The Truth About Cars » Assembly The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Mon, 28 Jul 2014 18:32:39 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Assembly Volkswagen Crossover Will Be Built In Chattanooga Mon, 23 Jun 2014 04:01:12 +0000 550x366xVolkswagen-CrossBlue-Concept-550x366.jpg.pagespeed.ic.uF-8gWFYml

Reuters is reporting that the long-awaited decision on the production site of Volkswagen’s new crossover is set to be handed down any day now, and the winner is Chattanooga.

According to Reuters, a generous incentive package swayed the decision to build the new CUV in the United States, rather than Mexico

The state of Tennessee is offering tax breaks, staff training, free land and infrastructure upgrades worth about $300 million in total, giving it a clear edge over Puebla, Mexico

Dealers have been crying out for a CUV sized above the Touraeg, but priced closer to the Honda Pilot (rather than in the pseudo-luxury space occupied by the Touraeg). With CUV sales growing in globally, the lack of competitive crossovers in Volkswagen’s North American product portfolio is undoubtedly holding them back from further growth in North America. The new three-row CUV should help put them on track – but without a next-generation Tiguan that’s adapted to North American tastes, it may be too little too late.

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Ontario Government Selling GM Shares To Fund Public Transit Mon, 14 Apr 2014 13:00:34 +0000 r-GM-CANADA-RD-INVESTMENT-large570

The government of Ontario has announced  it will sell its shares in General Motors as part of an effort to fund new public transit programs in the Greater Toronto Area. But the move could end up hastening the demise of GM’s Oshawa plant, located in the same metropolitan area.

According to The Globe and Mail, the sale could net about $1.4 billion for the province, which would “wait over the next year for the best time to sell.” While divesting its stake isn’t necessarily a bad thing, the timing of the sale coincides with two events that have a major impact on Oshawa’s future.

The first is the expiration of GM’s Vitality Commitment, a document signed during the bailout as part of the terms for receiving government funds., which requires GM to keep 16 percent of production in Canada until GM’s loan to the Canadian and Ontario government is re-paid, or until December 31, 2016, whichever comes first.

With the loans repaid, and GM’s shares now being sold off, the biggest question mark for Oshawa will be the expiration of GM’s contract with Unifor (formerly the CAW), which will expire in 2016, along with Unifor’s Ford and Chrysler contracts.

Oshawa has slowly seen its product whittled away, most recently losing the Chevrolet Camaro to Lansing, Michigan where the Cadillac ATS is built. As of now, the Flex Line (one of two assembly lines) has no unique product, with the Cadillac XTS and Chevrolet Impala also built in Michigan, the Buick Regal is also built in Germany and the Chevrolet Equinox/GMC Terrain are made in multiple locations.

The Consolidated Line, which builds the old W-Body Impala for fleets, is due to be shut down in 2016. The big question is whether the Flex Line will follow. The 2016 date may provide an easy out for GM, since it can use the labor contract expiry to close down Oshawa.

The plant’s closing would be a devastating blow to Oshawa, which is just as much of a “GM Town” as Flint, Michigan was in the “Roger & Me” era. Of the Detroit Three plants currently operating in Ontario, Oshawa has been in jeopardy the longest – but at this point, it’s an inevitability.

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Toyota Plants In Canada On The Path To Organizing Fri, 13 Dec 2013 12:00:52 +0000 ToyotaProduction

The UAW’s troubles with organizing Volkswagen’s Chattanooga plants are well known throughout the auto world, but Unifor, the Canada union that was once known as the Canadian Auto Workers union, now claims that it has enough union cards to hold a vote on representation.

Speaking to the Windsor Star, Unifor president Jerry Dias claims that 3,200 of Toyota’s 6,500 employees at plants in Cambridge and Woodstock have signed the cards, but Unifor will delay a vote until it is confident it can win a “comfortable majority”.

According to Dias, money isn’t the primary issue for the desire to organize, and workers are confident that the backlash from unionizing will be minimal

“We’ve had other organizing drives in the past, but this one is by far the most successful..the  workers are getting older. The issues aren’t so much wages. It’s line speed and the company unilaterally imposing changes to shifts and pension plans that have infuriated people…they used to be afraid that the plant would close. They see that’s not true. Toyota built more than 500,000 cars in Canada last year. They’re not going anywhere.”

