GM to Import Chinese-Made Buick SUV

[kscarbel2]

The Wall Street Journal / November 12, 2015

General Motors, fresh from agreeing to a new four-year union contract that is expected to drive up its U.S. labor costs, plans to become the first U.S. auto maker to sell a Chinese-made car in America.

General Motors, fresh off agreeing to a new union contract that is expected to drive up its U.S. labor costs, plans to become the first major auto maker to sell Chinese-made cars in the U.S.

The nation’s No. 1 automaker by sales early next year plans to start selling the Buick Envision, a midsize sport-utility vehicle made in China’s Shandong province.

The move would add a third SUV to Buick’s U.S. lineup at a time when such crossovers are among the best selling vehicles in the market.

Initially, the company expects to import a modest number—between 30,000 and 40,000—a year. But it signals the beginning of a strategic production shift for the Detroit auto giant and a bold experiment that will be closely followed by other auto companies that have said they would eventually consider such a move.

Until now, GM has confined production in China to meeting that country’s demand. But as sales gains have moderated and Chinese tastes in cars converge with Americans’, the potential for more Chinese imports from GM and others could blossom.

Global auto makers had been slow to ship Chinese vehicles to the U.S. and Europe, fearing Western buyers would shun them over quality concerns. Volvo Car Corp., now owned by China’s Geely Group, was the first to challenge that assumption when it started shipping Volvo S60L sedans from a plant in China to the U.S. this spring.

The arrival of Chinese-made Buicks in the U.S. is likely to rile the United Auto Workers union, which has struggled to gain approval from its members for recent labor deals, in part over U.S. production guarantees. Over the summer, as rumors spread that GM was considering importing vehicles from China, UAW officials called the prospect concerning.

However, the UAW and GM discussed the move during recent labor talks and appear to have come to an understanding.

Union officials have been hit hard in recent months with news that production of some smaller, less-profitable passenger cars now built in the U.S. will move to Mexican factories over the course of the next four-year labor contract.

In 2011, the UAW agreed to a wage contract that led to big bonuses for workers and the addition of tens of thousands of factory jobs. This year, union officials won much richer contracts that are expected to undermine those investment decisions and lead Detroit executives to look for lower-cost manufacturing options.

GM officials say importing the Buick Envision would fill a gap in the brand’s product line, and isn’t a cost-saving measure. Buick’s U.S. presence has declined as the auto maker’s market share slid and Chevrolet took center stage as its mass-market brand. Buick’s U.S. volumes have recovered in recent years on more attractive models and a near-record pace for light-vehicle demand.

In the U.S., Buick’s most popular offering is the small South Korea-built Encore SUV.

Since acquiring South Korea’s Daewoo in 2002, GM has used its Korean plants to supply low-cost vehicles, but lately has been rethinking that strategy due to rising Korean labor costs.

Buick’s second-best seller in the U.S. is the Enclave, a larger crossover built in Michigan.

By adding a third crossover vehicle to the lineup, GM could accelerate Buick’s attempt to take on other premium auto brands, such as Honda’s Acura or Ford’s Lincoln.

[kscarbel2]

Speaking of the new GM union contract...............

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UAW VP said to endorse ratification of GM pact

Automotive News / November 12, 2015

A top UAW official is recommending to the union’s board that it ratify a tentative four-year agreement with General Motors, despite a “no” vote from skilled-trades workers.

UAW Vice President Cindy Estrada, head of the GM department, told local union officials during a conference call this morning that she planned to recommend that UAW President Dennis Williams and the union’s International Executive Board ratify the pact, according to two people who listened to the call.

Last week, the UAW said the tentative contract that was approved by a majority of GM union workers who voted couldn’t be ratified because the skilled-trades workers -- who represent about 15 percent of GM’s 52,600 UAW-represented employees -- voted it down.

The UAW’s constitution requires approval by both production and skilled-trades workers.

But under the rules, the union can seek to reopen negotiations with GM only if the workers’ objections center on work rules related specifically to the skilled trades -- the elimination of job categories, for example -- rather than on wages, bonuses or other economic aspects of the pact.

Union leaders earlier this week visited GM plants across the country to meet with local union officials and skilled-trades workers to get to the bottom of their disapproval. That process wrapped up on Tuesday.

Mix of issues

Estrada said during today’s call that the skilled-trades workers’ complaints included a mix of economic issues -- being excluded from a $60,000 retirement buyout offered to some production workers, for example -- and non-economic ones, such as a consolidation of worker classifications that could require expanded duties, the sources said. She said GM has signaled that some of those work-specific issues can be hashed out at the local level, rather than set in stone in the national contract.

