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Normally, everyone at GM would be celebrating. The automaker said Thursday that it earned $7.6 billion last year, the most ever, less than three years after receiving a federal bailout and going through bankruptcy protection.
But the 2011 performance masked a disappointing fourth quarter for the Detroit-based auto company. GM’S fourth-quarter profit was flat with 2010. It earned about $500 million, or 28 cents per share before special items.
With those charges accounted for, GM earned 40 cents per share, two cents below what analysts forecast. And the worst headache for GM came in Europe.
It lost more than half a billion dollars during the fourth quarter on its European operations, bringing their loss for the year to more than $700 million. The crisis is escalating: as recently as November, GM was saying it might break even in Europe.
GM has been working on a European restructuring for more than two years. It says its plan “did not go far enough. This is simply unacceptable,” the company said Thursday. GM wants to move “rapidly and decisively” there, and plans to work with European unions and countries in order to bring down its costs.
Due to the difficulties overseas, GM’s net income came primarily in North America. But there is some good news: its hourly workers in the United States will receive profit sharing checks of about $7,000 apiece.
NPR’s Sonari Glinton and I talked about what lies ahead for the auto industry on WBEZ’s Afternoon Shift with Steve Edwards on Tuesday. Listen to that lively conversation.
If you’ve never heard of The Edge Factor, it’s probably because the TV show isn’t actually on the air – yet.
But the show has been going strong online for over a year now. Jeremy Bout is the executive producer, writer and host. Bout says he got the idea for the show after working as a programmer at a manufacturing plant.
In the pilot episode for The Edge Factor, Bout explains
What I find incredible is that manufacturing is the backbone of our economy. And I don’t think anybody really understands what that means. I think it’s time we changed that.
The Edge Factor is full of dramatic shots, cool graphics and fast music. But can a TV show make manufacturing cool?
Bout seems willing to try. So far, The Edge Factor has a couple episodes online.
And there’s already a side project, called Reality Redesigned. It’s a competition where students can enter their designs to build a new kind of mountain bike. The competition has up to $40,000 in prize money, and eight online episodes hosted by Bout.
We’ve reached out to Bout to ask about the show, and what he hopes to accomplish. Right now, he and the production crew are in Whistler, British Columbia shooting a teaser for their next production.
While we wait to hear back, we want to know what you think of the show. Could a TV show change your perception of manufacturing? What are your ideas for future episodes?
Let us know in the comments.
Yesterday, we told you that Michigan’s native son, Mitt Romney, has fallen behind former Pennsylvania Sen. Rick Santorum in two pre-primary polls. Now, Romney is firing back in the Detroit News. not at his rival, but at union leaders and Obama administration officials.
Romney touches on many themes about the 2009 auto industry bailout. You can read the entire op-ed here. We picked out three things and provide some context.
1) The UAW. Instead of standing up to union officials, Romney says President Obama “rewarded them” with stakes in General Motors and Chrysler.
The stakes he refers to are held by the health care trust fund that administers benefits for UAW members. But the UAW did not get the terms it wanted. The union originally sought a greater share of GM, only to accept a counter offer from the Treasury Department.
Meanwhile, the Treasury also owns about 33 percent of GM, out of an original 61 percent stake.
2) Sell GM shares. Romney calls on the government to divest itself of its ownership position in GM. “The shares need to be sold in a responsible fashion and the proceeds turned over to the nation’s taxpayers,” Romney says.
Treasury officials say they are acting responsibly. The department holds roughly 500 million GM shares. It made its initial sale when GM went public in 2010, but has waited to sell the rest, presumably expecting the share price to rise.
At the time, GM shares traded at $33. On Monday, they closed at $25.34.
That means the Treasury would get even less for GM shares than it did in 2010 if it sold them now. There would be no profit for American taxpayers, since the stock needs to sell around $50 a share for Treasury to break even on what GM received in bailout money.
