Lonesome Tree in Sandhills

Thursday, April 2, 2009

Big-3 US Auto vs Big-2 Japanese Auto

So much ignorance, so little understanding.  Management & unions have a history of both good & bad relations, depending on their leadership.  Decisions at the top set the tone.  Does greed play a role?  Yes, on both sides. Have certain corporations lost their way? Absolutely!

Unions elect their own leaders, but don't have a say in executive hiring decisions.  Consider for a moment that Chrysler hired Nardelli as its new CEO, who had been fired by Home Depot the year before & paid $125 million as severance! 

If bad blood began at the top, those attitudes get insulated on both sides, flowing down to the bottom rung, becoming entrenched regardless of market forces.  Those corporations eventually become dinosaurs - executive, management & union.  Unfortunately, both sides dig ever deeper defenses & their products or services suffer the most.  Expenses for marketing/sales get bigger, which cover bad products/services only so long before more flexible competition takes a bigger market share.  This describes GM, Chrysler & Ford.

As an investor, I look for companies who's executives have a positive tone at the top. If they treat all employees well in terms of safe working conditions & wages, that company does not have union problems regardless whether unionized or not. They clearly understand that "best practices" get "best results" from employees, top to bottom, i.e., smarter decisions, fewer conflicts, happier employees, better trained workforce, less turnover, fewer QA rejects or returns, far fewer injuries or sickness, experienced supervisors, better management, smarter executive decisions - full circle.  All of which leads to larger profits in the bottom line.  This describes Honda & Toyota.

Japanese auto manufacturers learned well from Peter Drucker.  His analysis of GM, at GM's request, was published in "Concepts of the Corporation" (1946), with suggestions for improved management that was rejected by GM executives for decades.  Meanwhile, the Japanese manufacturers hired Drucker & adopted his ideas wholesale.  Results speak for themselves, including their 9 US plants, which are not unionized & are expanding.

If someone on WSJ's staff knows anyone with Drucker's genius, please publish their solutions to the Big-3 problems.  Otherwise, the tripe from "talking heads" is simply not useful to us.

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