By Brendan Moore

09.24.2007

11:31 a.m.: UAW union workers have walked off the job at multiple locations and have started picketing outside in some of those locations after a union-imposed deadline to contract negotiations passed at 11 a.m. EDT.

GM has more than 80 U.S. production sites and more than 73,000 UAW workers employed at their plants. The company’s supply of vehicles for its core U.S. market could be in jeopardy if the strike drags on for any significant time. Because of recent sales downturns, GM has many day’s supply of almost all of it’s top-selling vehicles, so dealers will have ample stock to sell, but a long strike will hurt GM and its retail dealers in terms of vehicle availability.

This is the first GM labor strike of any consequence since 1984, when the UAW struck 25 facilities for 13 days.

The UAW strike comes after two months of negotiations with Detroit’s Big 3, 21 days of negotiations with GM, after the UAW singled out GM as its so-called strike target, and 10 days after the original strike deadline passed.

More details to follow.

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By Brendan Moore

09.24.2007

7:45 a.m.: The UAW has told it’s workers to prepare to strike GM today at 11 a.m. EDT. Although Ron Gettlefinger is known for threatening a strike in last hours of contract talks in order to inject extra urgency into the proceedings, union representatives insist the preparations for a strike are underway and that the announcement of the 11 a.m. strike is no bargaining ploy.

The UAW has not struck an automaker for more than twenty years.

This is the press release from the UAW issued at 1:40 a.m. earlier this morning:

Monday, September 24th, 1:40 AM

UAW shocked by GM’s failure to recognize worker contributions,

Sets strike deadline for 11 am on Monday, September 24th

The United Auto Workers announced today that due to the failure of General Motors to address job security and other mandatory issues of bargaining, the union has set a firm strike deadline for 11 am on Monday, September 24th.

“We’re shocked and disappointed that General Motors has failed to recognize and appreciate what our membership has contributed during the past four years,” said UAW President Ron Gettelfinger. “Since 2003, our members have made extraordinary efforts every time the company came to us with a problem: the corporate restructuring, the attrition plan, the Delphi bankruptcy, the 2005 health care agreement. In every case, our members went the extra mile to find reasonable solutions.”

“Throughout this time period,” said Gettelfinger, “it has been the dedication of UAW members that has helped GM set new standards for safety, quality and productivity in their manufacturing facilities. And in this current round of bargaining, we did everything possible to negotiate a new contract, including an unprecedented agreement to stay at the bargaining table nine days past the expiration of the previous agreement.”

“This is our reward,” said UAW Vice President Cal Rapson, director of the union’s GM Department. “A complete failure by GM to address the reasonable needs and concerns of our members. Instead, in 2007 company executives continued to award themselves bonuses while demanding that our members accept a reduced standard of living.”

“The company’s disregard for our members has forced our bargaining committee to take this course of action,” said Rapson. “Unless UAW members hear otherwise between now and the deadline, we will be on a national strike against GM at 11:00 am EDT on Monday, September 24th.

”The UAW negotiating team will remain at the bargaining table, Rapson said, throughout the night and up until the 11:00 am deadline.”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

GM officials had no comment on the UAW press release.

We will bring you more developments as we know them.

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Historic deal has the potential to change the U.S. auto industry

By Brendan Moore

09.23.2007

3:15 PM ET: It appears that the United Auto Workers and General Motors are close to a settlement as they returned to the bargaining table for a ninth day this morning and have continued making accelerated and substantial progress towards the crux of the talks, a union-managed healthcare trust that would be funded by GM. Such a shift of healthcare responsibilities would signal a far-reaching change regarding the contentious issue of healthcare benefits in the auto industry.

The proposed fund would take over most of GM’s $51 billion USD unfounded obligation to health costs for their current population of retired workers. It is also believed that GM and the UAW are discussing the financial mechanisms to be employed regarding future healthcare and pension benefits for the union workers now employed at GM.

According to sources quoted by Reuters and the Associated Press, GM and the UAW have so far agreed on a very good financial structure for building a Voluntary Employee Beneficiary Association (VEBA trust) that would make the long-term health-care liabilities from GM’s books go away, and pay the promised medical benefits for union retirees.

However, it is a slow process as the methodology of funding the trust is staggeringly complex and the funding ratio is being negotiated concurrently. The UAW had representatives from Lazard, the invest banking firm, to assist them with the negotiations around the funding issues. It is not known whether the contributions by GM will be made in cash or stock or some combination of the two, but what is almost certain is that there will be no funding contributions from GM’s employee pension plan. Negotiations stalled concerning the funding ratios until GM starting proposing alternatives including reduced wages and employment, and at that point, the UAW became more flexible. Obviously, any agreement needs to be ratified by the members of the UAW, so the union is going with concessions most likely to generate the least amount of internal dissension.