Dias reported that 85 percent of Toyota plants worldwide are unionized, and that Unifor is expecting minimal interference from the company. Having just returned from meetings with Japanese union leaders in Tokyo, Dias said that Japanese unions will ask Toyota officials not to have Canadian management interfere with the organizing drive.

This isn’t the first time the CAW/Unifor has tried to organize Toyota plants, or other transplants for that matter. The former CAW made a lot of noise about organizing Honda’s Alliston, Ontario plant, and has been at it since the 1990′s but nothing has panned out to this day.

While Dias asserts that the majority of Toyota plants are unionized, one key detail not mentioned is the differing nature of unions in North America and a place like Japan. Japanese labor unions are far less adversarial in their relationship with the company than an entity like the CAW/Unifor. The harmonious relationship is essential to the Japanese outlook on labor and business. During our research into the Honda-CAW matter, one former Honda employee with labor relations expertise told TTAC that organizing

“…runs counter to the Japanese concept of loyalty. The whole idea is that if you’re loyal to the company, they’ll look out for you and your best interests….Honda also doesn’t want an outside force interfering in the way their plants are run….[Organizing] interferes with the management structure of the plant itself – which is unacceptable to them.”


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GM, Unions Reach Tentative Agreement On CAMI Plant Mon, 16 Sep 2013 13:00:20 +0000 2010_GMC_Terrain_SLT_-_05-06-2011-450x300

GM and Unifor (the union formerly known as the CAW) have reached a tentative agreement for the 2,500 workers at the CAMI plant in Ingersoll, Ontario, which builds the Chevrolet Equinox and GMC Terrain.

The Equninox and Terrain are hot sellers for GM, having sold nearly a quarter million units combined through August of this year. Inventories are tight, and a quick and easy ratification of the agreement would mean uninterrupted production for GM. Earlier in the year, there was speculation over GM moving production of the Theta twins (as they are known internally), to a cheaper location like Mexico or Tennessee. But GM ended up investing $250 million in CAMI for upgrades, including a flexible assembly line similar to the one used at GM’s Oshawa, Ontario plant.

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GM Lands A One-Two Punch As Mokka Moves To Spain Wed, 10 Jul 2013 17:00:35 +0000 Opel_Mokka_1.4_Turbo_ecoFLEX_Innovation_–_Frontansicht,_20._Oktober_2012,_Heiligenhaus (1)

Amid labor unrest in Korea, and a desire to utilize capacity in Europe, GM is moving production of the Opel Mokka (aka, the Buick Encore, and Canada’s Chevrolet Trax) out of Korea and into a facility in Zaragoza, Spain.

Zaragoza, which also builds the Corsa and Meriva, will assemble the Mokka using CKD kits (shipped from Korea) at first. An $80 million investment will be used to bring full production online, and will further secure the estimated 5,800 jobs at the plant.

The Mokka has been a hot seller for Opel, and a rare bright spot in a European car market that has otherwise been in the dumps. But the compact crossover segment that the Mokka competes in relies on low prices, and GM has increasingly come to view Korea as an expensive country to produce cars in.

Unfortunately, it’s bad news for GM’s Korean assembly arm. While the official party line is that the Mokka’s move will free up capacity at GM Daewoo’s assembly plant in Bupyeong for small SUVs like the Captiva, labor relations in Korea have been deteriorating for some time, and this is a way for GM to avoid having to deal with South Korean unions that are not afraid of striking and rioting to get their point across.

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Transplants Could Account For Half Of American Auto Production In Five Years Tue, 23 Apr 2013 19:35:18 +0000

In less than a decade, the number of auto company workers employed by companies other than the Big 3 has risen from 25 to 39 percent. But by 2017 that number could rise to 50 percent.

A report by Automotive News outlines the post-recession rise in American auto manufacturing driven by Asian and European auto makers

Overall, carmaker employment in North America is down by 104,524 jobs since 2005. Yet Asian and European companies added 28,654 jobs during that stretch as they built plants, installed r&d centers and put in other facilities in the United States, Mexico and Canada. Nondomestic automakers have opened seven assembly plants in North America in the eight-year-span, while the Detroit 3 closed 21.

