have recovered more slowly than those at Ford or General Motors, but in each of the last two months, Chrysler has reported increases of more than 30% over the year-earlier month.

A big portion of those higher sales are going to rental agencies, government and corporate fleets.

This pledge, which is similar to an offer Hyundai made in the depths of the economic downturn in early 2009, could be aimed at boosting retail sales.

"It certainly couldn't hurt. It doesn't really cost any more than plunking down a big incentive on the hood," said Aaron Bragman, an analyst at IHS Automotive in Northville, Mich. "The actual incidence of returning a vehicle is fairly low, if past programs are anything to go by."

In addition, Chrysler is offering what it calls the "National Tent Event" through Aug. 2. Dealers will offer a choice of:

•The two-month payment offer.

•Interest-free financing up to 60 months on most 2010 models if buyers finance through GMAC Financial Services (1.9% for 72 months).

•Direct cash rebates that range from $1,000 to $4,000 on various models.

Maintenance-Free Luxury

The Wall Street Journal

Lots of Cars Have Leather Seats and iPod Jacks. Now Pricey Brands Want to Reel You In With Brake Pads at No Cost

 

 

 

The hottest new luxury car feature for 2011 isn't a sound system or another 50 horses under the hood. It's something you'll appreciate best when you're not driving: "no-cost" maintenance.

General Motors Co.'s Cadillac, Ford Motor Co.'s Lincoln and Tata Motors's Jaguar have declared in announcements during the past few weeks that they'll offer no-cost maintenance to customers who lease or buy new cars. Lincoln says its offer ends Sept. 7. Cadillac and Jaguar say their no-cost maintenance plans start with 2011 models, which start arriving later this summer.

These brands are jumping on the no-hassle maintenance bandwagon that BMW AG has been riding for more than a decade, and Volvo Cars began promoting last year. There's fine print to be considered—more on that in a minute. But the flurry of no-cost maintenance deals reveals something about the state of the luxury car business.

Luxury cars aren't created equal when it comes to technology and quality, but they're getting very close to that ideal.

Long ago, the simple things that used to distinguish a luxury car from a plebeian Ford or Chevrolet lost their exclusivity. Leather seats? You can get those on a Chrysler minivan. Tech-savvy connections for your phone and iPod? One of the slickest systems in the business is available on a Ford Focus subcompact. Navigation systems? Sure, the fancy systems built into luxury cars and SUVs are nicer than a Garmin or a Tom Tom. But those portable navigation systems can deliver a lot of information.

The ride quality, handling precision and power available from a BMW 3 series or a Cadillac CTS-V coupe aren't to be found in a run-of-the-mill mass market car. But the gaps in capability among the leading contenders in the main luxury segments—compact sedans, sport utilities, performance coupes—are narrower each year.

Luxury car makers now must compete not just over hardware, but over the "soft," human dimensions of the customer experience.

Among the first Cadillacs to come with the new maintenance offer will be the 2011 Cadillac CTS and CTS-V coupes—cars directly aimed at BMW's high performance franchise. "You don't just buy a car, you buy everything else that goes along with the brand," says Cadillac spokesman Nick Twork.

This is where "free maintenance" comes in. Luxury car buyers—especially newcomers to elite European brands—had reason to fear that maintenance could put a nasty dent in their checking accounts. The more technologically marvelous luxury cars become, the scarier the thought of paying to fix that technology if it gets glitchy.

"For years, the research has been definitive," says Dan Creed, vice president of aftersales for BMW North America. "It's nice to know you will not see a bill for four years or 50,000 miles except for gas and tires. It's both a clincher and it overcomes reluctance" to buy.

Still: "From a customer perspective my cost of ownership is known to a degree," says Chris Sutton of J.D. Power and Associates, a market research firm.

In other words, anyone wealthy enough to buy a BMW or a Cadillac or any other luxury car knows the maintenance isn't really "free." The cost is wrapped into the price of the car, as a kind of insurance.

