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GM Still Pays the Price For Get-Tough Tactics in '90s
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Delphi also sent a letter to GM yesterday asking to change the terms of more than 400 commercial agreements that are up for renewal.
Years ago, relationships were much different. DeKoker of the Original Equipment Suppliers Association said that in the 1960s and '70s, in years when labor and material costs went up, suppliers would pass the cost on to automakers that would then increase their sticker prices.
But in the 1980s, as the growing popularity of Japanese cars began eating into the Big Three's profits, U.S. automakers were reluctant to pass on the cost to customers for competitive reasons and began pressing suppliers to cut prices, a pattern that continues today even as the production costs keep climbing, DeKoker said.
From 1998 to 2005, the cost of steel went up more than 30 percent and the cost of health care jumped more than 40 percent, he said. Yet the price of U.S. vehicles dropped by 3.5 percent on a constant dollar basis.
Meanwhile, U.S. automakers were losing market share to foreign companies, and their profit per vehicle kept slipping. For example, GM lost $1,227 on every vehicle it made in North America in the first half of 2005, while Toyota Motor Co. made a profit of $1,488, according to Harbour Consulting of Troy, Mich.
Toyota helped keep its edge with a relatively young workforce compared with GM, which is saddled with high health-care costs, retiree benefits and pensions for its older workers. GM has 2.5 retirees for every active employee.
"The wages paid by the international automakers are about equal" to those paid at GM and Ford Motor Co., said Greg Gardner, a spokesman for Harbour. "But the benefits are not."
Also, the plants Toyota has in this country tend to be more productive, Gardner said. The least utilized of Toyota's six North American plants ran at 96 percent capacity in 2004, he said. At GM, the least utilized plant ran at 8 percent capacity, yet GM has to pay the hourly workers there even if they're not building cars because of union contracts.
Miller, Delphi's chief executive, has predicted his company and GM will pull through, despite the challenges. Still, he told Washington Post reporters at an October meeting that he felt sorry for Rick Wagoner, GM's chairman and chief executive.
"My problems are more urgent," he said. "His are more serious."