3) Car company founders. Romney, writing about auto pioneers like William C. Durant, Henry Ford, and Walter Chrysler, says, “These giants never envisioned a role for government in their business, but relied on the hard work and commitment of private individuals.”
That didn’t work out so well for Durant. He went to East Coast bankers for help shortly after he founded GM in 1908. They agreed to provide financing, on the condition that he resign. Although Durant later regained control of GM, he was kicked out yet again by investors in 1920.
February 10th, 2012
Earlier this month, Indiana became the latest state to go right-to-work. That means unions can’t force non-members to pay dues. It was a different story seventy-five years ago. The United Auto Workers was in its infancy, with little power. Then, workers at a Fisher body plant in Flint sat down on the job. After 44 days, the UAW became the official bargaining agent for auto factory workers. Many credit the protest with ushering in an era of strong unions and a better standard of living for workers.
Union workers celebrate the anniversary this week at their annual White Shirt Day. MLive reports 500 people attended the event at Flint’s UAW Local 651 Friday. UAW President Bob King used the occasion to call for new protests and action from his members. Faced with a possible spread of right-to-work legislation to states like Ohio, and what he sees as right-wing Republicans attacking workers’ rights, King said the union will soon train its members to take part in nonviolent, but possibly illegal demonstrations across the nation, according to the Detroit News. No word on whether those protests will involve sitting down on the job, like their forbearers in the 1930s.
February 10th, 2012
Over the last few weeks, we have been hearing from people who have left the region to settle in other parts of the country and the world. We’ve been mapping the migration and documenting the experiences of these Midwestern exiles. We’ve heard from around 200 people. Now that the project is wrapping up, we wanted to know how these stories compare to regional trends.
See a larger version here
February 9th, 2012
When you drive across the Great Lakes to Buffalo, you probably go through the town of Tonawanda — one of the most industrial places in our region. Now, a General Motors engine plant there that’s been closed since 2004 is getting some new life.
GM said Wednesday that it will revive Plant 4 at its Tonawanda engine complex for use as a training center and for production logistics. The move comes as GM is investing $900 million in its other three engine plants there.
The company is hoping the move eventually will lead to several hundred new jobs, according to the Buffalo News. The announcement came at the start of the Buffalo Auto Show.
Plant 4 first came to life during World War II, when it was used to assemble aircraft engines for Pratt and Whitney. Later, the 1.1 million square foot facility assembled big 3.1 liter and 3.4 liter engines, before it was shut down. Since then, it’s been used as a warehouse and for some shop work.
Under GM’s plan, the plant will be put back into use to train workers in the rest of the Tonawanda complex, and also as what’s called a “Logistical Optimization Center” or LOC.
Starting in April, workers will put together kits of the parts needed on the engine assembly line. Pre-assembling the kits means that employees on the engine lines won’t have to pick out the parts themselves. That should speed up production, and clear out space near the assembly line where individual bins of parts are kept now.
Toyota uses a process like this at its Tsutsumi plant, near its Toyota City complex in Japan, and it’s also implementing the LOC idea at its new plant in Blue Springs, Miss.
Robert Coleman, shop chairman for Local 774 of the United Auto Workers told the newspaper that between 100 and 200 people will be hired to staff the LOC over the next two years as it ramps up to three shifts.
The work will be handled by Tier II employees, who are paid a lower rate than veteran union members. (Read Changing Gears’ coverage of two-tier employees.)
At some GM plants, the LOCs are run by vendors who sometimes do the work off site. But Coleman said the UAW negotiated to do the work at the plant, by its members.
February 8th, 2012
If you’ve been following our coverage of iron mining in the region, this might interest you. Cliffs Natural Resources, North America’s biggest iron ore supplier, is scrapping plans to build an iron nugget plant in Michigan’s Upper Peninsula.
A nugget is just a little clump of very pure iron. Big deal? Well, here’s why the new nugget technology matters … and why Cliffs spent years studying it in cooperation with Kobe Steel of Japan.