One reason BMW and some other manufacturers are opting to eliminate out-of-pocket maintenance costs is that they want the cars kept up properly —by their dealers—so that when they come back for resale at the end of a lease, they fetch top dollar as certified pre-owned cars. BMW dealers sold 114,423 cars under its certified pre-owned program in 2009, up 9.5% from the year before and a new record. Sales of these well-maintained, three- and four-year-old cars are a significant source of profit for BMW dealers, and help support resale values for all BMW vehicles.

Not all no-cost maintenance offers are the same. BMW, as Mr. Creed says, covers all maintenance, including brakes and wipers.

Cadillac's "Premium Care Maintenance" offer doesn't cover brakes, and is limited to "scheduled oil changes, tire rotations, replacement of engine and cabin air filters, and a multi-point vehicle inspection."

Volvo has a "Safe + Secure Coverage Plan" which covers the first eight scheduled maintenance services for five years or 60,000 miles—including oil and filter changes, and replacement of brake pads and rotors and windshield wipers.

Lexus covers just the first two rounds of scheduled maintenance. Audi prefers to sell customers a maintenance plan separately, with a list price of about $790. Mercedes-Benz followed BMW in 2000 and began offering no-cost oil changes, fluid and filter replacements. But dealers began encountering unhappy customers confused about what was and wasn't covered, Mercedes spokeswoman Donna Boland says via email. Now, Mercedes offers pre-paid service packages dealers sell or roll into leases. "The sky didn't fall," Ms. Boland said.

Aluminum Bottoms With Ghosn Predicting 11% Car Growth Benefiting Deripaska

Bloomberg

Billionaire Oleg Deripaska’s forecast for a potential aluminum shortage and record global car output predicted by Carlos Ghosn mean the world’s second most- used metal may be about to rebound.

Smelters will shut this quarter because about 70 percent are unprofitable after aluminum fell as much as 27 percent in two months, said Deripaska, chief executive officer of United Co. Rusal, the largest producer. Ghosn, CEO of Renault SA and Nissan Motor Corp., expects car production to gain about 11 percent this year. Transportation is the biggest use for aluminum.

The executives are more bullish than Wall Street, where the median in a Bloomberg survey of 19 analysts is for the metal to average $2,100 a metric ton in the fourth quarter, 7.1 percent more than now. Harbor Intelligence, the researcher which correctly predicted a 2009 closing price above $2,200, forecasts prices as high as $2,500 before the end of this year.

“We see a long, steady climb for aluminum,” said Andrew Karsh, who helps manage $4.8 billion for the Credit Suisse Total Commodity Return Strategy team in New York. “We’ve been having a reactionary market instead of one that is driven by the fundamentals. The fundamentals are still strong.”

The U.S. will grow the most in six years in 2010 and China, the biggest aluminum consumer, will expand at three times that pace, according to as many as 67 economists surveyed by Bloomberg. Manufacturing is leading the rebound in the world’s largest economy, rising for a 10th month in May, while construction spending in April added the most since 2000. One in every five tons of aluminum is used in building.

Indebted Nations

The growth is coinciding with concern that Europe’s most indebted nations will derail the region’s recovery as governments shrink budget deficits. Western Europe accounts for about 15 percent of aluminum demand. The Standard & Poor’s GSCI Index of 24 raw materials fell 19 percent in the three weeks to May 25 and as much as $7.7 trillion was wiped off the value of global equities from mid-April to the end of last month.

Aluminum fell $1 to $1,944 last week, while the Standard & Poor’s 500 Index gained 2.4 percent, erasing this year’s loss. The S&P GSCI Index advanced 3.5 percent.

Aluminum for delivery in three months closed 0.9 percent higher at $1,961 in London after China signaled it will relax the yuan’s fixed rate to the dollar, boosting optimism for increased sales in the world’s third-largest economy.

Shares Rally

Shares of Rusal gained 5.8 percent in Hong Kong, paring the decline since they listed in January to 34 percent. Alcoa Inc., the third-largest producer, rallied as much as 9.1 percent in New York, closing up 5.5 percent at $11.72 and leaving the decline since January at 7.9 percent. Rio Tinto Group, the second-biggest, jumped 5 percent in London, erasing this year’s loss.

