DLEG
Grapples With Top Auto Issues
By
Antonio Vasquez
Staff Writer
In a candid interview after his recent keynote speech at the Detroit
Institute of Arts, David Hollister, director, Department of Labor
and Economic Growth (DLEG), talked about the challenges facing Detroit’s
Big Three and how DLEG along with Gov. Granholm’s office will
unveil a six-point automotive strategy designed to address their
concerns in 2005.
A graduate of Michigan State University, Hollister’s political
career began as Ingham County Commissioner in 1968. He later served
in the Michigan House of Representatives from 1974 -1993, before
winning his first of three terms as Lansing Mayor.
During this tenure, Hollister orchestrated over $2.9 billion in
investments for the state’s capital, including the successful
negotiation with General Motors Corp. to build two new assembly
plants, one of which received a gold rating in the 2004 Harbor Report.
Hollister recalled the criticisms he and GM executives received
for their decision to build instate.
At the time, automakers looked beyond Michigan when deciding where
to invest in new manufacturing facilities, and critics thought Big
Labor would be impossible to work with.
“They told me before we started it couldn’t be done,
that we were going to lose 14,000 jobs, that we were going to be
like Flint, hang out a shingle and go home,” Hollister said.
This past August in Traverse City, site of the Center for Automotive
Research’s annual Management Briefing Seminars, one out-of-town
journalist even quipped: “Why in the world would GM build
a plant in Michigan,” citing the common perception that building
factories down South was cheaper because of the lower labor costs
that come from a non-unionized work force.
Hollister said a UAW official also on the panel asked all the UAW
members from Lansing to stand up before replying: “There is
the reason we built that plant in Lansing.”
Hollister added that labor unions should be “seen as an asset”
and that bigger issues such as health care reform, fair trade policies,
safe and secure borders, a highly trained work force, and an energy
strategy that limits our dependence on foreign oil must be pursued
in order to make Michigan a more attractive state for new manufacturing
investments.
Those points make up the ribs behind a skeleton structure for an
automotive strategy currently being developed by the governor’s
office and DLEG, set for release at various phases throughout 2005.
In general terms first announced in August, the six points cover
business climate/attraction and retention; work force skill development;
international attraction and export assistance; new business models;
innovation; and automotive intelligence.
GM, Ford Motor Co. and DaimlerChrysler Corp., as well as a number
of Tier I and Tier II suppliers, helped the government agencies
to develop the auto-specific plan after the Michigan Manufacturing
Matters Summit in December 2003, Hollister said.
Their input was critical in separating the issues facing OEMs and
their suppliers from issues facing the greater Michigan manufacturing
community.
For example, on the issues of automotive intelligence and innovation,
the small think tank discovered that smaller firms were experiencing
difficulties when trying to penetrate overseas markets such as China,
Hollister said. To solve this problem, the strategy seeks to create
a common database where member companies can share data and information
on potential opportunities available to all firms.
“Smaller suppliers want to know what their opportunities are
in China for export, or to compete with larger firms with larger
resources,” Hollister explained.
Global powerhouses such as Detroit’s Big Three are saddled
with different problems, namely out-of-control health care costs,
which add thousands of dollars to the price of new vehicles.
Hollister reconfirmed efforts by high-level executives such as GM’s
Rick Wagoner and Ford’s Bill Ford Jr. and Alan Gilmour, whom
have elevated their concerns all the way to Washington D.C.
“$1400 per car minimum in additional costs makes it uncompetitive
and it’s getting worse,” Hollister said. “And
it’s disproportionate on the Big Three because they have a
longer history so they have these legacy costs.”
Hollister shared a story told to him by GM’s Wagoner about
a healthy UAW retiree who worked for the world’s No. 1 automaker
for over 30 years. The man, now 100 years old, theoretically contributed
to a health care compensation package for roughly half the time
he has received coverage.
“He’s gotten back twice what he paid in,” Hollister
said.
“Toyota doesn’t have that problem. When you start a
new plant in Mississippi hiring people from day one, you don’t
have legacy costs.
“Those are costs that a new company starting up doesn’t
have and our foreign competition doesn’t have because [their
health care] is subsidized by their governments. It’s just
economics,” he added.
Because of their sheer size and economic power, Detroit’s
Big Three carry a lot of political clout and Hollister says that
because of their dogged persistence, some form of nationalized health
care will be adopted in the U.S. in the next five to seven years.
After all, when you’re part of a global industry that employs
roughly 8 million people worldwide and generates roughly $1.5 trillion
in annual economic impact, it’s fair to say that auto manufacturers
deserve some concessions.
“It’s not going to be Hillary Clinton,” Hollister
joked. “I mean, Hillary will be there but the pressure is
coming from the Big Three and it’s coming from the business
community who is currently providing insurance and subsidizing the
uninsured.
“The biggest issue that the state governments are facing across
America is Medicaid so it’s just out of control and breaking
everybody.”
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