One huge plus for the UAW regarding a VEBA is the following: in a Chapter 11 bankruptcy, pensions can be fairly easily terminated and replaced with less expensive plans. Just ask the airline or steel industry employees. A trust, on the other hand, is protected. I am not suggesting that any of the Big 3 are in danger of bankruptcy, but there is no denying that their earnings results have been dismal for quite sometime.

Any VEBA deal that gets done between GM and the UAW will register as a seismic event in American industry (particularly the manufacturing sector) simply because of its magnitude. There have been other VEBA agreements recently, but their size is dwarfed by the potential UAW fund. It must be remembered that whatever happens with GM with almost certainly happen with the UAW workers at Ford and Chrysler (the three companies together lost a combined $15 billion last year). If GM and UAW agree to an approximate GM-funded rate of 70% of total liabilities (about $34 billion currently), and that agreement holds for the Ford and Chrysler UAW workers, that means the fund will start life with around $60 billion in assets. This, by the way, will make it one of the Top 25 funds in the country, and will necessitate a fund management investment firm, union fund managers as liaisons, administrative vendors to pay out benefits, etc. It will also be quite an event in the fund management industry as all the big players will be wooing the UAW for that business.

GM has about 541,000 UAW retirees and their –fully-eligible spouses on their books right now and would find it vastly preferable to pay the union to set up the desired VEBA to get those individuals and their health-care liabilities off their balance sheet. The UAW, while not ecstatic about the idea, is willing to consider it for the quid pro quo of guarantees for GM to build current and future models in U.S. production facilities that use UAW labor.

Of course, the current GM-UAW negotiations are not just about healthcare. GM says it suffers an approximate $25-an-hour difference in added labor costs when compared to its Japanese competition and only part of it comes from healthcare-related costs (Japan has national healthcare, as do the countries that produce cars in Europe). Those other costs, like wages and benefits, are also being discussed during the current negotiations. A “two-tier” pay plan, one for current employees and one for all future employees, is also being discussed, but UAW officials have a very low level of interest in such a plan.

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By Mike Mello

09.21.2007

It sits there, close to where I live, collecting twigs, dirt, and gunk in the seams of its 8′ bed. A few rot bubbles have broken through the moderately blue metalic paint but this truck still looks like a solid machine.

This early 70′s International 4×4 pickup is from a time when there actually were more than 3 choices in the domestic fullsize pickup market. According to information I found at Super Scout Specialists, this 1110 model could have been built in 1971, 72, or 73. Long before International Harvester decided to devote itself solely to the heavy duty truck market, you could also shop at the IH dealer for light duty trucks, including the Scout, Travelall, and pickups.

If you’re a fan of oddball, domestic trucks of years gone by, don’t worry, sooner than later I’ll be sure to post up about my favorite vintage American pickups, the Jeep J series. For now, let’s admire this lonely International that somebody has let sit for quite some time out on the street. (Better than in some muddy field somewhere, right?)

Most pre-1979 domestic truck featured beautiful, clean, aluminum grilles that can’t be beat. The long lasting, non-rusting qualities of a classic grille are just too good to resist and are perhaps a symbol times when manufacturing and design favored heavy amounts of metal, used appropriately throughout a vehicle. Today, we get plastic made to look like aluminum, of which the best materials look good and probably save weight.

How about those running lights perched on top of the cab? Pieces like that are probably gone for good and it makes me smile just looking at the brand name cast into the housing behind the amber lenses – it just speaks of permanancy, a quality one might value in a work truck.

Speaking of permanancy, although the overall design is plainer than a pair of Dickies, trucks of this vintage all came through with a decidedly utilitarian feel reinforced by predominantly straight body lines, upright seating positions, bench seats, and of course, steel dashboards.

Today’s trucks do a remarkable job combining luxury and workability, but early 70′s American pickups will always give you that straight, flat, boxy feel with the right amount of metal and horsepower.

Now the question here is, what sort of plans for the truck have been made by the person who owns this International? Is it someone who has bought it with the intention of restoring it to factory condition? Or, somone that has bought it and plans on just putting enough money in it to make it a great daily driver? That would make it’s current place of residence just a staging area for a kind of rebirth, which, of course, makes me happy to think about.