“The price drop that we’ve seen is something that we view as a shorter-term correction because fear is increasing above normal levels,” said Jesus Villegas, an analyst at Laredo, Texas-based Harbor. “Historical evidence has shown that in years when demand grows pretty quickly, like we are expecting in the next two years, production increases tend to lag,” he said, predicting the biggest supply shortfall in five years in 2011.

Smelters may shut facilities that can make 2 million to 3 million tons in the second and third quarters, equal to about half of annual North American demand, Deripaska said in an interview June 9 in Hong Kong.

Capacity Offline

In March 2009, 7.3 million tons of capacity was offline, Barclays Capital estimated last year. Prices had slumped 62 percent in seven months from a record $3,380.15 in July 2008. Aluminum rallied 95 percent from February 2009 to April this year, boosting earnings for Rusal, Rio Tinto and Alcoa. It fell to $1,828 on June 7.

The consensus among analysts has been too pessimistic before. A year ago, their median forecast for this year’s average was $1,700, according to estimates compiled by Bloomberg at the time. The actual average this year has been $2,173.

Part of their sentiment is explained by the near-record stockpiles held in warehouses monitored by the London Metal Exchange. Inventory of 4.47 million tons is five times the average since 1980 and more than Europe makes in a year.

LME-monitored reserves are little changed from a year ago and about 80 percent is tied to transactions, making it behave as a “financial asset rather than an industrial feedstock,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. Projections for interest rates to remain near record lows in the next 12 months mean the metal may not return to the market any time soon, he said.

‘Not an Impediment’

“High exchange stocks will not be an impediment to higher prices as long as most of this material remains tied up in long- term financing deals,” said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London, who expects a second-half average of $2,450. His forecast for 2010 demand growth of 13 percent compares with Barclays’s projection of 12 percent, the fastest pace in at least a quarter-century.

Ghosn of Yokohama-based Nissan, Japan’s third-largest automaker, told investors a month ago that while 2010 would be a “challenging” year, “the worst of the crisis is behind us.” His forecast for record global car sales of 70 million compares with 63 million last year and the previous all-time high was 68.5 million in 2007, Renault’s press office said in an e-mail. Nissan forecast May 12 that profit will more than triple this fiscal year. Its shares dropped 15 percent in Tokyo trading this year.

Auto Sales

U.S. auto sales rose to 1.1 million in May, the eighth straight monthly increase, as General Motors Co., Ford Motor Co., Chrysler Group LLC, Nissan and Hyundai Motor Co. exceeded analysts’ delivery estimates. On average, 8.6 percent of a North American car’s weight is made up of aluminum, according to the Arlington, Virginia-based Aluminum Association’s Aluminum Transportation Group.

Demand from the airline industry may weaken. Production of commercial jetliners will drop to 882 units this year, from 960 last year, according to December estimates from Fairfax, Virginia-based aviation consultant Teal Group. Boeing Co. says a typical 747 uses about 66 tons of aluminum alloy.

A slower global recovery may curtail the rally. Group of 20 finance chiefs meeting in South Korea this month said the rebound faces “significant challenges” and International Monetary Fund Deputy Managing Director Naoyuki Shinohara warned June 9 of more risks. U.S. housing starts fell in May by the most since March 2009, Commerce Department data show.

Surplus Production

China, accounting for 40 percent of global output, exported more of the refined metal in April than it imported for the first time since the end of 2008. China will produce 510,000 tons more than it needs this year, Barclays estimates.

A rally would mean fewer unprofitable smelters, limiting shutdowns and encouraging mothballed plants to reopen. Prices at $2,200 or more would probably encourage capacity to come back on line, said Julian Kettle, a London-based analyst at researcher Brook Hunt, a Wood Mackenzie company. Barclays expects output to rise 11 percent to 42 million tons this year, worth about $98 billion at the five-year average price of $2,328.