The key growth factor here is not so much the strength of weakness of Detroit, but the desire of auto makers like Honda, Nissan and Volkswagen to localize production in the United States as a means of protecting themselves from currency fluctuations or, in the case of the Japanese auto makers, unforeseen disruptions to their supply chain like the 2011 tsunami. As John Casesa of Guggenhein Partners tells it

“The economic reality of the auto business is that it is most efficient to produce cars in the markets where they are sold, and that is what has drawn all these automakers to the U.S.”



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Lexus ES Production Moving To Kentucky Fri, 19 Apr 2013 14:46:35 +0000

Production of the Lexus ES will move from Toyota’s plant in Kyushu, Japan to a plant in Georgetown, Kentucky, where its platform twin, the Toyota Avalon, is built.

Previously, the Lexus RX was the only Lexus vehicle made outside Japan, produced at a plant in Ontario. The move to Kentucky was no doubt helped along by a $146.5 million “tax incentive package”. The Wall Street Journal reports that the expansion taking place to accommodate Lexus will result in 570 new jobs.

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Analysis: VEBA, The UAW And The Warren Walkout Mon, 04 Mar 2013 18:45:12 +0000

The 12-person protest that took place at Chrysler’s Warren, Michgan truck plant got little notice in the automotive news cycle, save for a couple of mentions on the usual aggregators. In truth, it’s not the juiciest story to sell in this click-driven wasteland, though these stories tend to raise the most interesting questions. This example highlights an issue that is going to dog the UAW for some time – how will the UAW control their workers when they are also the owners?

For the sake of context, let’s recap the story. 12 workers decided to protest a recently implemented schedule at the Warren plant, which is building the 2013 Ram 1500. As the Detroit News explains it

The new system — which has already sparked controversy at other Chrysler factories in Michigan — would split the workforce into three shifts, each working four 10-hour days a week. Those shifts would be staggered over six days, meaning that many workers would have to work Saturdays. 

Saturdays, of course, means time-and-a-half pay. If you believe the Detroit News, then the rank-and-file are unhappy about the move and are determined to fight it. But the UAW is distancing itself from the protest, noting that the move to the current schedule was first approved a decade ago.

The protest coincided with a report by the Detroit News, citing leaked internal documents that show rampant quality problems with the new Ram 1500, a crucial product for Chrysler that is enjoying a lot of momentum in a very competitive segment.

During the first hour of production Thursday, workers at the Warren truck plant built 58 pickups. But only 16 of those vehicles passed final inspection, according to company documents. Quality improved as the day went on, but just over half of the trucks assembled by the first shift were approved for shipment. A company source told The News that number should be at least 78 percent and higher than that to meet the plant’s quality goals.

Wednesday’s numbers were similar, and many employees were ordered to stay late to repair the defective vehicles, according to the source. But the number of problem pickups in the plant’s lots continued to grow. Though nearly 200 vehicles were repaired overnight, there were still 1,078 trucks parked outside the plant Thursday morning that could not be shipped because of defects, according to a company document.

The same report made sure to preface that “…morale problems sparked by the new shift schedule are only making these problems worse…”, adding another barb to a series that is uncharacteristically critical considering that the Detroit News is the hometown paper for Chrysler.

It would be tempting to ascribe more sinister motives to nefarious factions within Chrysler, the UAW or both, but the reality is that the issues plaguing Warren are really just a perfect storm of bad circumstances. On a base level, human are notoriously bad with change. Having chatted with former union members in domestic auto plants, it’s evident that these sorts of shift changes are often presented in a manner that glosses over the ugly details so that the union bigwigs can get the measure approved. When it comes time for the changes to be implemented, the rank-and-file are inevitably unhappy (though our source notes that the blame cuts both ways; caveat emptor and all that).

So, take a bunch of disgruntled workers adapting to a new shift schedule and throw in a new model launch. What did you expect? Workers and management singing kumbaya around the camp fire? It’s hard to think of a bigger recipie for disaster, save for having Bob King ride into Chattanooga on an organizing drive while piloting a Chinese-built Wrangler with a Romney/Ryan bumper sticker. Combining the shift change with a new model launch and production ramp-up may have been a poorly judged move, but in all likelihood, the defect rate will settle down in a month or two.

