Prime Minister Gordon Brown against saving Big Three

I'm an anglophile, but Gordon Brown is testing my patience. Give me liberal doses of Monty Python, Shakespeare, the Magna Carta, Yorkshire pudding, paneer makhani, C.S. Lewis, the Rolling Stones, William Byrd, Beowulf, Peter Rabbit, cockles and mussels. But please spare me the advice to let the U.S. auto industry crumble.

At the G20 Summit yesterday British Prime Minster Gordon Brown described bailing out the U.S. auto industry as akin to 1930s style protectionism. Brown said, "The dividing line here is between an open society capable of trading round the world, against a protectionist response that happened in the 1930s and is totally unacceptable."

That's a whopper of an either/or. Either we're an open society presumably like Britain (hey what about all those cameras around London?) or we are stupid protectionists (pitching tea overboard). Has he trotted that past the Chinese, renowned for skewed trade practices, currency manipulation and government subsidized manufacturing? Probably not. Maybe he's just jealous that the United States still has a car industry to protect, while Britain does not...think Jaguar and Land Rover.

In fact, Mr. Brown champions extensive global management, regulation and oversight of finance. He would like to expand the IMF's role in the care and feeding of Mammon. According to the Times, "He wants the IMF to create a council of experts to monitor the markets for danger signs — his much-vaunted early-warning system — and the IMF’s coffers to be boosted by cash-rich states such as Saudi Arabia and China. He is also calling for a clean-up of the banking system, including a network of regulators to scrutinise the world’s biggest banks. "

But who minds the minders and what's Brown willing to trade away to get China and Saudi Arabia to ante up?

Chrysler procurement shakeup raises engineering concerns

Chrysler's vice president for procurement, John Campi, wants to trim costs by scaling back parts testing. But at least one of his engineers worries about the consequences.

Last week Campi told The Detroit Free Press that he has challenged the company's testing protocols, saying to engineers, "If I have a supplier that's building products for the automotive industry today, with companies that you know, I don't want to hear why it has to take six months to do your testing when in fact it is a quality product."

One Chrysler engineer familiar with supplier and parts issues, who spoke with Michigan Messenger on condition of anonymity, expressed concern at cutting corners on parts testing: "Chrysler can't go to Home Depot to get their bolts. We use an engineered product."

CEO Bob Nardelli took the reins of Chrysler after a stint as Home Depot's CEO. At Home Depot, Campi was Nardelli's senior vice president of vendor management.

The Chrysler engineer worries that cutting back on testing could risk lowering the reliability of Chrysler vehicles. He explained that although parts suppliers manufacture for multiple auto companies, parts are engineered to unique specifications and are not interchangeable from one carmaker's product to another. "A water pump is not just a water pump. It has to meet a set of specifications that are unique to Chrysler," he said. "The engine goes down if the water pump fails."

In addition, vendors can make mistakes and their production processes can be inconsistent. Testing parts "verifies that the vendor has made them in accordance with our specifications and that takes time."

Current testing protocols can take up to six months. Their purpose is to find bad parts and to prevent them from getting into vehicles. A bad part can stop the assembly line or lead to costly vehicle recalls. When bad parts make it into cars on the road, it can lead to accidents, and injuries or death. To fix the problem, the company must replace the part in stock in transit, stock at the plants, stock at the dealers and customers' cars on the road. "It's a nightmare," the engineer said.

According to the engineer, the current protocols are necessary to meet federal safety requirements, EPA requirements and customer satisfaction requirements. He said that to meet those requirements "means that every part is tested thoroughly."

Chrysler offers a lifetime guarantee on its power trains and up to 10-year guarantees on various other components. Testing assures the company can deliver what it promises customers. "How do you make that claim -- how do you stand behind the product -- when you don't know if it meets your requirements?" he asked.

Global management for supply chains

Noel Tichy, who has known Nardelli for more than 20 years and worked with him at GE, told Michigan Messenger, "Obviously, Bob wants to shake up everything and procurement is a big piece of putting cars together." Tichy currently serves as director of the Global Leadership Program and is a professor of Management and Organizations at the University of Michigan Ross School of Business.

