Auto Industry Supplier: I Don't See Leadership From Big 3

The Big Three
The Big Three

Here is someone you haven't heard from much in the crisis facing GM , Ford and Chrysler. Up til now we've heard either from CEOs or blue collar union workers.

But Paul Fenner is somewhere in between—in management at a parts supplier with tough decisions ahead. He also has the ability to take a step back. I met him earlier this year, and we've stayed in touch as "The Disaster in Detroit" unfolded (at one point Fenner expressed his incredulity that GM would continue to run shifts six days a week at its truck plants).

Here's what he wrote me about the Big 3's attempt to get money from Washington:

"As someone is who is ultimately going to be affected by the 'auto bailout', I am torn. Part of me would really like to see the financial system work and the Detroit 3 file for bankruptcy. I don't think they get it. I don't see them having the business plans or the leadership necessary to make the right decisions to sustain their businesses. I speak from experience, having spent almost my entire 10-year career in the auto industry in operational and financial roles. I'm currently controller of a tier-one parts supplier facility. I have taken part in closing three manufacturing facilities in my career and countless other plans to reconcile capacity or 'right size' operations. I have played a role in cutting thousands of jobs affecting hundreds of families, all while trying to save as many jobs as I could."

"It has been proven that the only sure thing in long-term investing is diversification, a concept the Detroit 3 have yet to catch onto, even though a company like GM has 8 brands. There is no diversification between a GMC Envoy and a Chevy Trailblazer, or a GMC Sierra and a Chevy Silverado. The Detroit 3 have failed to see the need to right size their own operations. They work off of a business model where they have to sell more and more vehicles in order to cover their overhead structure due to their previously negotiated contracts. Big problem--sales volumes aren't coming back, and they're losing more of their own market share."

"There is a sense of entitlement that resonates within the auto industry, in which a lot of people feel they are owed all of these luxurious benefits, and nothing can, or should, be taken away. The UAW contract is the most lucrative deal in America, one where a worker who is laid off retains 90% to 95% of his or her pay. Name another industry that has such rights? When customers cut back on production at my facility, and I lay off workers, those workers have to file for unemployment benefits which are usually much less than what they were previously paid."

"One of the new great divides I see developing in this new crisis is the gap between mid- and high-level managers and the executive level management. Just recently, due to the crisis, a company laid off all salaried employees who had exhausted their allotted vacation time. Although we are in unprecedented times, I saw this as a horrible method of trying to save costs. These are typically the employees working beyond standard requirements in order to propel the company forward, or at least keep it on pace. The company loses valuable assets this way."

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