Remember, the iron-rich regions of Michigan and Minnesota:
1) provided the iron ore
2) that made the steel
3) that helped the industrial Midwest become the industrial Midwest.
However, miners extracted so much high-grade ore, for so long, that mostly low-grade ore remains today. Companies like Cliffs spend a lot of time and money processing that ore — essentially upgrading it into a product that contains more iron. That product, called a pellet, is what they ship to steelmakers.
Nuggets have a far higher iron content than the pellets typically produced in the region. They look like Junior Mints, but they’re almost 100% iron. Very pure. Which could make them very valuable to the next generation of steelmakers.
Check out our recent piece on a groundbreaking nugget plant in Minnesota. Mesabi Nugget hasn’t reached full capacity yet, but it has produced more than 200,000 tons of iron nuggets.
As for Cliffs Natural Resources, the company decided a nugget plant in Michigan would not be commercially viable. However, spokesman Dale Hemmila says that won’t prevent Cliffs from investing $60 million to extend the life of its Empire Mine to 2015.
The Empire and Tilden open pit mines are essential to the economy of the UP. We reported earlier on one “company town” that relies on the economic oxygen of the mines. If you’ve never been to Ishpeming, now’s your chance.
Toyota said Wednesday it plans to move production of the Highlander, a mid-sized SUV, out of Japan next year and into its plant in Princeton, Ind.
It will spend $400 million to expand its operations there, and once that’s completed, the plant will supply Russia and Australia along with North America. Toyota also builds the Highlander in China for the Chinese market only, but it says Highlander will no longer be built in Japan after 2013.
The investment will add 400 new jobs at the Princeton plant, which employs 4,800 people. The factory, which is southern Indiana, builds the Highlander, Sequoia SUV and the Sienna minivan. Toyota says it plans to build about 50,000 more Highlanders a year there.
“That’s great news for this region, for our American customers, and for the U.S economy,” Yoshi Inaba, Toyota’s North American chief executive, said in a speech to the Economic Club of Chicago. Every new auto job, he said, creates three and a half “spin off” jobs to support those workers.
Niala Boodhoo · Originally Exempt From State Cuts, Wisconsin Police And Firefighters Now Face Changes Too
February 8th, 2012
This is the second in a two-part series about what’s changed for public workers in Wisconsin, one year after labor protests gripped the state (part one is here).
The Capitol building in Madison is amazing – anyone can just walk in. And in Madison, people often do just visit, like Brian Austin, who often brings his children here.
Austin is a detective with the City of Madison’s police department. He was also one of the tens of thousands who packed this building in protest when Gov. Walker proposed limiting union rights for public workers. The law – Act 10 – passed anyway. So Austin says when he goes into the building now, he can’t help think of it as a “completely different” building – and he means that in both a positive and a negative way.
His ambivalence is because he says Walker has brought the Wisconsin workers together – even though they’re suffering now.
The Wisconsin state worker’s union estimates that some 22,000 public employees are taking home 13 percent less pay since the law has taken effect. As it was written, public safety workers like police officers were supposed to be exempt.
But now, police and firefighters are finding, they, too, are facing increased pension and health care costs.
“We knew there was going to be a slippery slope,” says Jim Palmer, executive director of the Wisconsin Professional Police Association, the state’s largest police union.
“Economic conditions that are impacting Wisconsin aren’t going to go away,” Palmer says. “And we knew that if municipalities in this state continue to see a shortfall, and if police and firefighters are the only ones with collective bargaining rights, we would be next.”
Last fall, the city of Madison saved more than $2 million when the mayor asked police and fire unions to renegotiate their contracts. Now, workers are contributing three percent more to their pensions and are paying for their own uniforms. In return, no one was laid off or furloughed.
Palmer – the union rep – says that’s how collective bargaining is supposed to work. But it’s hasn’t been so agreeable elsewhere.
In a decision that’s yet to be announced, the Wisconsin police union and Eau Claire County have gone before the state labor board over police contracts there. Eau Claire’s corporate counsel, Keith Zehms, says the county is simply following the law.