Meanwhile, the UAW, through the VEBA health benefits organization, currently owns roughly 41 percent of Chrysler. While Fiat is currently attempting to buy the remaining stake from the VEBA, the retiree health benefits of the union members are largely dependent on auto maker stock as well as the overall financial health of the companies. The two parties are currently locked in tough negotiations over the remaining stake, but this is likely too far removed from quality defects at one plant to have any effect on potential stock prices or the respective bargaining position of either side. What is in the mutual self-interest of both parties is the continued success of Chrysler’s auto sales – and with Ram and Jeep being the two pillars holding Chrysler up right now, the UAW knows which side their bread is butter on.

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UAW Targeting Nissan’s Mississippi Plant Sat, 09 Jun 2012 14:45:17 +0000

Tennessee is so 2011 for the UAW. The hot new locale for foreign plant organizing campaigns is Mississippi, where the UAW is trying to organize workers at a Nissan truck plant.

The union has tried to organize before – campaigns in 2005 and 2007 ended with the UAW unable to even organize a vote. According to Reuters, the UAW has been working over the last 6 months to unionize the plant in Canton, which builds the Nissan Titan, Quest and Altima.

Union President Bob King apparently feels that an automaker backlash against organizing will drive workers to unionize.  History, of course, is not on the UAW’s side, with foreign plants located in the South being famously hostile to the UAW. King accused Nissan of mis-representing the UAW to workers during information sessions held at the plant, but a Nissan spokesman told AN

“We’re giving them factual information about the history of the UAW and the lack of success that they have had with their employees and with the companies that they’ve represented…”

To say that the UAW has an uphill battle against them is an understatement. Mississippi’s governor has even said that intervention on his part would be possible if the UAW tried to organize at the Nissan plant.

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Jeep Grand Cherokee To Get Diesel In 2013, 1,100 Jobs Created Fri, 06 Jan 2012 19:56:48 +0000

The diesel powered version of the Jeep Grand Cherokee will return to our shores in 2013, 5 years after it was last offered in North America. Chrysler announced that 1,100 jobs would also be added to a third shift at the Jefferson North assembly plant in Detroit.

The new hires will help build the Grand Cherokee, Dodge Durango and portions of the upcoming Maserati Kubang SUV. The 3.0L diesel makes 237 bhp in European trim, as well as 405 lb-ft of torque.

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Is China’s Cheap Labor A Thing Of The Past? Thu, 29 Sep 2011 17:13:33 +0000

The prospect of a Chinese auto industry growing at insane speed thanks to a booming market and resiliently low wages has long kept auto industry execs up at night, most notably inspiring Sergio Marchionne’s acquisition of Chrysler. But basic economic principles dictate that you can have a high rate of growth or low wages… but not both. Growth inevitably drives inflation, which drives up wages, which in turn slows growth. And according to a report in the Wall Street Journal [sub], that dynamic is already taking hold.

Jae-Man Noh, head of Hyundai’s joint-venture operations in China, said average manufacturing-worker wages in China—about 27,000 yuan ($4,200) a year per worker in 2009—are likely to double by 2015 from current levels.

Auto makers are expected to be affected as much as other industries by the trend, if not more, Mr. Noh said, adding that wage costs for many foreign auto manufacturers already have doubled in less than a decade. He said that a rival foreign auto maker that Hyundai has researched has seen worker wages in China rise to 49,000 yuan a year per worker in 2010, up from 24,500 yuan a year in 2003.

“We need to let go of our perception that the Chinese market is a low-cost production base,” Mr. Noh told a group of reporters at Hyundai’s office in Beijing. He didn’t offer specifics on Hyundai’s wage costs in China.

