October 13, 2005
BY JOE GUY COLLIER
FREE PRESS BUSINESS WRITER
Delphi Corp.'s bankruptcy and the money-losing automaking operations of General Motors Corp. and Ford Motor Co. mean Michigan automotive workers should brace for more layoffs and tougher times for months, if not years, to come.
The automotive companies are to begin reporting next week how well they did or didn't do for the last three months. Ford, GM and many automotive suppliers are expected to lose money, say financial experts who follow the industry.
These earnings reports spell trouble for Michigan because companies that lose money eventually have to stop the gap, often by cutting jobs or lowering wages and benefits.
Ford and GM have attempted to fight losses by offering deep discounts on their vehicles but that's just made it harder to turn a profit. It also does nothing to address the looming problems of high pension, wage and health care costs.
The bankruptcy of Delphi, the largest U.S. supplier, signals that Michigan's automotive industry is headed for a shakeup, said Patrick Anderson, a principal with the Anderson Economic Group in East Lansing.
By Brett Clanton / The Detroit News
Delphi fate will ripple in region
FLINT -- Like many workers at Delphi Corp., Greg Meinecke is worried about the company's threat of a bankruptcy filing and what it could mean to him.
The 47-year-old toolmaker, with a combined 28 years at Delphi and its former parent General Motors Corp., always assumed that his pension and health benefits would be there for him when he retired.
"Now, all of the sudden, the rules have changed," said Meinecke, who works at a Delphi engine components plant in Flint.
August 30, 2005
BY TOM WALSH
FREE PRESS COLUMNIST
Is this really the worst of times for Detroit's automotive industry?
Former UAW President Doug Fraser said so last Friday. And he should know.
Fraser, 88, steered the union through the Chrysler Corp. bailout in 1980 and the severe slump that pushed Michigan's jobless rate to 16.3% in 1982, more than double the current 7% rate.
What makes things worse today for General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group is "11 years of declining market share," Fraser said, referring to the 1993-to-2004 span when the combined GM-Ford-Chrysler share of U.S. car and truck sales fell from 73.8% to 58.7%.
Back in the early 1980s, the whole U.S. economy was in the tank.
Not so now. Indeed, the best six years ever for total U.S. auto sales have been the last six. But the Detroit auto companies and their suppliers keep getting a smaller and smaller share of the pie.
Trials and Tribulations: Four Core Hurdles
Automotive News World Congress, January 16, 2002
January 14, 2002
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HURDLE 1: Vehicle manufacturers ("OE's") have unrealistic cost cutting expectations.
1A. The remaining, "survivor" automotive suppliers have been focused on cost cutting for the last five to ten years, pushing "new" cost cutting efforts to an ever-increasing point of "diminishing returns". Liken the industry-wide focus on cost cutting to dieting; losing the final two extra pounds is exponentially tougher than shedding the first 20 pounds. And, in some instances, some automotive suppliers are surviving by operating below normal body weight.
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The best Tier 1 suppliers, come "very, very close to 100% perfect orders," says Scott Lundstrom, chief technology officer, AMR Research (Boston, MA). They score perfect deliveries 98% to 99% of the time. Yet a 90% perfect-order score, unheard of in any other industry AMR surveyed, is considered a "failing grade" in automotive. Moreover, the difference in a supplier's "strong" performance versus another supplier's "weak" performance, as measured by perfect-order fulfillment, is a mere 6%. "That is the equivalent between an A+ and a C-. That's how demanding the automotive environment is." exclaims Lundstrom. "The demand is not so much about being an excellent supply chain company. The demand is about what's next."
This article appears in the August 5, 2005 issue of Executive Intelligence Review. U.S. Auto Supplier Sector |
September 24, 2005
Goodyear Tire & Rubber Co., the nation's biggest tiremaker, will close plants as part of plan to reduce worldwide capacity by 8% to 12% over the next three years.
Restructuring charges will be $150 million to $250 million, the company said Friday. Goodyear has a target of $750 million to $1 billion in cost savings by 2008.
Goodyear Chief Executive Robert Keegan, who halted three consecutive years of losses in 2004 by trimming workers, closing plants and selling assets, is making deeper cuts to reduce North American costs that are limiting its competitiveness with rivals such as Bridgestone Corp.
