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Old 10-14-2007, 11:57 AM   #1
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Detroit's 3 finally on track, tough critic says

Detroit's 3 finally on track, tough critic says

Better cars, smarter execs, lower costs

October 14, 2007

BY TOM WALSH

FREE PRESS COLUMNIST

Chalk up this past week as a big win for the home team, Detroit's three automakers.

General Motors Corp. workers ratified a new labor contract by a ratio of nearly 2-1.


Chrysler LLC and the UAW forged a new tentative pact with only a hiccup of a 6-hour work stoppage.

Ford Motor Co. lured marketing hotshot Jim Farley away from Toyota Motor Corp.

GM stock surged past $40 a share for the first time in more than two years, closing at $42.64, up 11.6% on the week. Ford shares rose 10% to $9.20.

If it's too early for Detroit to declare victory over automotive competitors from Japan, Korea and Europe -- and yes, it is too early -- we can at least enjoy this spate of good fortune for our much-maligned home team.

Still skeptical? OK, but have a listen to Maryann Keller, a relentless critic of Detroit's auto industry for the past three decades as a Wall Street analyst, author, consultant and now a director of two auto-related companies, Lithia Motors and Dollar Thrifty Automotive.

"For the first time in 30 years I think that Detroit is going to finally turn around," Keller told me Friday.

"The cars are better, the management is smarter and the costs are down with these new contracts. The UAW and Big 3 have finally figured out how to save each other and create a headache for the Japanese."

Wow, has Keller, the author of "Rude Awakening," a 1990 book on GM's fall from supremacy, suddenly gone soft on Detroit?

Hardly. She still has harsh words for earlier Detroit products and executives, but she does see a sea change in the works.

"Detroit was just incompetent for three decades," Keller said in a telephone interview. "I mean, who could have come up with cars as bad as what they offered in the 1980s? ... They did everything in their power to shatter their reputation.

"Who could have imagined anything more incredibly stupid than what (then-GM Chairman) Roger Smith did to the Cadillac division during the 1980s? Remember the Cimarron? Or the Allante?" the convertible with leakage problems so bad that "when it rained outside it also rained on you inside the car? Those cars were jokes."

Keller argues that the success of Toyota, Nissan and Honda in the American market was due as much to Detroit's mistakes as to appealing and economical Japanese products.

"Detroit enabled the Japanese to be successful. Detroit now has it in its power to make the Japanese suffer a little bit, or stall out," she said.

"Is Detroit going to really continue to get its act together," she asked, "in terms of quality, design and technology? If they do, and they now have a cost structure that makes them much more competitive, the bottom line is, they can stop the Japanese juggernaut. No question."

By allowing more flexible deployment of workers and assuming responsibility for a trust that manages retiree health care, Keller said, the UAW has improved the outlook for both the carmakers and the union. "I think the UAW has done more for its potential to improve membership in the last 30 days than in the previous 15 years," she said.

Keller sees promise, and a few problems, at each of the Detroit 3:

At GM, she said CEO Rick Wagoner, with able assists from Vice Chairmen Fritz Henderson and Bob Lutz -- and a prickly nudge from billionaire investor Kirk Kerkorian and his adviser Jerry York -- has improved quality and efficiency and has created more attractive products.

"But GM could not solve its problems alone," she added. "I think GM needed the UAW to realize that together they can ally to actually improve the future of the Big 3. And I think that's happened."

Chrysler, Keller said, has made interesting moves under new owner Cerberus Capital Management to hire Robert Nardelli as CEO and snag executives Jim Press and Deborah Wahl Meyer away from Toyota.

"But there's an awful lot of Chrysler product that you just can't sell at anything close to list price," she said, noting the high rebates and other incentives on many vehicles.

"A major product overhaul will cost a whole lot of money and it's going to be interesting to see how much Cerberus is willing to sink into it."

Ford President and CEO Alan Mulally has impressed Keller in his first year at the helm.

"I think he's taken time to understand who the people are in his company and where he needed to make changes. I'm impressed with the fact that he got Farley. I think that is a bigger win for Ford than Jim Press was for Chrysler, because Press, while he had an illustrious career at Toyota, had moved into a more ceremonial role."

Still, Keller said, Ford has a pile of problems, starting with some of its brands. "They have to figure out what they're going to do with Mercury. I think they have to figure out, what's a Lincoln? I'm not sure what a Lincoln is today."

All three of Detroit's automakers need to focus more on fuel economy, Keller suggested, "because it's going to be the issue that defines this industry in the next decade, whether they like it or not."

Detroit's auto companies may have convinced one of their toughest critics that they are back in the game, but that doesn't make the game any easier.

Contact TOM WALSH at 313-223-4430 or twalsh@freepress.com.
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