A split vote between production and skilled-trades workers is rare: It happened at Ford in 1973 and again in 2011 when Chrysler’s skilled-trades workers voted down their tentative deal. The UAW ratified the Chrysler contract anyway, after determining that the workers objected to the deal’s broader economic aspects, not to the part of the agreement specific to skilled trades.

If the UAW were to decide that the skilled-trades workers’ objections were legitimate, it could jeopardize the entire contract. The union could ask GM to reopen the talks to address some of those specific issues, but the company could refuse, raising the possibility of a strike.

Voting on the UAW’s tentative agreement with Ford Motor Co. started today at some plants. Nearly 53,000 Ford workers will have a chance to vote on the deal through next week.

Raise for Tier 2

The GM agreement would establish an eight-year grow-in period for Tier 2 workers, who were hired in recent years and are paid an hourly wage of about $16 to $19, slightly more than half what their Tier 1 counterparts earn. About 20 percent of GM’s 52,600 hourly UAW workers are in the lower-paid Tier 2 category.

Under the unratified contract, new hires would start at $17 an hour and see wage increases each year through the eighth year of employment, when their wage will reach nearly $30. That would match Tier 1 workers, who also are getting their first wage increases in more than a decade: 3 percent raises in the first and third years of the contract, with lump-sum bonuses in the second and fourth years.

GM also committed to spend about $8 billion across 12 U.S. factories over the life of the contract, the union said. That spending should “create and/or retain” more than 3,300 jobs, the UAW said.

The deal also included an $8,000 signing bonus, to be paid in the second pay period after ratification. Workers also would be eligible for lump-sum performance bonuses of $1,000, in addition to an annual $500 bonus if GM hits vehicle-quality targets.

[kscarbel2]

Déjà vu.

The Mack Trucks’ Macungie plant union employees had wanted to make concessions so that on-highway production would remain in Allentown and not shift to Winnsboro, South Carolina.

However, the UAW ignored the very people they represented and fought Mack Trucks, resulting in a lose-lose for all parties.

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The Philadelphia Inquirer / February 04, 1987

A Mack Trucks spokesman said the Allentown United Auto Workers membership had approved a new contract despite opposition from the international in Detroit.

William McCullough, Mack vice president for corporate affairs, told United Press International yesterday that members of UAW Local 677 had approved, in a vote Saturday, the terms of a January 18th agreement between local union officials and Mack.

The Allentown local, locked in a dispute with the union's international Detroit office, imposed a news blackout Monday on the progress of its talks with Detroit officials. The international, whose approval of contract terms is a required part of the ratification process, opposes the January 18th agreement because of wage and benefit concessions it contends are unprecedented.

Before Saturday's vote, Local 677 officials had endorsed the tentative 6-year agreement with Mack Trucks primarily because of guarantees by the company that it would not close operations in the Lehigh Valley during the life of the contract.

Mack also had promised job offers at a new truck plant in Winnsboro, S.C. to at least 600 Local 677 members who are laid off or facing loss of their jobs.

But within a week after the terms of the tentative January 18th agreement were released, the international indicated it would oppose the contract no matter how Local 677 members voted.

Local 677 has called its disagreement with the international a "family" matter and even declined to provide some details about the dispute to Pennsylvania Governor Robert Casey, who went to Allentown on Sunday to try to bring the parties closer.

Casey also met with Mack chairman John B. Curcio.

Robert Grotevant, a spokesman for Governor Casey, said one of the international's primary objections focused on Mack's refusal to give the UAW an open door for organizing workers at the new South Carolina plant. Wages at that plant are expected to be significantly lower than those at the Mack plant in Macungie, Pennsylvania.

[grayhair]

A Buick made in China and sold here in the U.S. No chance I'll ever buy one.

[kscarbel2]

A Buick made in China and sold here in the U.S. No chance I'll ever buy one.

I hear you. It's not a quality issue......same as U.S. production.

The issue is that, with a country market the size of the United States, the world's second largest, all but low volume niche car models sold in the U.S. should be produced in the U.S., supporting employment in our country.

Given our market size, we have the right to demand that, and we should. The subject is inarguable.

Automakers wanting to profit in the United States must build in the United States (with the exception of low volume niche models).

[RedBullDog]

Since Obama and his flock have been working on this Asian trade pact, I suspect even more auto production will go over there, and those cars will come back into this country with even more favorable tax and tariff conditions than past asian models.

