A New Detroit?

by Henry Payne

It’s a new Detroit era. That’s what Detroit automakers told themselves this week after Chrysler reached a deal with its 26,000 UAW-represented workers. “We recognize the corporation is in its infant stages of a comeback,” UAW Vice President General Holiefield said at a news conference. “We did not enter any set of negotiations to break any one of these companies.”

Well, that is reassuring.

It may be a new era inside the Detroit bubble where jobs banks and budget-busting pensions were once the norm. But outside the bubble? Why would say, Hyundai-Kia, want to adopt this business model?

Korean autos are the new Japanese. Hyundai-Kia stands at 8 percent market share and closing (Chrysler is the smallest U.S. automaker with 12 percent share). Yet Hyundai/Kia operating in right-to-work Georgia pays $42 in wages/benefits vs. $58 for Chrysler — with no $3,500 signing bonus, no productivity-sapping work rules, no $300 “attendance bonuses,” etc., etc..

The good news is that, at current wage rates, Chrysler will make money. But Hyundai will make more — and be more flexible to adapt to changing circumstances.

“I left the (Ford labor deal) and went immediately into Chrysler because I wanted to complete all of these negotiations before the economy got worse,” UAW Chief Bob King said, sounding more like he was stealing from the cookie jar than trying to assure the long-term competitiveness of his members’ employer. Shouldn’t he be asking how the “New Detroit” stands to compete with the “New Asia” threat?

With the Chrysler and the separate GM deals wrapping up the first contract negotiations since the Detroit Two bankruptcies, it should be dawning on America that it missed a once-in-generation chance to level the playing field with its domestic competitors. Instead, it is Detroit’s foreign competitors who have adopted the lean, post-union American model.

It must frost Fiat CEO Sergio Marchionne’s shorts (even though he got Chrysler for free from Obama) everyday that he is the only U.S. transplant that has to wake up with the UAW in his bed.

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