Cutbacks have yet to appear. Global output rose to a record daily average of 112,500 tons in April, according to the London- based International Aluminium Institute, which says steel is the most-used metal. It was 112,300 tons a day in May.

European Premiums
Rising production is not being reflected in availability. European premiums, or the fee added to the price of metal for immediate delivery on the LME, will probably be as much as $115 a ton this month, compared with $60 in January, because of a scarcity of available metal, according to London-based researcher CRU Group. Premiums in Japan more than doubled in a year.

Capacity is also being added in regions where power costs are lower. Globally, energy accounts for about 39 percent of total costs, according to Bank of America Merrill Lynch.

New smelters in Abu Dhabi and Qatar and Chinese plants will add capacity this year, Barclays said in a report this month. That will be partly offset by Europe, where about two-thirds of plants “are in danger of closure” before the end of 2013, the European Aluminium Association says.

Energy may stunt the growth of output in China, where the government is raising power surcharges by as much as 100 percent for some energy-intensive companies starting this month.

Supply could also be kept off the market by exchange-traded funds backed by the metal. Rusal said in April it was in talks to supply metal to banks for possible ETFs.

Swing to Profit

Deripaska’s company said in May it swung to a first-quarter profit from a loss. Rio, based in London, will more than double earnings per share to $6.82 this year, according to the mean estimate of 17 analysts surveyed by Bloomberg. Alcoa, based in New York, will post earnings per share of 30.3 cents this year, compared with a loss of $1.06 last year, the estimates show.

“You aren’t going to see a lot of downside risks from here,” Deutsche Bank’s Brebner said. “It will probably start to hurt in the $1,900 to $2,000 region and now we are below that so there is probably pressure growing.”

Auto Industry may see Labor Shortage

USA Today

DETROIT — It seems counterintuitive, but the auto industry could face a labor shortage within the next few years, says the head of the Center for Automotive Research.

While 228,000 auto jobs have been shed in the past two years, the industry is poised to add about 15,000 this year and could need up to 100,000 new workers a year from 2011 through 2013 as the recession recovery continues, says David Cole, chairman of the non-profit organization that looks at trends related to the auto industry and society.

The new jobs won't necessarily be filled by those displaced workers. Automakers need workers with more and different skills than in the past on the factory floor, Cole says. Among priorities: computer skills and the ability to work with less supervision than their predecessors. That likely means education beyond high school.

"The one thing that is very clear is that production workers need a two-year community college degree or the equivalent," he says. "The technology is quite sophisticated and changing rapidly."

He predicts a shortage as early as next year.

Experts have predicted for about five years that a labor shortage eventually would come for the auto industry simply due to the aging population. Advanced Technology Services and ACNielsen predicted in 2005 that changing demographics alone could leave the industry short of skilled autoworkers by the middle of this decade.

Cole says that problem exists, too, and it may arrive sooner than expected, since buyout offers from automakers in recent years accelerated retirement by many older workers. Meanwhile, an industry that shrank for more than a decade has not been adding great numbers of younger workers.

At least for now, thanks to the economy, there are plenty of applicants for any new jobs.

When Kia began hiring for more than 1,000 jobs at its just-opened plant in West Point, Ga., it got more than 44,000 applications.

Chrysler announced last month it would add 1,100 jobs this summer for a second shift at the Detroit plant starting to build its new 2011 Jeep Grand Cherokee. But it's not taking applications because it has enough already to fill the spots.

Sophia Koropeckyj, managing director for Moody's Economy.com, says, however, that lots of applications don't mean a surplus of applicants with skills now needed for state-of-the-art auto plants.

"It's not contradictory at all," she says. "(Automakers) are having a hard time filling all those positions. That really is the scenario."

Chrysler to Reward Dealers

The Wall Street Journal

DETROIT—Chrysler Group LLC plans to reward about three-quarters of its dealers with financial payouts of as much as $200,000 under a new program geared toward boosting customer satisfaction.

