By on October 29, 2009

UAW ain't looking so bad now, is it? (courtesy: The Hindu)

Well, the “what makes an American car American” debate just got a little more interesting (and a lot more interesting than the “who ‘won’ the CTS-V Challenge” rigmarole). Automotive News [sub] reports that Ford’s Oakville, Ontario plant and GM’s Delta Township plant have ceased production of Flex, Edge, MKX, MKT, Acadia, Traverse and Enclave as supplier Rico Automotive is unable to supply key transmission components. The reason for the parts stoppage: labor violence… in India. Turmoil at Rico’s plant in Gurgaron (30 miles from New Delhi) came to a head on the 18th, when clashes between temporary workers and factory staff left an employee dead. Now GM stands to lose 7,200 units of production, while Ford admits “several thousand” units won’t be built over the next week. This striking illustration of how globalized the auto industry is, is causing some analysts to question the wisdom of using Indian suppliers. They argue that labor unrest like this is common in the subcontinent, compounding already-challenging logistical and shipping-cost issues. But GM and Ford aren’t exactly about to stop investing in Indian firms and production capacity either, since that market shows more growth potential than the US. One thing is for sure: there’s no such thing as an “American car,” let alone an “American car company” anymore. Government ownership notwithstanding.

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24 Comments on “Ford and GM Crossover Production Halted Due To Indian Labor Strife...”

  • avatar

    I guess I don’t get how the nationality of a supplier Ford and GM purchases widgets from makes their products or company any less American?

    You know Coke is mixed all over the world and it isn’t any less Coke. Nor is a McDonald’s burger in a foreign country.

  • avatar

    I guess a nuclear war between India and Pakistan would really mess up production schedules.

    I can see that attraction of manufacturing in India or other third world countries. But I would like to think that any company doing so would be sure to have alternate sources for any key components.

  • avatar
    Greg Locock

    Second sourcing can’t be done, economically, any more. To get the best price you have to give all the volume to one supplier. There are also IP issues if you have more than one supplier, or you have to run more than one development program.

    For a very few components (tires spring to mind) there are still parallel buys, we get around that by running parallel development programs.

    I am aware of the costs associated with a failure to supply, I do not know how this is offset against the best price in my first para.

  • avatar

    Why offshore to India when you can simply place such plants in the ‘Murkin South? No union worries and docile locals.

  • avatar
    Greg Locock

    If you want to source a part from one factory in the whole world, to supply the whole world, why would you build a plant to do so in the USA rather than SE Asia?

  • avatar

    You know Coke is mixed all over the world and it isn’t any less Coke. Nor is a McDonald’s burger in a foreign country.

    Actually, that’s not true. Coca-Cola bottled/sold in India doesn’t taste like what’s available in the US; it’s got a slightly a bitter after taste. The American formulation of Coke would be considered sickenly-sweet by most Indians. And Good luck trying to find a beef hamburger at a McDonalds in India.

  • avatar
    Mr Carpenter

    Britain used to be able to turn out enough educated engineers and machinists and aircraft designers and jet engine designers to have the RAF commission a heavy nuclear bomber in February 1947, and have the first prototype in the air by September 1948. Approximately 18 months. Their first nuclear bomb was developed alongside the delivery system, one designed for the other.

    That was the Avro Vulcan bomber, the first production aircraft went into service in 1956 and last one was built in late 1964. It was entirely British, conceived, developed, engineered, and every nut, bolt, whizbang and cog – in the UK.

    Then they went ahead (at a different company) and repeated the process for the Handley Page Victor bomber and Vickers Valiant bomber.
    Nowadays, neither the British nor Americans seem to be able to manufacture anything of consequence, and even if they design items, they don’t seem to have the desire to manufacture the entire product within their own countries any more.

    Furthermore, it seems to take 36 to 48 months for car companies to develop new cars – nothing nearly as complex as a Vulcan bomber, which was using improved Olympus jet engines (and not forgetting that jet engines had only JUST been invented).

    The Chinese and Russians are no better. All they can do is steal and copy.

    Out of the automotive oriented companies (no pun intended) today, I have to say I admire Honda most. They have also developed, ironically, their own jet aircraft. Not to mention ASIMO, a robot; outboard motors; small engines; and hybrid cars, as well as hydrogen cars (which may or may not pan out at some time in the future).

  • avatar

    @Mr Carpenter:

    of course that Honda Jet is being built in the US, with a lot of US tech (including engines built in partnership with GE).

