Episode 610 – Supply Chain Cracks?, Saab Stops Production, UAW Wants Jobs Over Wages

March 30th, 2011 at 11:45am

Runtime 6:50

One economist says automakers may have consolidated their suppliers too much and may need to rethink how they structure their supply chain due to the disaster in Japan. Saab had to halt production in Sweden because some suppliers stopped shipping parts because they were worried about getting paid. A top UAW official says the union would be open to accepting more lower-wage positions as long as automakers keep jobs in the U.S. All that and more, plus John answers your questions about electric vehicles, Hyundai and much more in the “You Said It!” segment.

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This is Autoline Daily for March 30, 2011. And now, the news.

SUPPLY CHAIN CRACKS?
Are cracks starting to appear in the global automotive supply chain? The earthquake and tsunami in Japan may force automakers to rethink how they have structured their supply chain. That’s the opinion of Sean McAlinden, an economist with the Center for Automotive Research. He says automakers may have consolidated their suppliers too much, meaning that if one goes down for whatever reason, there’s no easy way to replace them. He says it’s possible automakers share too many parts on too many models and in too many regions in the world. Again, if you lose one critical supplier that means an across-the-board and across-the-world series of shutdowns.

SAAB’S SUPPLIER TROUBLES
Saab is trying to brush it off as not a big deal, but Bloomberg reports it had to halt production in Sweden because some suppliers stopped shipping parts. The suppliers were worried about getting paid. Saab says the issue was resolved and that production has resumed. But problems like this typically suggest that an automaker is having cash-flow problems, meaning it’s just not selling enough cars.

PIETRO GORLIER ON AUTOLINE DETROIT
Pietro Gorlier, the head of Mopar at Chrysler, says it’s imperative that more dealerships in the Chrysler Group stay open on Saturdays and even Sundays. He says dealers need to regain customer service work and that quick oil changes can be a key to get that work back.

Pietro Gorlier is my guest on Autoline Detroit this weekend.

UAW OPEN TO MORE LOWER-WAGE JOBS (subscription required)
There’s been a lot of rhetoric coming from UAW president Bob King lately about how the union will try to win back concessions from the Big Three in negotiations later this year, but maybe those talks won’t be too contentious after all. According to the Wall Street Journal, the vice president in charge of GM at the UAW, Joe Ashton, says the union would be open to accepting more lower-wage positions as long as automakers keep jobs in the U.S. He also says the UAW would like pattern bargaining, meaning Ford, GM and Chrysler would get similar contracts, but he admits “that could change in negotiations.”

DONKEY POWER
A few weeks ago we told you about one ticked-off Lamborghini driver who publicly took a sledge hammer to his Gallardo because of problems with his dealer. Now it’s Land Rover’s turn. Chinese automotive site TheTycho.com reports the owner of a Range Rover had his luxury SUV towed back to the dealership by a pair of donkeys! The truck, which cost 2 million Yuan new – that’s about 305,000 U.S. dollars – had been in for repairs six times in one year, including an engine replacement. When it broke down for the seventh time the driver had enough. He brought the vehicle back and is asking for a full refund. No word yet if he’s getting one or not. You can’t beat donkeys for reliability.

Coming up next, it’s time for You Said It!

And now it’s time for some of your feedback.

Ron Paris reacted pretty strongly to our reports on the lease cost of the electric cars from smart and Volvo. He says, “John, I am appalled by your naïve and insulting comments about high lease prices on smart and Volvo EVs. Did it not even occur to you that maybe these cars did not benefit from layer upon layer of government subsidies lavished on cars like the LEAF and Volt?”

Ron, I hate to break the news, but the lease prices that we quoted, almost $600 a month for the smart and $2,100 for the Volvo, include the $7,500 federal tax credit.

tj Martin, and a few others of you, take issue with us saying anything nice about Hyundais. “I know Hyundai has their little ads showing up here from time to time, but it’s ABOUT TIME for some solid Gorilla Journalism such as Mr. Burgess has been practicing when reviewing the Hyundai/KIA line-up.”

tj, yes the hardcore car critics love to find fault with Hyundais and Kias. Meanwhile, the people who go out and plunk down their hard-earned money on buying new cars have made these two car brands the fastest growing ones in the world.

Speaking of Scott Burgess, Lex, writes in to say, “I hope Scott Burgess got a raise, too!”

And yummy1234098 thinks “Scott Burgess looks a lot like Billy Ray Cyrus . . . just saying.”

Brett is against those who are against unions working together globally. He says, “Yeah, those danged unions got a lot of nerve not just rolling over for the fat-cats and corporations. How dare they globalize like the corporations! How dare they not let themselves be demonized and snuffed out! Oops, gotta run! Glenn Beck’s coming on!!”

You don’t fool us Brett, we know you don’t watch Glenn Beck.

Don’t forget to catch Autoline After Hours tomorrow night. If you want to know where Ford is going with its styling here’s your chance to learn. Our guest will be Joel Piaskowski, the head of exterior styling for Ford of the Americas.