Shaking up Chrysler has meant bringing new management into an industry that Tichy describes as very "inward looking" when it needs to become more global to survive. Of the Big Three, Chrysler is most heavily invested in North American production when that is proving untenable. The maker will have to go abroad to expand markets for its products and find cheaper parts production, as other carmakers have already done. But those foreign-made parts will still need to be tested to assure they meet North American market standards.

Acknowledging the fundamental difference between retail supply-chain management and automotive supply-chain management Tichy said, "The difference is you are manufacturing a product. At Home Depot, you're buying stuff to sell in a store." He added, "But you are still managing a supply chain with suppliers in China and all over the world." He says that is where automotive supply chains are headed -- China.

Defending the practice of moving management across diverse businesses, Tichy cited his time at GE with Nardelli, under former CEO Jack Welch. "We moved people around more SIC codes in business than anyone on the planet. Jet engines, power generation, appliances, NBC, GE Capital. There are absolutely generic skills that cut across industries." SIC codes, standard industry classification codes, are used in business and government to categorize types of industries.

As for Campi's move from retail to automotive manufacturing, Tichy said, "How much transfer of learning there is from retail to automotive, we'll find out." He added, "That is yet to be determined."

Promises, promises -- UAW falls in love again

Promises made the UAW contract with GM a reality. GM promised to build specific vehicles in the future including the Volt in Hamtramck in 2010. GM's promises gave Chrysler workers pause as they considered their own contract, which did not contain any such promises. Chrysler would not, and further claimed it could not, make those sorts of promises. To do so would have been irresponsible, irrational and unrealistic. In the end, the UAW did accept the Chrysler contract.

The International Herald Tribune reminds us that the Volt "is a concept car that cannot be built until the technology is available, and one that the company has not even officially announced it will build."

The piece quotes Professor Walter McManus, an auto industry economist at the University of Michigan:

"The problem," he added, "is the battery technology is still not ready. I would say, when they break ground on a plant to make batteries, two years later the Volt will come out."

For the car to be built starting in 2010, he added, "a factory has to be built soon, and it doesn't look like the batteries are that near production."

Those promises to build the Volt, while well-intentioned and seductive, are premature.

Less than three weeks after ratifying the GM contract, nearly 2000 Michigan workers were laid off -- 767 of them in Hamtramck. Lay offs are a rational response to market conditions. You shouldn't build cars you can't sell. GM is in the business of building and selling cars, not guaranteeing employment. So how could they make promises about future production? After the recent lay offs, those promises seem suspect. How can GM assure future employment or promise to build something it cannot build?

Although the Chrysler agreement made no predictions beyond its four-year term, it may end up a fairer, honest commitment to workers.

Now, on to Ford...as negotiations have resumed.

UAW resistance grows to Chrysler contract offer

UAW local opposition to the proposed Chrysler contract continues to grow. Detroit Axel; St. Louis North; Twinsburg, Ohio; St. Louis South Assembly; Newark, Delaware and Fenton, Missouri have all voted against the agreement.

The contract needs majority approval of all members voting to be ratified.

At issue, a lack of commitment to build future products and a two-tier wage system. Experts expect opposition to gain momentum as more locals decline the offer. Chrysler has some room to stand its ground. Reuters reported Wednesday that Chrysler will be eliminating some products in the near term. Fourth quarter auto sales are expected to continue to lag. So, the company is anticipating lower production demands.

According to the Detroit News, ratification votes will include:

Local	City	Vote Date
75	Milwaukee	Today
76	Fremont, Calif.	Today
212	Detroit (Conner)	Today
412	Auburn Hills	Today
868	Conyers, Ga.	Today
889	Warren (Clerical)	Today
1649	Orlando, Fla.	Today
7	Detroit (Jefferson North)	Sunday
509	Pico Rivera, Calif.	Sunday
624	Syracuse, NY (New Process Gear)	Sunday
2149	Syracuse, NY (Engineering)	Monday
685	Kokomo (Transmission)	Tuesday
1166	Kokomo (Casting)	Tuesday
140	Warren (Warren Truck, Sterling Emission)	Wednesday
869	Warren (Stamping)	Wednesday
1264	Sterling Heights (Stamping)	Wednesday
1700	Sterling Heights (Assembly)	Wednesday