    Not that this fact takes anything away from Honda. Their current designers/stylists, however, sure as heck do…

  • avatar
    Mr Carpenter

    Interesting, hurls, I did not know that the Honda jet was going to be built in the USA. Once again, the same principle applies; could Honda build an aircraft in Japan if it desired? I don’t know.

    Which begs the question: Is Honda an American company, a Japanese company or a pan-national company? Yes. (To all three)

    Have to agree with you on the Honda styling, though. Their grill work gets more hideous every year, I think.

  • avatar

    You just gotta love how America and the American consumer are held hostage to labor strikes and wars in other countries.

    You just gotta love how globalism and multinational corporations with corporate lobbyists in congress have gotten Americans set up to be slaves to the rest of the world.

    And By the way…”Slumdog Millionaire” was a stupid movie with a good soundtrack and a ridiculous MPAA rating.

  • avatar

    If single sourcing is the rule, then it seems extraordinarily risky to spread production of components around the world. Aren’t you then gambling on political stability and uninterrupted trade routes pretty much everywhere?

  • avatar

    The only reason anything is outsourced for production in another country is because it’s cheaper. Has nothing to do with a manufacturer’s desire or lack thereof to produce it here.

    Realizing there are differences in the nationality of the suppliers and manufacturer’s home countries which purchase provides more work and income for Americans, a Honda built in Ohio or a Fusion built in Mexico?

  • avatar

    You know Coke is mixed all over the world and it isn’t any less Coke. Nor is a McDonald’s burger in a foreign country.

    Still doesn’t change the fact that both brands mostly taste like absolute shit in anywhere other than the US.

  • avatar
    John Horner

    Just ask Boeing how the Don’t Worry, Outsource Everything and spread it around the globe plan is going with their new Dreamliner. The product is over two years behind schedule and many of the delay have been blamed on the unprecedented level of outsourcing planned into the project.

  • avatar

    The labour strike would not be taking place unless the temporary workers were being taken advantage of. Its only natural that workers want some form of security in their workplace. The labour market has changed dramatically in the last 10 years and this type of conflict will visit our shores soon enough. The rapid expansion of companies which pimp out “temp” workers to corporations who want cheap labour with no legacy costs is a recipe for disaster.
    Large companies which own their suppliers are vulnerable to unions so from their standpoint the contracting of parts from outside sources is good business.
    More trouble to follow…

  • avatar

    We dump on the UAW frequently on this site, but many of the automotive unions around the world are worse. Much worse. Ie, Korea, Britain, France.

  • avatar

    The fuel filter for my 63 Valiant and the air filter for my 95 Saturn SL 1 I just bought were both made in Israel.

    The company [Mann] is based here in the US and claims it’s been working with OEMs and producing service parts since the 40s. Who knew?

  • avatar

    As near as I can tell, Toyota do not single source.

    Nor do Boeing (until the 787).

    Nor do HP.

    Nor do Siemens.

    Nor do Nokia.

    Nor do Intel.

    Nor do ASEA/ABB, Sony, Philips, Getrag, BMW, Komatsu, Terex, Kirin, …….. plenty of others.

  • avatar

    @DweezilSFV: You have a ’63 Valiant? How about doing a blog or editorial on it, with a couple of pictures?

    I find it amazing that the same company produces air filters for modern cars and cars going back to ’63. They can’t have too much call for the latter.

    Both of your cars will undoubtedly breathe easier with air filters from Israel.

  • avatar

    I have read that Boeing is pressured to tap suppliers around the world because they wish to sell aircraft to many different foreign airlines most of which are nationalized in one form or another. Thus, to ultimately get the aircraft sales they must subcontract to the country in question. In a larger way they are also trying to block the creation of competitors in other countries, i.e. a Japanese, Korean, Chinese, etc competitor to themselves.

    Also, to those who say the US cannot manufacture anything: go to a chip foundry (Intel, AMD, IBM, etc). This is manufacturing at its most complicated. Logic circuits (but not memories) are largely made in the US. Also, when chip carriers are stamped with a foreign country name this typically refers to where the chip was packaged not to where it was made.

    (Sorry these are not auto related but this site seems to extrapolate from anything auto related to conclude that those observations apply to the whole world.)