Conversely, it could be parked there because it stopped running, it’s owner has decided it’s not worth putting any more money into it, and this is merely the first stage of a long decline. You see this happen all the time, cars or trucks that get parked somewhere with the intention of doing something about the vehicle at some undefined “later”, and then nothing happens for two years, five years, ten years, sometimes 30 years.

This old International has been parked where it is for a long time now – I can only guess as to the reasons. I’m hoping for a postive outcome.

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By Chris Haak

09.20.2007

A breathless, critical report has been issued by CNW Marketing research stating that Toyota dealers are still claiming that the Prius can achieve 60 miles per gallon.

It has been reasonably well known in the automotive world for years that EPA fuel economy ratings were generally higher than what people could expect to see “in the real world.” Sure, it’s theoretically possible to drive like a stereotypical septuagenarian and achieve those window sticker numbers, but more likely than not, we’re accelerating more quickly, driving faster, and using accessories such as air conditioning and power steering that also require fuel to run. With gas prices near historic highs, consumers are more concerned about fuel economy than they have been in years, and were getting irritated when their own gas mileage didn’t match the numbers on the window sticker, in spite of the famous disclaimer, “your actual mileage may vary.” In response to this, the EPA has implemented a revised calculation to establish fuel economy for the window sticker for all 2008 and later models to better reflect “real world” experiences. The calculations are complex, but the end result is that most vehicles will see a 2-4 mile per gallon decrease in both city and highway fuel economy. The exception to that is hybrids, which took a disproportionate beating in their ratings. The Toyota Prius, previously rated at 60 miles per gallon in the city and 51 miles per gallon on the highway, dropped to 48 miles per gallon in the city and 45 miles per gallon on the highway. My own theory on the reason for the larger drop is not that Toyota was cheating, but that the Prius’ driving characteristics were very well suited to the conditions of the old test methodology (truth be told, I also am skeptical of the 21 miles per gallon highway rating of GM’s Tahoe full size SUV, thanks to its active fuel management that shuts down four of its eight cylinders, but in reality, rarely has the chance to do so).

The point is, although there really are people who achieved 60 miles per gallon in the Prius, though you have to “know” how to drive a hybrid like the Prius to maximize its fuel efficiency. (From what I have heard, it’s not the same thing as driving a conventional car for maximum economy). Most people achieve mileage in the mid-40s in the Prius, which is exactly what the EPA now says it should do.

Details left out of the report, however are:

• Do dealers of other brands also talk about fuel economy in terms of 2007 numbers?
• Are the Toyota dealers in question referring to 2008 Priuses or leftover 2007 models?
• Is doing this illegal, or even unethical?
• Who paid for this research?

Let’s dive into the implications of each of these.

I don’t know about other brands’ dealers, but I can say for sure that if you go today to http://www.gm.com/shop and click on “30+ MPG highway,” the only vehicles that come up in the search are 2007 models. Some of the models listed (Impala, Grand Prix, etc.) will not be over 30 miles per gallon in 2008, but GM is still advertising those models as being over 30 miles per gallon.

As far as whether the Priuses are 2007 or 2008 models (which would each have different economy figures on their window stickers), it’s impossible to tell (and I doubt that CNW knows), but wouldn’t the natural tendency of a salesperson be to cite the highest fuel economy figure he or she can for a given model? If the window sticker says 60/55 for a car they’re selling, then they should feel free to show that to a customer. If the customer asks about real world economy, I’d hope that they’d either be more realistic about it or tell them to check a neutral website like http://www.fueleconomy.gov/.

If the dealers are representing that 2008 models get 60 miles per gallon in the city, then I think they are being unethical and misrepresenting the car’s likely fuel economy. Actually, a better solution would have been for ALL new car window stickers on sale after a certain date (say, October 1, 2007) to show the new ratings, regardless of the model year. That way, it wouldn’t look like an old model was getting better fuel economy than a new one, when in fact they’re likely to be mechanically identical. Really, is it that expensive or difficult to reprint the window sticker for a new vehicle, in the interest of full disclosure and minimizing consumer confusion and angst? After all, the Fueleconomy.gov website has converted all past fuel economy ratings to the current 2008 equivalents to enable more fair comparisons between models and especially between different model years.

CNW’s website does not list this report, only its infamous “Dust to Dust” report that grossly exaggerated the energy costs of a Prius versus a Hummer (see excellent rebuttals of the Dust to Dust report on TrueDelta.com here and here). However, the company states that it performs syndicated studies that “protect you from seeing information that is skewed toward a particular point of view or company or product.” Yet, they seem to have a serious anti-Prius agenda after the Dust to Dust report and now this. Though it’s possible that an anti-Toyota client underwrote this latest research project, it is possible that the company undertook it on its own for publicity reasons.