Goodyear didn't say how many plants it would shut or disclose their location.
Keegan, who took over as chairman in June 2003, had already cut 1,400 jobs this year in addition to the 5,150, or 5.8% of its workforce, trimmed in 2003 and 2004. He has been adding production in lower-cost China.
September 27, 2005
BY JOE GUY COLLIER
FREE PRESS BUSINESS WRITER
Soon-to-be DaimlerChrysler AG Chairman Dieter Zetsche met with the Free Press on Monday to discuss issues at the company. Zetsche, the former head of Chrysler, took over the Mercedes division earlier this month and will head the entire company in January.
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QUESTION: What needs to be done to address quality and profitability concerns at Mercedes?
ANSWER: What you need in the first place is to improve your process. You need standardization. You need clear definition of your process and a very rigid execution across those. It's basically about doing it right the first time.
Q: You've set a goal of making Mercedes No. 1 in J.D. Power's quality ratings, a position currently held by Lexus. How soon can the Mercedes brand reach that goal?
A: It's pretty tough to make an absolute binding statement. ... It's clear the next step has to be among the top three and then ultimately we want to be on top. This is not a plan for the year 2020 but for the midterm.
September 29, 2005
BY JOE GUY COLLIER
FREE PRESS BUSINESS WRITER
DaimlerChrysler AG chairman-in-waiting Dieter Zetsche, famous for cutting costs and turning around Chrysler, took his first steps Wednesday at getting Mercedes in shape.
Zetsche left Auburn Hills-based Chrysler Group this month to take over the ailing German-based Mercedes Car Group of DaimlerChrysler. He is to become chairman of the entire company in January.
DaimlerChrysler announced Wednesday that it would be cutting 8,500 employees, or about 8% of the workforce, at Mercedes at a cost in buyout packages of about $1.1 billion. The company's stock rose $2, or about 4%, to $54.83 Wednesday.
September 30, 2005
BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER
Ford Motor Co. said Thursday it will reduce by half the number of companies from which it buys 20 key parts and commodities such as seats, axles, brake systems and bumpers for its vehicles.
The move represents a major overhaul to the way Ford does business with parts makers and will impact about half of the company's annual, $70-billion production buy worldwide.
Tony Brown, senior vice president of global purchasing for Ford, refused to say how much streamlining the number of parts suppliers with whom Ford works might save the company.
The move is being made because the current way of doing business "is not working effectively for our suppliers, and it is not working effectively for us," Brown said during a conference call with journalists.
October 1, 2005
BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER
About 65 companies have already expressed interest in buying some of the automotive parts plants and operations that Visteon Corp. officially spun off today into a temporary new holding company, the chief executive in charge of the new firm says.
The goal of Automotive Components Holdings LLC, which is managed by Ford Motor Co., is to sell off or close all of the 23 former Visteon facilities it now owns. The holding company, called ACH, will lease about 18,000 hourly workers from Ford and 5,000 salaried workers from Visteon, and most of its $7 billion in sales comes from contracts with Ford.
October 1, 2005
BY MICHAEL ELLIS
FREE PRESS BUSINESS WRITER
Delphi Corp.'s stock shot up nearly 40% early Friday upon rumors that General Motors Corp. and the UAW would announce a deal at an 11 a.m. news conference to bail out the troubled auto supplier, then slipped back after it didn't happen.
The stock climbed to $3.53 in the morning; it closed up 24 cents at $2.76 on the New York Stock Exchange.
Meanwhile, Delphi declined to make a voluntary payment on a loan, and said Friday it was considering talking to lenders to arrange a potential waiver or amendment to the loan. Delphi also said Friday that it will make regular monthly payments to its suppliers by Oct. 4, despite its financial troubles.
Delphi said that it had violated the terms of a $1.8-billion bank loan by failing to meet a financial target that serves as a warning sign of the company's health. As part of a financing agreement reached with lenders this summer, Delphi was required to meet a ratio of secured debt to EBITDA, or earnings before interest, taxes, depreciation and amortization.
