Chapters 7-9, Once Upon a Car

Chapter 7

  • We begin this chapter with Delphi, a key parts producer for GM, in dire financial straits aggressively attempting to cut costs through immense cuts in pay to UAW (the failure to negotiate lead to filing for chapter 11 bankruptcy)
  • Steve Miller (Delphi) was much to abrasive and harsh with Gettelfinger (UAW), and when a deal could not be reached Miller brought to public light the intraindustry warfare that existed within the auto industry; namely that hourly wage blue collar workers with their unions were being blamed (rightly so to some extent) by salaried white collar workers for placing unbelievable strains on the profitability of North American automobile manufacturing
  • GM also suffered from the burdensome legacy costs associated with pensions, healthcare, and high wages to union employees and retirees (having dropped in market share from 50% to 25% the large amount of fixed cost became increasingly septic).  However, Wagoner managed to maneuver a deal with UAW that spared GM from bankruptcy if only for the moment

Quotes

“In August, Miller told John Devine, the GM chief financial officer, that bailing out Delphi would cost the automaker as much as $12 billion”

-pg. 82

” Today we are paying double or triple more for hourly labor compared to what prevails in the marketplace”

-pg87 Steve Miller on what drove Delphi into bankruptcy

“Between the health care savings and other cutbacks, GM expected to shrink its annual operating costs in North America by $5 billion a year”

-pg94

Chapter 8

  • Rick Wagoner is forced to meet with Jerry York, a sharp financial analyst working for Kerkorian, who Kerkorian is requesting be placed on the GM Board of Directors (Kerkorian was the single largest GM shareholder with roughly 10%)
  • The struggles at GM and Delphi regarding cutting legacy costs and handling bankruptcy problems stemmed from the inability to compete in the changing auto market with foreign firms who made better quality cars at lower costs (non-union workers who were so new that they had no retirees drawing down on pensions or healthcare services)
  • York gives a speech addressing the state of GM and its future, asserting that drastic measures needed to be taken immediately in order to right the ship, but that profitability was possible given the correct leadership and adoption of better business practices

Quotes

“By York’s calculations, General Motors was spending $24 million more every day than the company took in”

-pg 97

“This was GM they were taking on– the most inbred, hidebound corporate culture of them all, a virtual block of granite of tradition and resistance”

-pg 98

“GM, York declared, was facing insolvency in a thousand days if management did not shift immediately into what he called ‘crisis mode’.”

-pg 112

Chapter 9

  • We find Ford following the same path as GM; beset with legacy costs, competing with younger foreign car companies that produced higher quality small cars at much lower costs (ultimately meaning that Ford needed to strike a deal with UAW)
  • Bill Ford decided that he needed to find a true leader and creative genius that could turn Ford around in North America, and he found this in Mark Fields whom he brought over from Ford in Europe (Fields had already done incredible things for Ford in Argentina, Japan, and Europe)
  • Ford ends up cutting a deal with UAW (cutting 30,000 jobs and closing 9 factories in the US), which UAW agreed to with little resistance.  Also Vlasic introduces Dieter Zetsche of Daimler Chrysler, who introduces the reader to the problems Zetsche was having with the soon to be unprofitable and highly liable Chrysler in the US (which lead Zetsche to begin private meetings discussing how to sell Chrysler off )

Quotes

“The implosion at GM was a loud wake-up call for the Ford Motor Company”    -pg 116

“Fields and his team proposed cutting thirty thousand hourly workers, four thousand salaried jobs, and fourteen factories in the United States and Canada”  -pg 126

“And if that happened (Chrysler saw diminishing market share/sales) , Chrysler had the potential to bring down one of the greatest industrial companies in German History (DaimlerChrysler)”   -pg 132

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