Monday, August 18, 2008
On this day:

How to fix GM?

I like Rich Kaarlgard's suggestion in Forbes:

Of course GM can be fixed. The question is whether CEO Rick Wagoner or anyone can fix the auto giant while it remains a public company and gasps under union contracts and pension obligations in union-friendly Michigan. I'm not sure Wagoner's plan to cut $10 billion in costs over 18 months and raise $4 billion to $7 billion through asset sales and debt is quite enough, bold as it is.

Here's an alternative: Take GM private. Move it to the South. Get auto-friendly but union-hostile states, such as South Carolina, Alabama, Mississippi, Texas and Oklahoma, to compete for its business. Pay the workers union salaries. If GM wants to compete with Toyota, the competitive barrier will not be worker salaries. It'll be productivity on the factory floor and quality in the finished product. To achieve these goals, GM must free itself of rigid union work rules so it can install Toyota-like flexibility in its manufacturing.

GM also needs workers who are motivated--by carrot and stick--to actually show up and work. Here's a shocker: The average daily employee absentee rate in a United Auto Workers plant often exceeds 10%. Compare this with the 2% to 3% absentee rates at Honda, Nissan and Toyota plants in the South.

There's no reason why General Motors shouldn't be able compete with the foreign auto giants who have been so warmly received in the South. It has the capital, it has the know-how, and it has roots in an auto-crazed country that desperately wants to buy American-made cars. What it apparently doesn't have is enough employees who are willing to work.

So, come to Alabama, GM. Just leave the union army behind.