About 1,750 dealers will receive an electronic cash payment under the "Dealers Standards" program initiated by Chief Executive Sergio Marchionne. The rewards, to be paid out over the next week, range from $1,500 to $200,000, with the national average of $12,200.

Dealers were evaluated on the operation of their stores and customer care by Chrysler and three outside firms hired by the auto maker. The outside firms used mystery shoppers and official appointments.

"Our emphasis this time around was much more on customer care but the focus will continue to change throughout the year," said a Chrysler spokeswoman. Dealers will be notified of the results during a conference call later Friday.

The program is another step Marchionne is making to entice dealers to boost their efforts as he attempts to revive the struggling auto maker. Mr. Marchionne runs a similar program within Fiat SpA where he also serves as CEO.

The payouts also come as Chrysler's arbitration process to drop dealers from its network intensifies. About 250 dealers are pursuing arbitration to rejoin the network after Chrysler decided last year to stop supplying 789 dealers with new vehicles as part of its bankruptcy process.

Congress later mandated Chrysler to engage in arbitration before cutting the dealers. Chrysler has won three out of four cases in which a decision was rendered through Friday. More than 50 hearings in states throughout the country are scheduled to take place next week.

Deland Dodge, in Deland, Fla., won its case earlier this week. It is now waiting for Chrysler to finalize details and begin shipping vehicles. "I think in their selection of the 789 dealers there had to be a mistake in who they terminated," said owner Gil Dannehower about why he fought to rejoin the network.

Ford-Geely Deal Spells Out Tech Sharing

The Detroit News

Global automakers have been leery of deal-making with China's fledgling carmakers because of the Chinese history of pirating technology and designs, and in 2008, Ford Motor Co. was no exception.

The Dearborn automaker responded coolly that year, when Zhejiang Geely Holding Co. first wrote to Ford with an offer to buy its Swedish carmaker, Volvo.

Privately owned Geely had been making cars for only a decade and already had been sued for trademark infringement by Toyota Motor Corp.

But last month, after a year of talks, Ford and Geely signed a binding agreement for a groundbreaking $1.8 billion deal for Volvo that will serve as a major test of the Chinese auto industry's willingness to respect the rules of global business.

Prior to the Volvo deal, China's automotive acquisitions were limited to troubled companies and castoff assets that were headed for the scrap heap.

But now, Geely is vaulting ahead by acquiring a global carmaker with state-of-the-art technology and vehicle development, as well as other operations that are still deeply intertwined with Ford's.

According to people familiar with the yearlong negotiations, which took place mostly in London, drawing up the intellectual property agreements took up the largest amount of time.

"When they laid them out, they went from one end of a board room table to the other," said an adviser to Geely, who spoke on condition of anonymity.

In addition to clarifying who owned what technology, the agreements detailed the procedures, sanctions and penalties for any breaches.

"I'm very comfortable with the arrangements we have in place, and the arrangements we've made, if we have issues, to resolve them," said Lewis Booth, Ford's chief financial officer and the U.S. automaker's top negotiator.

Splitting up the technology

The accords give Volvo access to any technology that it needs from Ford to produce the vehicles in its business plan covering the next few years.

Volvo may share some of that technology with Geely, but is not allowed to share some of the exclusive Ford technology to which it has temporary access.

Geely will acquire all the technology that Volvo has developed -- primarily safety and environmental technology.

With the acquisition of Volvo, which is expected to close before October, Geely will obtain a research and development operation comprising 3,000 engineers -- about as many as Ford inherited when it bought Volvo in 1999.

Ford, meanwhile, retains access to technologies jointly developed with Volvo, according to people familiar with the accords.

In any industrial transaction of this size, technology agreements are bound to be complex.

But negotiators are particularly wary when dealing with companies from China, which has a poor record of protecting intellectual property, such as patents, copyrights and trademarks.

Although China joined the World Trade Organization in 2001, foreigners working there say the protection of intellectual property remains a concern.

"There's a well-articulated set of intellectual property guidelines and laws, but there hasn't been consistent enforcement of those laws," said Bill Russo, a Beijing-based consultant with Booz & Co.