 And though the laws of supply and demand made this development inevitable, the story of the decline of China’s low-wage manufacturing base is a lot more interesting than you might think. After all, economic and historical forces may seem mechanical in the abstract, but on the ground level they work in dramatic, disruptive ways.
Anyone who has spent the last decade or so in China will have witnessed incredible economic growth, but along with it has come a creeping inflation. Despite widespread accusations of currency manipulation, certain commodities like food and real estate have driven prices incredibly high in recent years. This selective inflation was already underway when I visited China in 2007, and according to Frau Schmitto-san, grocery shopping in Beijing has become nearly as expensive as it is in Tokyo. And in another sign of how bad inflation for basic consumer goods has become, China recently opened its “strategic pork reserve” in an effort to keep prices affordable. Another dynamic playing into Chinese inflation: the penetration of economic development and infrastructure into the country’s interior has reduced the  wage and opportunity differential between the coast and the interior, reducing supplies of cheap migrant labor.
But the tipping point for the auto industry came last year, when a series of strikes hit Honda and Toyota assembly plants in China as part of a wave labor unrest that has its own Wikipedia entry. Work was halted at Honda and Toyota plants, as well as at key suppliers like Denso and Omron, and production ground to a halt for weeks. Calling the strikes, which were largely triggered by demands for better wages and working conditions, a “wake up call for Japan,” the NY Times reported

Japanese companies see the Chinese as crucial consumers of their goods to make up for a shrinking and aging market at home. Some of the most profitable Japanese companies, like Fast Retailing, which runs the budget clothing line Uniqlo, have relied on production in China since the 1990s to keep prices low.

“Japan is starting to realize that the age of cheap wages in China is coming to an end, and companies that looked to China only for lower costs need to change course,” said Tomoo Marukawa, a specialist on the Chinese economy at Tokyo University.

And make no mistake, foreign firms clearly have more to lose from newly-empowered workers, as the BBC reported
The BBC’s China editor Shirong Chen says the government has tolerated strikes at foreign-owned plants, which are obliged to respect workers’ rights, but maintains strict control at Chinese-owned factories for fear of widespread social unrest.

But for foreign firms, the protest must have seemed like “widespread unrest.” As LaborNotes documents, in an in-depth study of the strike wave

the events at Honda Nanhai triggered a chain reaction among workers in auto supply and electronics factories throughout the Pearl River Delta. According to the Guangzhou Federation of Trade Unions, more than 100 strikes occurred, of which only a small number were reported in the media. Around Toyota’s ultramodern factory in Guangzhou Nansha, eight of 14 core suppliers had labor conflicts. And action spread to other areas: workers in several electronics factories near Shanghai and at a Toyota supplier in Tianjin struck for several days.

The strike movement not only scared multinational corporations in China, it challenged the system of labor control. Typically, tacit coalitions between capitalists and local government rule over conditions inside the factories. Unions play a role in former state-owned enterprises and flagship joint ventures, but not in most private companies. Often, local governments back up violations of labor law by major investors, as has been documented in many cases for suppliers to multinationals such as Wal-Mart, Apple, and Nike.

But under conditions of rapid growth and highly modern production, the methods of control have become ineffective. Hundreds of labor conflicts occurred in the wake of the global economic crisis, affecting millions of Chinese workers in 2008 and 2009. Following the recovery, workers are seeking a voice. Workers’ wages have been falling continuously as a share of China’s national income since the 1990s, when the shift toward capitalism really took off, and the government is now officially calling for higher wages in order to raise domestic demand.

If underlying economic fundamentals have been pushing China towards wage inflation for some time, the dam broke in last summer’s wave of strikes. Now Hyundai is publicly acknowledging the reality that every foreign auto firm must face: low costs alone aren’t reason enough to be in China. But as the WSJ notes, even though the glory days of cheap Chinese labor may be over, Hyundai (and others) still have plenty of incentive to stick with their Chinese market plans.

China still offers other draws, including strong economic growth, an increasingly affluent population and a quickly growing car culture.

Plus, Hyundai’s average factory labor cost in China is still one-fifth of that in South Korea, Mr. Noh said. What concerns him most is the dramatic rate of increase, he said.

This trend is “inevitable” as the Chinese economy grows and society improves, Mr. Noh said.

Despite rising labor costs, China’s auto exports will continue to increase in part because of excess auto-production capacity in the country, he said. China’s central government will also continue to focus on automotive exports, he said.

