Inherent Hazards

With the next round of United Auto Workers union contract talks more than a year out, General Motors Corp. Vice Chairman-Global Product Development Bob Lutz warns that job losses for salaried and hourly personnel will become a way of life in the U.S. and Europe unless there is a significant restructuring of GM's fixed costs.

“The traditional places where you make cars are threatened unless they (workers) can adapt,” Lutz says.

“If there is no adaptation and the unions become very rigid, (saying), ‘We will make no concessions,’ then I would say traditional high-cost Western manufacturing locations are in for a rough time.”

Lutz notes India is churning out world-class engineers who are willing to work for a fraction of what U.S. and European engineers earn.

GM is redefining its vehicle engineering and assigning new-vehicle development programs to global engineering teams in other talent-rich regions. Still, the auto maker remains uncompetitive on cost.

Hourly workers in the U.S. no longer are faced with a choice between high-paying jobs and low-paying jobs, he says. They must choose between jobs “or no jobs at all.”

The expansion of Asia-based auto makers is accelerating this shift because their costs are rooted in economies that are years away from a development level that would rival the U.S.

“In a few years time, it's clear that the Chinese automobile industry will be capable of exporting products,” Lutz says. But with GM's strong foothold in that country, he adds: “There's no doubt that someday we will be (using) GM China as a source of products.”

The creation in 2002 of GM Daewoo Auto & Technology Co. in South Korea leaves the auto maker “uniquely positioned” as globalization unfolds and was “perhaps one of the boldest and best strategic moves that General Motors ever made,” Lutz says.