And that’s today’s report on the top news in the global auto industry. Thanks for watching, we’ll see you tomorrow.

Thanks to our Partners for embedding Autoline Daily on their websites: Autoblog and WardsAuto.com

20 Comments to “Episode 610 – Supply Chain Cracks?, Saab Stops Production, UAW Wants Jobs Over Wages”

  1. Zieke Says:

    Re: Donkey Power.
    John, are you kidding me? 300k for a freekin’ Land Rover? I must be reading Greek. Can’t you buy a Bentley for that? That is absurd. And then for it needing to be in the shop for that amount of time. Absolutely disgusting. That car co. should be fined for not replacing the guy’s car or etc. after 3 times in a year. I would never buy a vehicle from them, because it’s obvious they could care less about their customers. Other than the high price, I guess that’s why you don’t see many of them.

  2. Chuck Grenci Says:

    Looks like Joe Ashton should have been the new “Boss” of the UAW; his rhetoric is much more to the moderate (and makes a whole lot of sense). I still say, and this has been said on Autoline Daily, that a fair profit sharing plan would go a long way to having happy manufacturers and happy workers.

  3. dcars Says:

    Sadly Saab might be nearing the end of the road. It would be nice to see US Labor and US companies working towards improved products and wages to insure work remaining in the US.

  4. HtG Says:

    Resin?!

    Here’s a quote from EETimes about how semi manufacturing will likely suffer because a resin used in building up the layers in chips is now impaired.

    “Semiconductors are used to manufacture a broad variety of complex technology based components used in everything from cars to LCDs. And the resulting global shortage of this unique resin will drive semi-conductor manufacturing delays and costs up, which will be passed through the supply chain to end user prices.

    Car plants in the USA and Germany have already confirmed they are looking closely at their supply chain to define future product levels; many are heavily reliant on electronic component manufacture in Japan.”

    http://www.eetimes.eu/en/worldwide-manufacture-braces-itself-for-semiconductor-shortage.html?cmp_id=7&news_id=222906676&vID=209

  5. Dave Says:

    As a 6 year owner of a 4X4 2005 Kia Sorento ,that I have had NO problems with, I WOULD buy an other Kia / hyundai. Feel free to buy over priced junk from the BIG THREE, granted they are getting better, but KIA / Hyundias are very good vehicles with the best warr. for the best price….dont like it?? TOO BAD

  6. HyundaiSmoke Says:

    Dave= Smart man.

    Anyway, see this is why I think China will come to America by storm.

    If the Chinese are this militant with finding faults in Foreign products. Then out of National Pride they will make sure they grow to be among the best in the world.

  7. Jesse W. Henry Says:

    Glad to see that the union is open to negotiation… I am all for keeping jobs in the US there are just certain jobs you can’t pay 25 dollars an hour to someone to do and keep costs down.

    I agree with Chuck Grenci about profit sharing. I feel this is one of the best ways to truly compensate everyone. I also think profit sharing should be on a few levels and not 100% based on pure pay but pay levels. I also don’t think that the top level of payout should exceed more than maybe 4 to 5 times the lowest level. (Open to others thoughts on amounts and percentages.) If one guys profit sharing amount is 50% of the total profit sharing money paid out it is not really profit sharing. By the same token I don’t think the lowest paid line worker should get as much as the CEO.

  8. SalvadorG. Says:

    SUPPLY CHAIN CRACKS?
    I’m sorry JohnMc, but I can not believe this was the first time all these manufacturers face this problem, I would at least have expected some little crack to shown during the last economic collapse and you know someone could had said something like “If this had been a real disaster, we could face a supply shortage”; so the whole Japan disaster caught us by surprise, yeah.. sorry don’t buy it.

  9. Ali from the Bronx Says:

    Are any of the U.S automakers jumping into luxury compact sedan segment? It seems like they are letting foreign automakers run that part of the show.

  10. Randy S. Says:

    1. Of course the supply chain is in absolute disarray, the supply chain is still an absolute disaster with in itself. Over and under consolidation all across the board is the answer to the this mess, just after the over dependence on Japan for automobile parts. I do support the Japanese brands and made parts, but shouldn’t some sort of back up plan been put in place? Hello!

    2. Saab. As much as I like the car and company I think Saab may have been killed by GM and I do not see the brand making a come back when there is already a clustered mess of brands still out there. GM cut away the brand intentionally, and was at one point planning its funeral. It is sad and a disappointment, but I still do not see Saab making a come back, unless they are bought out by a monster brand like VW or Daimler?

    3. I absolutely agree with the better Chrysler Service. I recently visited a Chrysler dealership, the service was not only terrible, but prompted me to want to open my own dealership, a Buick dealership or something of the like, because I could have provided better customer service myself. Talk about literally turning me off to the entire brand and family there of. Then, to take the cake, I went across the street, and was wined and dined by the likes of Nissan and Kia salesman? Service with a smile!