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By Chris Haak

09.20.2007

Michael Karesh, an occasional contributor to this site and owner of TrueDelta, an automotive research firm, conducted a survey of his reliability survey participants last spring to gauge whether dealers were pressuring their customers to rate their salesperson and dealership with top scores in all areas on the customer satisfaction surveys that come from the manufacturer. I hadn’t seen the survey results until reading the August 27, 2007 issue of industry publication Automotive News last night (I’m a little behind!) and saw an article about Mr. Karesh’s research.

I think Mr. Karesh was onto something by conducting a survey about this. Not only did a major auto industry publication pick up on his work, but also today’s Autoextremist article was about what a failed system CSI scores have become.

In the past four years, I’ve bought two new vehicles, and while my buying experience was a positive one in both cases (I bought a Honda and a Nissan), it helps that I didn’t have to negotiate price, as a family member had a close business relationship with both dealerships and was able to get a great price for me. But toward the end of the delivery process, both salesmen mentioned the CSI surveys and that they need perfect scores, and that they’d be happy to address any concerns I might have before completing the survey. Needless to say, I gave them top scores.

Apparently, I’m not the only one who has been pressured to do this. Dealerships’ allocations of popular models, their employees’ compensation, and even factory to dealer incentives are tied to CSI rankings. Even worse, manufacturers have set such ridiculously high standards (anything short of “excellent” is a black mark, when in fact, outside of Lake Wobegon, not everyone is above average, and certainly not excellent.) “Exceeds expectations” might be a difficult rating to achieve if the customer’s expectations are too high. And even if that customer’s expectations are exceeded once, would they not expect the same treatment when they buy their next car from that dealer, so the same level of service that exceeded expectations earlier might only meet the higher expectations the second time.

If every car buying experience was excellent or very good, then why are there so many horror stories out there? Hmmm…

TrueDelta’s research (with admittedly small sample sizes) found that at least 75% of all dealerships at least mentioned the survey would be coming, and many others took further steps such as allowing to preliminarily address problems before the survey (36%), asking for perfect scores without begging (28%), saying they wouldn’t get a bonus without perfect scores (9%), begging for perfect scores (9%), offering to watch the customer complete it (2%) or allow the dealer to complete it (2%), or offering a gift in exchange for a positive survey (2%). Note that these do not add to 100% because multiple responses were allowed. It also found that among respondents, Nissan, Hyundai, and BMW dealers pressured customers the most to complete their surveys with only the highest scores.

Further adding to the furor is that GM announced in the past week or two that some dealers had submitted “fraudulent” CSI surveys and those results would be ignored, and the dealer would likely be penalized in some way.

So let’s see: customers don’t like being pressured, dealers and salespeople don’t like having their livelihood tied to the whim of someone completing a survey who marks “very good” instead of “excellent” (or “meets expectations” rather than “exceeds expectations), and the manufacturers are suspicious of the process.

Part of my “real job” is working with employee compensation, and designing incentive plans to motivate employees to perform a desired behavior. I’d say that the current CSI system should be thrown out, because clearly begging, lying, and fudging should not be the behaviors that are encouraged.

Are there any other stories of dealer or salesperson pressure to give perfect scores out there?

Link to TrueDelta’s research on this subject: http://www.truedelta.com/pieces/survey_survey.php

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By Bruce McCulloch

09.20.2007

Anyone else remember when the automotive world, specifically that which is the supercar world, was limited and controlled? By limited and controlled, I’m referring to a market where the number of supercars wasn’t reminiscent to the vast amount of fruit types you buy at the super-market.

It’s no secret that I love supercars and take great joy in discussing them, examining them and above all else, dreaming about them. After all, supercars are the acme and epitome of the automotive world; they showcase all of which has advanced in our century – speed, power, technology, handling, braking – you name it, actually.

Thing is, though, I’m starting to lose much of my faith and interest in supercars and the reason is because they are now becoming a bit garden variety, a rich man’s play palace where bragging rights are the number-one priority. Though, one could argue that’s always been the case with these unambiguously expensive automobiles, but I happen to think the market has finally shifted them into an undesirable state.

Never did I think that in my lifetime supercar companies would be competing for a market share which in retrospect is similar to that Toyota versus Honda – albeit at a much smaller level. The supercars market throughout the 90’s was much simpler and it only consisted of a few marques; those being such greats as Ferrari, Lamborghini, Porsche and Jaguar. It was all so simple back then, but now we don’t have just four marques, we over have twenty and probably some more on the way as I type this – all jostling for their place and of course, while trying to out-do each other.

