Howes: GM 'transition' portends angst, conflict ahead
General Motors Co.’s plan to idle, and try to close, five North American plants this year is hurtling toward a titanic battle to determine the direction of the auto industry as this town knows it.
Asked during Wednesday’s earnings call about political and union blowback to its plans, CEO Mary Barra offered a simple explanation freighted with meaning: “We can’t run at 70 percent utilization,” she told Wall Street analysts, referring to GM's use of existing plant capacity. “We had to move to improve that. It’s a transition we need to go through and problem-solve” with the United Auto Workers in national contract talks later this year.
That should be interesting. Two sides with diametrically opposed views of the market today, where technology is heading for the future and whether it will affect jobs and investment, have radically different strategies for how to get there. The upshot: 2019 will be the most consequential year for the future of Detroit's automakers since the bankruptcies a decade ago.
Plant closings beget angst and distress in the Detroit auto industry, often signaling decline, the embrace of reality or both. They’re disruptive and demoralizing, threatening to undermine everything from small businesses and property values to tax bases and economic development strategies. That's why they enrage politicians, scare communities and draw intense media attention, especially when a company like GM last year booked roughly $1 billion a month in pre-tax profit in North America.
The expectation for this year is pretty much more of the same, ranking company executives said. The automaker is launching new versions of its profit-rich full-size SUVs, delivering its heavy-duty Chevrolet and GMC full-size pickups to showrooms, and expecting to see improved financial gearing at GM Financial, its captive finance arm — none of it evidence to support laments of corporate impoverishment.
But terms of the traditional bargaining rite are about to change because the environment in which these century-old automakers and their 80-year-old union are operating is changing, fundamentally. Consumers are abandoning traditional sedans for pickups, SUVs and crossovers of all sizes. The race is on for advantage in ride-sharing, electrification and self-driving vehicles that promise to alter market demand, ownership models, the number of vehicles produced annually.
Are the UAW, Unifor representing Canada's autoworkers, or the politicians in Lansing and Washington demanding GM reverse its plant idlings making any effort to wrestle with the implications of this looming transformation for their members, their communities or the general public they represent? If the folks on panel after panel discussing the coming wave of "automobility" are any indication, the answer is not so much.
It's more comfortable to fight the last war with gripes about product allocation, corporate greed and GM's obligation to American taxpayers 10 years after their federal bailout. This while Silicon Valley rivals, richer and more valued than almost any auto company, prepare to define the next automotive century on technological terms threatening to siphon enormous sums of capital away from the auto industry that built Detroit.
Even if the gripes about products, greed and GM's obligation to taxpayers are legit (and in some cases — say, Chevy Blazer to Mexico — they might be), they sidestep the larger forces driving GM to lay off 1,300 salaried workers at GM's Tech Center in Warren; or the hiring implications of needing more software developers and fewer traditional automotive engineers; or the fact that longer duty cycles of electrified ride-sharing fleets and self-driving cars threaten to reduce production schedules staffed by hourly union members.
This round of potential GM plant closings is not likely to claim many hourly jobs, considering the openings for affected union members in its other plants in Michigan, Tennessee, Indiana, and Ohio. Instead, the cuts are targeting thousands of salaried employees and contractors, starting with this week’s wave at GM and continuing with expected reductions at Ford Motor Co. likely to measure in thousands, too.
It's a "transition" alright, and a brutal one at that. A decade after GM emerged from federally induced bankruptcy and Ford managed to escape its own Chapter 11 thanks to what former CEO Alan Mulally called a $22 billion "home improvement loan," the automakers are reckoning with change they can't control but must manage — or die.
Barra described it as a transformation from a company trying to be "all things to all people" into a "strategic, agile and profitable company" run with "speed, discipline and integrity." Anyone who knows anything about Detroit's Auto 1.0 century knows its synonyms seldom included "speed," "agile," even "discipline" — but delivering those qualities, consistently, is the price to pay to stay in the game.
That's only going to become more true with each passing month, and denying it won't make it go away.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.