The solution offered by General Motors to American Axle workers brings an end to one of the most bitter disputes in the recent history of vehicle making. The US$200 million offer from GM to pay off the supplier’s early retirement offers, pension plans and other buyouts, comes after the carmaker publicly stated that it did not want to get directly involved in the strike. That went by the wayside when parts supply to its most popular models came under threat.
Was a dwindling parts supply the only motivating factor to drive GM to offer the universal olive branch of cash - with the added offer of further lines of credit? Cynical though it may sound, the American Axle strike might actually help the carmaker. Heavily laden with (US) stock that even the most generous of consumer terms could not shift, the strike might well have benefitted GM three-fold: by offering the chance to halt production, blame someone else for the stoppage and empty those bulging lots of gently dating stock. Meanwhile, Ford, much to the dismay of its stockholders, has had to announce further plant closures and cutbacks in production. Most recently, the company reduced expected second-quarter production by a further 20,000 units to 690,000. Further cuts have been announced for the third and fourth quarters of 2008, the hardest hit being truck and SUV production. Shift and line-speed reductions have been cited as ways of curtailing output.
Reasons given for the reduced production figures (while output of small cars and crossover vehicles will be slightly increased) are the cost of raw materials and higher fuel prices, driving customers towards more fuel-efficient vehicles. Be that as it may, wouldn’t it have been more convenient to have a scapegoat on which to blame the production cuts? Wouldn’t it have been great to have the opportunity to move that unwanted stock from the balance books, while placing the blame squarely on forces beyond your own control? Certainly better than having to revisit over-estimated production targets. Perhaps no one could have predicted the meteoric rise in oil prices. It’s a simple case of demand outstripping supply. An additional 200,000 barrels per day will do little to ease the situation, and as the northern hemisphere’s driving season hits full swing, prices will in all likelihood keep rising. This is not a situation that should have taken anyone by surprise, particularly carmakers, such is their vested interest in energy and how it affects product sales.
So while Ford has had to publicly adjust forecasts and juggle production lines, GM it could be said, was playing the American Axle dispute for all it was worth. What better opportunity to temporarily close the production lines of slower-selling models, while dealers took delivery of lot-jamming inventory. It can only be hoped that, during the shutdown, GM had the foresight to rejig its own lines, quietly cutting production to balance its own supply and demand figures. If not, there will be a lot of spaces filled with unsold cars again.