Sure, it always about competing, but not at such a level as it is now. And it would appear that the turn of the decade was the birth of these many new manufacturers and the “new” way of selling, producing and manufacturing these automobiles. No longer is it a simple and mostly innocent game of billiards among guys that know each other down at the gentlemen’s club, (where you also debate important things like Jessica Alba or Rosario Dawson, steak or lobster, etc. ), it’s an all-out war where the specialty maker that produces the most powerful car is ultimately the winner.

Production, Performance & Power:

With the exception of F40, exotic production through out the 1990’s was pretty low-key. Just 300 Jaguar XJ220’s were built, just 349 Ferrari F50’s were manufactured; and on a smaller scale of exotica, just 60+ some McLaren F1’s were built. Furthermore, each of these high-end models didn’t have a dozen multiple variations.

Thus is the main reason why my interest in supercars is swiftly fading. As these companies are now engrossed in making big money and keeping up with the competition, one variation with a 5-year life span is deemed no longer sufficient from a business point of view. Now, if you plan to have a 5-year life span for a model it’s going to need multiple updates; everything from a new sticker on the boot to a possible 200 horsepower upgrade.

Look at the recent crop of Aston Martin’s for instance. Firstly, they had the 6-speed sequential DB9 coupe, then a 6-Speed Sequential cabriolet, then a 6-speed coupe and then 6-speed cabriolet, then a sports package, and then an 06 model update featuring everything that sports pkg had and now, the DBS and the DB9 LM. Even the V8 Vantage has undergone a similar twist of marketing with potential owners being force-fed multiple variations; each one promising something new and unique. Even such companies as Lamborghini and Bugatti have followed this trend; evidenced by both launching special editions of their flagship at the Frankfurt Autoshow.

And let us have a look at the power upgrades these vehicles are constantly undergoing. The first generation Koenigsegg CC8S had 655bhp – more then enough for any sane individual – but 600+ bhp was becoming a casual figure (even amongst various Mercedes-Benz automobiles), and as a result the company decided to step it up and give it a full 806bhp. That is merely one example, but one that is evidently at the top of the peak; other such manufacturers are following by pumping up model updates with an additional 100 some horsepower.

And so forth and so forth, company and after company following these trends. Now, I am fully aware that from a business standpoint such an approach is doing these manufacturers mighty, so why then, am I complaining?

Guess I’m just an ‘ol car romantic; I loved the day when the market was exclusive and unique. It was smaller, and therefore more mentally manageable, and frankly, more emotionally intimate regarding the wonderful machines themselves.

Guess I should get used to the Camry vs. Accord market of the supercar, eh?

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But can they do well by doing good?

By Alex Ricciuti

09.19.2007

Frankfurt: …um…I know, euros aren’t green, they come in different colors, just like my own great Canadian currency, but I’m sure you are all familiar with that expression.

Yes, the question is, with the theme this year at the IAA in Frankfurt being “Green is Good”, will it translate into profitability for automakers or just added costs that consumers will not be willing to absorb?

It has been building to this for several months now as more and more automotive coverage, and news in general, is devoted to addressing the issue of global warming. The threat of climate change has penetrated the popular consciousness over the last year or so in a way that it had never done before. And that’s good.

After all, with more than 100 years of the internal combustion engine, inside of which humans went from first flight to the moon in just 66 years, isn’t it about time that we move onto something more advanced, more efficient? Imagine for a moment an alien race out there watching our development. They must be thinking, what’s with these humans? They get a new cellphone every six months but still need to burn oil coming out of the ground to get around?

Also, are 20 to 30 percent reductions in greenhouse gas emissions per vehicle enough to stave off global warming when we are actually producing more cars worldwide and India and China are rising industrial powerhouses hungry for energy and producing ever increasing CO2 emissions?Not according to scientists.

There have been indications (real numbers and not just hype) that consumers in Germany are beginning to buy more eco-friendly cars. Automakers also make more money on diesels than they do on petrol cars, about 8,000 euros more, according to one recent study. As automakers incorporate these new fuel-saving technologies across their platforms and model range their own costs will come down and more and more of these features will become standard and expected by consumers. We can rest assured they will profit from it. We are wealthy societies and we can afford to add 5 percent or so to the cost of the cars we buy. I’m not sure about consumers in India, China and the rest of the world.

Emissions will keep rising until something drastic is done about it or something drastic happens.

Alex Ricciuti is a freelance writer and automotive journalist based in Zurich, Switzerland. He writes frequently for Automotive News Europe.

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