  • avatar
    Rod Panhard

    1. Honda’s jet isn’t being built, yet.

    2. Globalism isn’t new. It was one of the causes of the European renaissance.

    3. Globalism isn’t new in the automotive business, either. Fiat had a factory in the US in 1908.

    4. Stuff happens. Wait and see what happens with next week’s sales reports for October. Ford and GM might not need those transmissions …. yet.

  • avatar

    @TriShield – Burgers and bacon in Japan have a taste of fish since it is a cheap source of feed for livestock.

    @bwell – dual sources are costly to manage in terms of tooling costs and quality costs. No two tools are ever built exactly the same, so managing build variation from two tools can become an initial quality nightmare as well as a reliability nightmare. Multiple tools are built however because of high volumes but rarely as a backup source of supply. And relative to nuclear war, natural disasters as well can wreak havoc with supplies, typhoons in Taiwan typically topple machine tool suppliers.

    @Greg Locock – in any industry, a good purchasing decision evaluates the cost of the widget, the tooling cost to produce the widget, and the transportation and packaging costs (and cost to design the widget if you are not designing in house).

    @grog and Greg Locock – Michigan used to have docile, inexpensive labor until they realized they were being exploited. This famous strike
    resulted in better treatment of the workers. SE
    Asian workers are now where northern US workers were in the mid 1930’s. Southern US workers are actually paid on par with UAW workers. The difference was in the retirement and health benefit. (Who really wants to rely on Social inSecurity and Medicare-NOT in their golden years? show of hands?)

    @ Mr Carpenter – jet engines and bombers did not have to meet federal safety and fuel economy ratings in the 1940’s like vehicles today do. And having worked at the former division of GM called Allison Gas Turbine, now Rolls Royce, I can tell you that engine development started in 1989 for an engine that would be on the market in 2000. FAA requirements were so stringent then that quality departments had to have tracability back to the mine where the ore was extracted for turbine wheel forgings in the event of a failure.

    @mtymsi – There are other reasons for sourcing in another country besides price. If the long term strategic plan is to be able to sell the finished product in another country, some countries require a certain percentage of the assembly to be produced in that country. The USA does not have such strictures.

    @DweezilSFV – Israel is known for great manufacturing skill with excellent quality. But some companies put a high price on the risk of sourcing there because of the Mid East turmoil that has existed, how many years now?

    @EN – regarding American car companies, IIRC, GM still has the highest percentage of North American (Canada, Mexico, US) made parts and labor content in its vehicles sold in North America than others, roughly 75%. And in fact, how many products, let alone cars, are American any more? Let the analysts opine all they want about the wisdom of globalization. It started thousands of years ago and the evidence is in shipwrecks where they find 1000 year old Chinese stoneware decorated with Persian motifs in the Indonesian straits. (full disclosure, I work for GM)

  • avatar

    You know Coke is mixed all over the world and it isn’t any less Coke. Nor is a McDonald’s burger in a foreign country.

    Well, yes and no. You have to make the distinction between products and brands. Many people (especially the guy I see around town with a “Buy Domestic/Save Jobs!” on his Mexican-built Chevy Uplander**) fail to understand this.

    Coke, McDonalds, Apple, Nike, Ford and such are American brands. For every dollar you spend with them, the “profit” portion that isn’t reinvested is profit for the American company. With many products, the bulk of your dollar offsets the cost to produce, distribute, market, etc. Not all of that dollar goes to America.

    If you take an environmental or local-economy tack on things, then you should spend money on products that benefit your local economy and have the least environmental and economic cost to distribute. Buying a Korean built and designed Chevy, for example, to “support domestic jobs” doesn’t fall into this category, even though the brand is more “local”. You’re better off to buy the Canadian-made and (largely) Canadian-sourced Honda that actually does support domestic jobs.

    There are grey areas: products can be designed in America, with local design assistance and assembly in China, shipped by an Indonesian logistics firm, trucked by a Canadian, marketed by Americans. Despite all that, you pay a price, and in that price is the salaries and overheads and costs involved at all these stages. Some of it is local, or at least in the same country. Some is not.

    Visualize your dollar is being cut up into portions, and each portion going to a different part of the world. If you care about these things, you want to spend your money on products where the biggest “portions” of the dollar are closest to you. That the “brand” is American doesn’t often factor in, unless you work on Madison Ave.

    ** I live in Ontario, Canada

  • avatar

    The strike started 21 September. Didn’t know that shipping was that fast. Thank god it affects the slow selling models first.

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