Big 3: Evolve Or Dissolve?

Anthony Fontanelle
May 25, 2007

The most recent talk between the United Auto Workers (UAW) and Detroit's automakers is plunging into a fundamental issue: Are they willing to evolve or dissolve?

To close competitive gap, the parties are discussing transformation plans. Will the union and its employers entertain another incremental multiyear contract that embraces the status quo without taking efforts to solve the irksome competitive inequity with their foreign rivals?

Or will they craft what is dubbed as a "transformational deal" that would help them close the gap with the likes of the Toyota Motor Co., Honda Motor Co., Nissan Motor Co. and the Hyundai Motor Co. and free up cash to be reinvested in new product lines?

The General Motors Corp., Ford Motor Co. and the Chrysler Group are all in the process of coping up from previous losses. The fact is obvious: Detroit is collectively losing market share. If a new deal does not close the competitive gap, why should the Big Three bother staying in business?

There is no denying which side favors which. "It's incremental versus transformational - that's what it's all about, or we don't have a prayer," said Sean McAlinden, the chief economist for the Center for Automotive Research which is based in Ann Arbor.

With the UAW inundated by bankrupt Delphi Corp., an off-shoring Visteon Corp., a black-and-blue supplier sector and the Big Three in various stages of distress, recapitalization or new ownership, conformist thinking holds that the union's generosity is near its outer limit. With the retiree health care givebacks, overwhelming buyouts and plant closures, the thinking continues…

Toyota is competing in a free-spirited way. By far, the Japanese automaker is the most powerful among Big Three’s rivals. But it is not the only foreign automaker that challenges Detroit automakers, there’s a bunch of them. If the momentum could not be shunned swiftly, the way EBC Greenstuff performs, there is a tendency that the Big Three will go down the drains in their very own soil.

With the ferocious Toyota juggernaut, ebbing market share in the United States, investors are bothered by Detroit's long, woeful list of excuses, endless talks, and fading confidences. Analysts said the factors could halt their self-inflicted slide.

The present contract is set to expire in September. In addition, the bargaining is expected to start in less than two months. How could the next contract alter the gung ho stance of the Big Three? Is there a chance that the parties work together harmoniously (at least for the meantime)? Would they share responsibility to avoid other ills in the auto industry?

What will be the aftermath of pushing away from the icy, rigid truths slowly weakening the life from the Big Three, their employees and the communities in general? The talks continue and a lot of people are seeking answers to loads of queries. They are keeping their fingers tightly crossed… Evolution or dissolution – those are the words that incessantly reverberate in their anxious mind.

Source:  Amazines.com