The End Of The Era

How times flies when you’re making money. This same story echoes through out the industrialized world. From the birth of the industrial revolution in Great Britain to the rise of America as the pre-eminent manufacturer and innovator, to the Asian tigers, the phases of growth and decline are replayed again and again. Industry is driven by cycles of boom and bust and in that game there are always winners and losers. It has been lamented in music with Pink Floyd on The Final Cut in The Post War Dream writing about British ship building:

If it wasn't for the nips
Being so good at building ships
The yards would still be open on the Clyde.

To Billy Joel on The Nylon Curtain in Allentown who wrote about the demise of the US steel industry.


Well we're living here in Allentown
And they're closing all the factories down
Out in Bethlehem they're killing time
Filling out forms
Standing in line

There is always someone that can make something better, cheaper, more efficiently. As the technological innovation continues and people’s sense of style changes, industries must either adapt or lose. America finds that its automobile industry is in the throws of fighting for their existence. It is not a pretty sight.

Ford Motor announced that they are increasing the amount of shrinkage they are planning. Between the hourly and salaried layoffs, the plant closings and the shrinking vehicle sales, there is not much they are doing right at this time. One of the biggest targets of blame in the automotive industry is the United Auto Workers union. The hourly wages and benefits they have negotiated for their members and the retirees are amazing. Their tactics have been ruthless over the years but it is about getting what you can for your union brothers. I do not hold them responsible in any way for the current state of the automobile industry. The contract is a two way street. In order for the unions to get that level of benefits, GM, Ford and Chrysler had to agree. As managers and stewards of the business, they made some awful decisions about what the hourly workers should be allowed to have. It is like your children asking for ice cream and candy bars. You can cave every time they ask and end up with overweight and spoiled children or you can say no and deal with the short term complaining. It sounds like the manager’s method of dealing with the union demands was to delay the pain. Well, now the situation has become life threatening and if not addressed immediately, may result in complete systems shutdown.

It amazes me the number of times that the automotive industry has been through this. Every time there is a slow down in business, they go through the cost cutting exercise, hacking off chunks of healthy tissue but leaving the source of the malady attached to the body. Now they have a situation where there is little healthy tissue to hack off and the source of their troubles (it includes poor design, bad product mix, high gas prices, lethal legacy costs, and down right years of poor management) are all left to deal with. They are now forced to reconcile the years of short term neglect. All of that sugar has turned into fat and diet and exercise won’t work fast enough. Ford has just called in a high priced surgeon to perform the delicate maneuvers required to save the patient. Henry Ford must be spinning in his grave. We may see the once mighty Ford Motor Company settle up as an acquisition to another car company or watch them fade into the fabric as a remembrance of the once dominant titans of American culture.

Whew!


Icool

Cobb