A December AmCham/Booz survey of business people working for foreign companies in China found that China had made little progress in the past three years in protecting intellectual property.

"Rulings in favor of foreign companies in China are still rare," said Michael Dunne, president of Hong Kong investment and advisory firm Dunne & Co.

Toyota lost its case against Geely in 2003, after a Chinese court concluded that Geely's logo wouldn't be easily confused with Toyota's.

Attorneys with experience in China say it's difficult to win intellectual property suits because the rulings may be subjective.

Increasingly, companies such as Ford are reinforcing their claims by specifying sanctions or penalties incurred in any breach of intellectual property in the sales contract.

In such cases, the courts rule on the basis of contract law, said attorney Justina Zhang at TransAsia Lawyers in Beijing.

Power of a brand

From Geely's standpoint, Volvo's technology wasn't the main reason that Chairman Li Shufu pursued the deal, which was suggested to him by a banker at Rothschild & Sons in 2007.

An adviser to Li, a farmer's son who became one of China's first industrial tycoons, said Li believes Geely's technology will attain world-class standards within a decade.

But it will take at least twice as long, Li believes, to command similar prices on Chinese-branded vehicles. He was eager to obtain a strong brand as well as Volvo's distribution network.

Auto analysts say the Volvo acquisition will help Geely gain expertise in vehicle development -- an area where China's fledgling carmakers are all weak. Geely has only been making cars since 1998, while expertise in vehicle development is built over five-year product cycles.

"It's like you can go to medical school and be a straight-A student, but until you've been a doctor for 10 years, you're not going to be that good at it," Russo said.

But it won't take long for the Chinese to catch up.

"We probably had this discussion about Japan 40 or 50 years ago, and we probably had this discussion about Korea 10 to 20 years ago," Booth said.

"The world is accelerating, and China is accelerating very fast."

Obama Links Auto Industry Woes, Financial Overhaul

USA Today

 

 

Celebrating signs of a turnaround in the U.S. auto industry, President Obama said Saturday the financial system must be overhauled to prevent a repeat of the economic crisis that pushed carmakers to the brink.

Senate Democrats have set a test vote Monday on a bill that aims to protect the overall economy by imposing tighter regulations on the financial sector.

The auto industry was one of the biggest casualties of a recession fueled by risky lending and speculative trading practices of major financial institutions. But after shedding 400,000 jobs in 2008, bailed-out U.S. automakers are rebounding.

General Motors Co. said this week it will repay $8.1 billion in U.S. and Canadian government loans five years ahead of schedule. Chrysler LLC, now run by an Italian company, said it boosted its cash reserves by $1.5 billion despite a first-quarter loss of almost $200 million.

In his weekly radio and Internet address, Obama said that while the auto industry is on more solid footing, it will take more time for the economy to recover from the loss of 8 million jobs. He blamed the downturn on irresponsible risk-taking by Wall Street firms.

In a speech Thursday in New York in the shadow of Wall Street, Obama argued for new rules to protect consumers and hold financiers accountable. The changes would end taxpayer bailouts, bring complex financial dealings into the open and extend new rights and protections to consumers and shareholders.

"That's how after two very difficult years we'll not only revive the economy, but help to rebuild it stronger than ever before," he said Saturday.

The White House, in a report timed to GM's loan repayment, said the past nine months had produced the auto industry's strongest job growth in nearly a decade, with the addition of 45,000 jobs.

Democratic Senate Majority Leader Harry Reid has set a test vote on the financial overhaul bill for Monday, but conceded that the timetable could slip if bargaining with Republicans proved fruitful. Republicans say they don't agree the bill would end government bailouts and they want to keep negotiating.

Without an agreement with the Republicans, Democrats would need 60 votes to move forward in the Senate. They have 59 votes.

In the weekly Republican message, Sen. Kay Bailey Hutchison said Republicans aren't trying to block the bill but want to make sure it would end taxpayer bailouts.