“Our position is based on the change that the state legislature made in the law last summer,” Zehms says.
Zehms isn’t talking about Act 10. He’s referring to the state budget. It contained language allowing municipalities leeway in negotiating health care contracts for all of its workers – including public safety.
And that’s why some local governments are saying police and firefighters have to pay more on health care costs – regardless of what the union says. So the unions are fighting back. As of now, there are at least three court cases going on in Eau Claire, but also Milwaukee and Green Bay.
At issue is whether the unions have the right to bargain over health care costs – how much workers pay for deductibles and premiums.
Back at the capitol building in Madison, Detective Austin walks outside to where about one hundred people were singing. It’s a noonday protest that has occurred every day since last Feb. 14, when the protests really began. Austin isn’t the only public safety worker in the crowd.
Madison firefighter Cory Roberts says he’s there because even though his union has reached an agreement with his city, he’s worried about his colleagues elsewhere.
“People say you have amazing benefits,” Roberts says. “but, you know, those were negotiated in lieu of wages at some point.”
Roberts is holding a sign that says “Recall Scott Walker.” Last month, Wisconsin Democrats turned in one million signatures to recall Walker. His Republican supporters have until the end of this month to challenge the signatures.
Austin and Roberts both said something you hear echoed more than a few times by public safety workers in Wisconsin. Before last year, they stayed out of politics. But now, they’re actively engaged – trying to get the governor voted out of office.
Last night during the Super Bowl, Chrysler ran a follow-up to its much buzzed-about commercial from last year’s big game. The new commercial, dubbed “It’s Halftime in America” ran, appropriately enough, during halftime.
The ad makes it clear that Chrysler is sticking with its strategy to promote the Motor City as a way to promote its vehicles.
After declaring that “it’s halftime in America, the ad’s narrator, Clint Eastwood, says:
People are out of work and they’re hurting. And they’re all wondering what they’re going to do to make a comeback. And we’re all scared because this isn’t a game. The people of Detroit know a little something about this. They almost lost everything. But we all pulled together. Now, Motor City is fighting again.
The ad got us thinking: When people say Detroit, oftentimes what they mean is “the auto industry” or “metro-Detroit.” So, what exactly are we talking about when we talk about Detroit?
Clearly, when Dirty Harry himself says Detroit “almost lost everything,” he’s not talking about the City of Detroit. Because, if the city doesn’t get its finances in order, it could still lose “everything” and fall under the control of a state-appointed emergency manager. And he’s not talking about Detroit schools, which are already under the control of an emergency manager.
It’s arguable whether he could even be talking about Chrysler, since the company’s headquarters are a half-hour drive from the city’s borders, and the company is majority-owned by Italy’s Fiat. Also, unless you’re talking about the Jeep Wrangler or Dodge Durango, none of Chrysler’s cars are actually made in the Motor City.
These might seem like minor details. After all, few of us are confused when people use “Detroit” to mean “the auto industry.” But the distinction does matter, certainly to Detroiters. And it helps explain why the city is still struggling, even though the car companies seem to have bounced back.
As Changing Gears wrote last year, there are only two auto assembly plants left in Detroit (although Chrysler is re-opening a third this year). And GM is the only car company whose headquarters is within the city limits.
When the car companies left the city, they took with them their property tax obligations, their employee income tax obligations and a whole lot of money that the actual city of Detroit could use right about now. It’s not like we can expect these decisions to be reversed, nor would it necessarily be a good thing for the region.
But we should be aware that when a company, or a person talks about rebuilding Detroit, sometimes they’re not talking about Detroit at all. Sometimes they’re talking about a suburb (where things were never as bad as they are right now in Detroit). Sometimes, as is the case with a recent Chrysler announcement, they’re talking about Belvidere, Ill.
So how is it you can hear about the rebirth of Detroit, and a minute later hear about how the city’s finances are crumbling?
Because when people say Detroit, often what they mean is something completely different.
When you use the word Detroit, what does it mean to you?