The growth of the Chinese car market in recent years has been nothing short of freakish, and was overdue for this kind of correction. But even though costs are increasing, China’s continued growth and still-low costs relative to other manufacturing centers continue to make it an attractive target. Foreign firms just have to work a little harder than they used to, and as Chinese wages rise, workers there and around the world will only benefit from a narrowing assembly cost gap.

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Honda Joins The Guanajuato Gold Rush, Toyota On The Way? Sat, 13 Aug 2011 00:08:47 +0000

Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak. Today it’s not precious metal that’s driving Guanajuato’s booming economy, but cars, as the world’s automakers flock to Central Mexico. Between 2005 and 2008, GM, Ford and Michelin dumped $1.8b into production in the state, and the expansion is still picking up steam. In the last year, Volkswagen invested $800m in engine production capacity in Silao, Pirelli built a $210m facility and Mazda just revealed it would build a new compact car plant there in June. Toyota is said to be the next to set up shop in Guanajuato, but for the moment Honda is the latest automaker to announce new operations in Guanajuato, as Automotive News [sub] reports the Japanese automaker will spend $800m on an assembly plant there. Honda, which is fleeing a strong yen which has battered Japanese exports, will start building 200k subcompacts per year in 2014. Clearly Guanajuato’s got it’s automotive mojo flowing… but are the days of new Japanese transplant factories in the US over? Is it only a matter of time before the coyotes start smuggling Detroiters into Silao, Celaya, and the Puerto Interior??

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Bailout Watch 577: Auto Task Force Redlines GM Production Wed, 23 Dec 2009 16:42:12 +0000 No Fairfax?

The WSJ reports that GM has added a third shift to its Fairfax assembly plant at the request of the US auto task force. The Kansas City plant will now build 6,300 vehicles a week working 21.6 hours a day, up from 4,500 units per week working 14.5 hours per day with two shifts. The move reportedly makes Fairfax the first US auto plant to run three shifts on a routine basis. According to the WSJ,

the auto task force that oversaw GM’s reorganization last spring was startled to learn that the industry standard for plants to be considered at 100% capacity was two shifts working about 250 days a year. In recommending that the government invest about $50 billion in GM, the task force urged the company to strive toward operating at 120% capacity by traditional standards.

Why? That’s not exactly clear. The potential downsides of the move are far easier to identify.

One of the biggest downsides to running a production line almost 24 hours a day is that it reduces time for maintenance and restocking. The WSJ notes that Toyota’s US plants only runs third shifts on a temporary basis, as Mike Goss, a spokesman for Toyota’s U.S. manufacturing operations, explains “two shifts gives us the flexibility to perform any necessary maintenance on equipment between shifts.” Paint shops, for example, take about 4 hours per day of cleaning and maintenance according to plant efficiency analyst Ron Harbour. If production schedules don’t include that time for maintenance, it can leave the rest of the line idling, the bane of any production system. “If running three shifts means you’re moving [the line] at only 60% of capacity, then you haven’t gained anything,” says Harbour.

Such inefficiencies are bad enough on their own, but because GM has to offer third-shift jobs to existing UAW members and pay $30k per worker to move them to Kansas City, the costs add up quickly. And that’s before you factor in the fact that midnight-shift workers unsurprisingly have above-average rates of on-the-job errors, absenteeism and illness. Or the fact that strong sales of the Malibu and LaCrosse assembled at Fairfax are hardly a sure thing (especially if quality declines), opening the possibility of more incentive-driven inventory clearing if the market stays weak (or quality declines). For all these reasons, automakers typically add overtime to the standard two shifts rather than routinely running plants around the clock.

But when the government owns you and it asks you to add a third shift, you do it. “Do those guys understand the business?” wonders Harbour of the auto task force. Apparently not so much. The upsides are nebulous and far from guaranteed, while the downsides couldn’t be more clear. The fact that the decision was made by the government, which has already admitted that it is not interested in maximizing the value of its (our) 61 percent stake in GM, raises (yet again) the specter of moral hazard. And if the gambit doesn’t pay off, the consequences could be huge, since Fairfax is only the start. In the second quarter of next year, GM will add third shifts to its Fort Wayne Silverado plant, and its Delta Township Crossover plant as well.

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