"It's time for the name-calling to stop," Hutchison said. "Getting our economy back on track is too important to allow political games to sidetrack these efforts. Both parties agree that any financial regulation should do one essential thing: No company should be considered too big to fail.' And never again should taxpayers be expected to bail out those who made risky financial bets with other people's money."

Report from Canada: Auto Sales Keep Climbing

The Montreal Gazette

Ford leads in Canada with 29% boost

Ford of Canada was the top-selling vehicle manufacturer in the country for March and for the first quarter, the automaker says.

Ford sold 22,018 units, which represents an increase of 29.1 per cent over last March. Results were led by strong Taurus and F-150 sales, which saw an increase of 230.2 per cent and 51.8 per cent, respectively. First-quarter sales totalled 51,491, up 29.2 per cent compared to the same period last year.

"Sales crowns are nice to have but we remain focused on sustainable growth by delivering what customers want and value," David Mondragon, president and CEO of Ford of Canada, said Thursday. "Our results in March show that we were strong across the lineup in car, crossover and truck sales."

In March, overall car sales jumped 19.4 per cent, led by strong sales of the Ford Taurus and Fusion.

Total CUV and SUV sales increased 33.3 per cent with Canadian-built Ford Edge and Escape leading the way. And overall truck sales were up 32 per cent with Ford F-150 showing positive results compared to last year.

In addition, total Lincoln sales in March rose 109.5 per cent, with MKX sales up 118.5 per cent and MKZ sales increasing 97.4 per cent. With the introduction of the newest hybrid -- the 2011 Lincoln MKZ Hybrid -- Ford will have the most fuel-efficient luxury car in North America.

"Ford is committed to delivering the freshest showroom in the industry and our new products are driving our sales success," Mondragon said. "With new products like the 2011 Ford Fiesta, Edge and Super Duty, our lineup will have something for everyone."

Meanwhile, Toyota Canada Inc. was the No. 2 automaker, reporting a 24 per cent rise in year-over-year sales in March despite a massive global recall earlier in the year that saw 270,000 Canadian vehicles return to shops for service due to safety concerns ranging from sticky accelerator pedals to brakes.

Toyota saw car sales increase by 18 per cent while truck sales surpassed March 2009 by 36 per cent in Canada.

Propelled by sales of the Windsor-built Dodge Grand Caravan and Chrysler Town and Country minivans, Chrysler Canada --- which came in third -- enjoyed another strong sales month, with 19,470 units sold in March -- an increase of 22 per cent over the same month in 2009.

For the fourth consecutive month, Chrysler Canada retail sales posted an increase of greater than 20 per cent, with March retail sales gaining 36 per cent for the month, the automaker said.

"We made more records in March than Motown has in the last 10 years," said Reid Bigland, president and CEO of Chrysler Canada.

"Our Ram trucks, Dodge Grand Caravan, Dodge Journey and legendary Jeep Wrangler were all big hits last month, posting record sales."

Sales of the Ram Heavy Duty pickup helped propel the Ram division to its best March ever, with a gain of 101 per cent on sales of 4,841 units, the car- maker said.

The Dodge Grand Caravan and Chrysler Town and Country saw their combined sales rise by 43 per cent (5,774 units), also an all-time high for the month of March.

More than eight out of every 10 Canadian minivan shoppers chose a Chrysler minivan in March, Chrysler said.

While General Motors reported a 35.7 per cent jump in core brand sales last month, overall sales fell 22.9 per cent. "This puts GM's year-to-date market share at an all-time record low, at least for the modern history of the automotive sector, of only 14.7 per cent to the end of March," said Dennis DesRosiers, a Toronto-based auto analyst.

"You would have to go back to the period between 1915 and 1919 to find GM's market share below 15 per cent."

Industry sales last month in Canada were up 14.1 per cent to 145,428 units, said DesRosiers. "Canada had a great month in March, but ... sales are still tracking in the 1.55 million range and are not as healthy as they appear on the surface."

DesRosiers estimated it would take another two years before the industry fully recovers previous sales levels.