[41chevy]

So the UAW who owns 17% or so of GM from the Obama bail out (more for the UAW than GM) basically came to an agreement with them selves? More than likely the UAW International sees the Chinese and Asian Auto industry as a cash cow for themselves with unionizing and dues with out any benefits to the Chinese workers. IMO

[kscarbel2]

Detroit shifts car output to Mexico

Automotive News / November 16, 2015

General Motors will be the only one of the Detroit 3 making compact or midsize cars in the U.S. by 2019, according to the companies' new UAW agreements.

Ford Motor Co. and Fiat Chrysler Automobiles (FCA) are essentially giving up on trying to build mass-market cars profitably in this country, instead shifting most production of those nameplates to Mexico so they can dedicate U.S. plants to higher-margin pickups and SUVs. The UAW is accepting that trade-off to get rid of the two-tier wage scale that was vital to the business case for U.S.-made sedans and because it expects a net increase in jobs.

The result: In a few years it will be far easier to find a Japanese or Korean car produced domestically than one designed in Detroit that's not imported. Foreign brands are expected to keep their U.S. plants churning out high-volume cars, such as the Toyota Camry and Honda Accord.

But, increasingly, Ford and FCA see the U.S. as a place to build light trucks.

"You can afford to pay a little more when you're making trucks," said Dave Cole, chairman emeritus of the Center for Automotive Research, "but the structural change in the industry has been so huge that I was kind of surprised by that -- trucks here and cars in Mexico."

The Ford and GM agreements had not been ratified by UAW members as of press time.

Space for Ranger, Bronco

Ford's product comments to the UAW show that it plans to halt U.S. production of four car nameplates: the Fusion, Focus, Taurus and C-Max. The Focus and C-Max are moving out of Ford's Michigan Assembly Plant in 2018 to make way for two vehicles that sources have identified as the Ranger pickup and Bronco SUV. The Fusion is built in Mexico already, while the Taurus, with sales plummeting here but surging in China, may be discontinued in North America.

Ford's factory in Flat Rock, Mich., will be the only one of its eight U.S. assembly plants still making cars. It loses the Fusion when the next generation arrives in 2019, keeps the hot-selling, higher-profit Mustang and gains the Lincoln Continental, another high-margin nameplate, which will replace the MKS.

Meanwhile, FCA is expected to move the Dodge Dart and Chrysler 200 to Mexico after 2016 and will discontinue the Dodge Viper in 2017, which would leave no cars in the U.S. The Dart is leaving just four years after its launch in the U.S. allowed Fiat to gain an additional 5 percent stake in Chrysler under a deal with the federal government.

The cars that Ford and FCA are moving out of the U.S. and the Buick Verano, which GM is expected to move to either Mexico or China, account for 45 percent of the domestic-brand car production in the U.S. for the first 10 months of this year, according to estimates.

GM hasn't announced any sweeping changes in where it will assemble its cars. It makes most of its sedans in the U.S., including the Chevy Sonic at a plant in Michigan that reopened specifically because the UAW agreed to cut costs there with two-tier wages.

CEO Mary Barra said in July that GM had no plans to move production of the Sonic, which it also builds in Mexico. GM spends an estimated $674 more on labor costs for each Sonic built in the U.S. than Ford does for the Fiesta built in Mexico, according to the Center for Automotive Research.

In August. FCA CEO Sergio Marchionne said it makes financial sense to move "all the cars that we get killed on somewhere else" and keep trucks in higher-cost UAW plants.

UAW President Dennis Williams went into this year's talks noting that he was concerned "when any corporation invests outside the United States," but negotiators and workers seemed far more concerned with wages and benefits than discouraging production shifts to Mexico. The union's deals include billions of dollars worth of investment in U.S. plants, and moving cars to other countries isn't expected to result in job losses -- so long as consumers buy enough SUVs and pickups to keep the plants here running at capacity.

SUV evolution

The plans undo most of the product diversification that the Detroit automakers had worked toward in the late 2000s to avoid the problems that occurred when SUV sales plunged after gasoline prices shot up.

The danger in focusing U.S. plants on SUVs and pickups is what could happen if gasoline prices spike again. But Erich Merkle, Ford's chief U.S. sales analyst, said the booming popularity of SUVs is less a function of low gasoline prices than of how much the vehicles have improved and consumer needs have changed as baby boomers and their children get older.

"The SUV has evolved dramatically over the last 15 years, and that's really helped to keep it at the forefront," Merkle said. "SUVs are actually a growing segment not just in the U.S. but when you look to Europe and parts of Asia and China. It's a worldwide growth story."