    4. I love how the Chinese are doing these crazy things to brands like Lamborghini and Land Rover, it is absolutely priceless. To many times I have wanted to do these types of things here in America and actually send a real message out to the world, unfortunately here in America most people are to devout to ever change their minds about anything. As well, Most companies don’t listen anyways. This includes anyone from Apple to GM all the way down to Verizon.

    5. Kia and the up and coming Hyundai are decent brands, they are just from Korea, which has the same old people in this country upset that other parts of the world are coming into development. My mom has a 2004 Sedona, and this was back when Kia was inching its way into our market, and even it has not had a problem given that the vehicle reached 300,000 thousand miles, driver error killed the engine, and she threw a slightly used engine in it, and headed off to soccer practice. You can drive them past the day that the vehicle literally dies, and if it wasn’t for my negligent mother, the vehicle wouldn’t have even needed a new engine for who knows how much longer?

    6. Just thought I would add that the Glen Beck reference made my day. I so agree with that guy! (Brett.)

  11. GPL Says:

    Ali,

    Depends on your definitions of compact and/or luxury, I guess. Caddy has the ATS coming soon. Not sure how “compact” it is, though.

    Lincoln has shown a lux/compact concept, but I don’t know if that will go anywhere. Ford is still a bit cash poor and focused on its bread-and-butter brand, so I don’t expect to see much from Lincoln other than the continution of Ford rebadges until they have a few profitable years behind them.

    I wouldn’t be surprised to see a Fiat based Chrysler or a US built Fiat compact positioned as a lux brand in the next couple of years.

    Other than that, the content of smaller cars just continues to increase across the board. If you tick all of the boxes for a Cruze or 2011 Focus, I doubt there would be much left to want except more power, and the Focus will get that soon and I suspect the Cruze will eventually as well.

  12. cwolf Says:

    The Chinese guy who had a donkey towe his Range Rover back to the dealer must not be aware the brand is problematic and crazy to pay over 300 grand for one. He would have been far better off using the donkey for everyday transportation. Even China should have”wremon wraws”!

  13. dcars Says:

    What is the “luxury compact sedan segment?” Does it include the Copper Mini and Fiat 500?

  14. cwolf Says:

    dcars, IMO the Fiat 500 is just a small subcompact,period!And your Mini might be at the higher end,but at a luxury price.Volvo sure would like its C30 to be considered,just like the other expensive brand two seaters.In my view,this luxury segment is still open. Maybe the lil’caddy is something to look forward to and maybe Lincoln. Then again,if Lincoln doesn’t do something/anything soon they may go to Yugoland!

  15. XA351GT Says:

    Finally something the UAW has said that I can agree with. Maybe there is a little common sense there after all.

    I wish the Chinese had all stayed with Donkey power ,then maybe we wouldn’t be looking down the barrel of $4 @ gal gas prices.

    Ford either needs to make Lincoln a unique model brand (not sharing w/Ford cars as it does now) or shut it down and call everything a Ford as it does every where else in the world.

  16. XA351GT Says:

    I had a look at the Fiat 500 the other day at a dealership or salon as they call it. It is growing on me and I was happy to see no extra dealer markup in the price. base price $17,500 with a couple options and destination charge was around 20K . The real thing is whether or not people will trust the reliablity or not. I guess time will tell. But for the price I saw a couple cars were already sold.

  17. dcars Says:

    I’m just not that familiar with that size of car in a luxury brand. Are you referring to a 3 series BMW? The old (1990) 318i was a pretty small car but decent. The old Saab 900/93 is another fairly small car that charged a higher price and had lots of nice features.
    The Cruze looks substantial for a car in that size range but I don’t think it will preform like the other cars.

  18. Charlie Fullerton Says:

    John: In my area, dealers charge insane rates for their mechanic’s time. much too close to $100/hr. The only work that goes near a dealer is, and will continue to be, warranty stuff, that will not be billed to the customer. Nobody in the world is worth that kind of money — Oh, for a Model T, that we could fix ourselves. My current mechanic charges $65/hr + 15% tax — he drives a fully optioned F-150, diesel, crew-cab, 4X4. with his lettering all over it which he can probably depreciate @ 40% a year of the current “book price”.
    His tire prices “out the door” have gone up about 30% in the last six months.
    We have no mass-transit, Taxis are available which I must investigate. Now gas is $1.30/L.
    Don’t have a conversion to your gallons.

  19. Jim Thykeson Says:

    Some of these guys should realize (do any of you WORK!) that the union will capitulate again because the conservatives (read repubs) have told the ‘Big-2′; Chrysler will be dead by the end of the year, that if you don’t get the concessions do what the rest of the industries have done…replace your labor-force with Mexicans! The hard-working men from below our border have been RECRUITED to come here and replace workers…why do you think there numbers are so huge! Wake up guys, you could be next.

  20. Kit Gerhart Says:

    A loaded up Cruze could be considered a “luxury compact” in most ways, but people won’t see it that way because of the Chevy name plate. Looking at it objectively, though, Cruze has a nice interior, and you can get most of the “luxury trappings” like power seats, homelink, sun roof, auto temp control, and more.