In 1970, GM employees went on strike for 67 days in the US and 95 days in Canada, the 400,000 workers lost $760 million in wages,and GM failed to produce 1.5 million vehicles resulting in a loss of $5 billion in profits. When Chrysler had a 104-day strike in 1950, Ford was able to overtake Chrysler. Strikes were devastating. In 1914, Henry Ford famously paid his workers $5.00 in order to create a middle class that could afford his automobiles. Today, the issue between United Auto Workers and management is not wages but fringe benefits. According to Lee Iacocca, the fault lies with management at Ford, GM and Chrysler who focused on expediency, profits for the next quarter and earning large bonuses for themselves instead of worrying about the long-term impacts of unsustainable benefits for union workers. Regularly, when the UAW threatened to strike, they played management hard and convinced them to accept their demands for better benefits so that short-term management goals could still be maintained.
Management gave in on three areas that has effected the US auto-industry deeply. They gave in because they were focused on the short-term rather than the long-term objectives…
The Cost-Of-Living Allowance (http://en.wikipedia.org/wiki/Cost_of_living): COLA causes run-away inflation since millions of autoworkers and regular Americans benefit from it because it pins the worker’s salary to the Consumer Price Index. Ironically, it was Charlie Wilson of GM’s idea in response to inflation when government lifted price controls in 1946. When the US was booming in the 1950s and 1960s the COLA was not an issue BUT when inflation soared as productivity declined the real problem was revealed.
Thirty And Out: early retirement takes away qualified specialists and then leave the Big 3 to pay their $800 per month pensions (1984 numbers) while they sit at home being unproductive. In reality, the retired guy would work as a cab driver illegally on the side. This results in the best electricians ending up driving cabs. The policy was an UAW driven idea to make way for younger people to take on new jobs but the reality was people live longer than thirty years these days.
Medical Benefits: the Big 3 pay $3 billion per year for hospitals, medical, surgical and dental insurance. This cost means $600 per car sold at Chrysler per year. Iacocca believes that there is immense abuse of the system where a podiatrist had charged Chrysler workers a total of $400,000 a year. There were over 240,000 blood tests done for only 60,000 employees.
For Iacocca, reforming and clawing back on union power and management weakness is imperative for the future of the US auto-industry. UAW never fought automation because it was a way to be more productive.
This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.
Leadership & Organizational Behaviour: you will have to learn about this subject. Example, you might have a CEO who has a misogynistic head engineer, or staff who are envious of the salaries of others. When shareholders visit, the CEO might screw up by allowing those visitors to roam around the company offices to discover the lousy situation for themselves. Did the CEO create his own lack of empowerment? How can one be a leader and manage with inspiration and structure? Did the CEO deluge upper management with information in order to cover herself? Most people are skeptical of whether it is possible to teach leadership. There are all kinds of ways to reward. At a plating company you could reward highly-productive employees with extra time-off and turn a blind eye to their intimidating and casual racism. This action might help keep wages lower and secure the loyalty of workers who might otherwise have left. Ethics is ever present. Wall Street perks, for example, having a free cab ride home was something that investment bankers took even if they didn’t need the perk. Those who didn’t, hated the free cab ride perk as they didn’t need it; the psychological satisfaction of employees is important. The idea of people as an individual is not useful to most business thinkers, they want militants so understanding them might seem less salient.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Ranking Industries: in your MBA program, you might be expected to look at a list of twelve industries, from a basic chemical company and a grocery chain to an airline and a retail bank, and then compare it with a list of unlabeled balance sheet percentages and ratios. The assignments then asks you to match the industry to the correct set of numbers.
Q: How are ratios, and percentages related to a given business model?
Companies that have inventory are always trying to balance the cost of storage with supply. You might want to buy large quantities but not so much that you cannot house them. If the ratio is 1 to 1, then the inventory is equal to how much it sells. In a grocery chain you would expect a high ratio as inventory is replenished on a daily basis. In jewelry, you would expect a ratio might be below one, as each item is held for a long time before it finds a buyer. A company with many fixed assets such as a store + factory would likely have more debt than say a deal a day site whose main assets were people. Banks don’t like lending to law firms, or deal a day sites because they can walk out the door, and leave at anytime.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Play dumb when you have to: In December of 1960, McNamara pressured Henry Ford to promote Iacocca to head of the Ford Division, Lee was told to play it cool when being taken to Henry Ford’s office and when offered the position. The reason was that Ford II wanted to make the offer as though it was his own decision and surprise Iacocca.
Use common sense and experience in management: Iacocca relays this message about common sense that he picked up from Charlie Beacham (top sales guru) from Iacocca’s Chester, Pennsylvania days; “if you can’t tell the difference between a scope of horse crap and vanilla ice cream then there is no hope for you.” Common sense is something you have to be born with. Logical reasoning is a kind of common sense.
Be decisive as a manager: To act is the one key. The most important decision in a company is made by individuals and not by committees. Decisions by committee take dialogue, which is not what you need when you are trying to shoot a moving object like a duck, according to Iacocca. You need to look at the facts as far as you are able to outline them and make decisions accordingly. Too many MBAs will wait until they have 100% of the facts. The problem is that too much education leads managers to over analyze their courses of action. For Iacocca, timing is everything, getting the right decision at the right time is the difference between success and failure.
A leader takes a leap of faith: 1) even the right decision is wrong if it’s too late; 2) there is no such thing as certainty so stop trying to create it; 3) don’t be the little boy with the big dog that leads the boy wherever he wants.
Always be careful of those who may be jealous of your success: Iacocca had no real credentials when he was made head of the Ford Division. He was an ideas guy not a product guy, you need to have a major success in order to prove your worth, hence Iacocca spearheaded the development of the Mustang…
This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.
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In 1970, GM employees went on strike for 67 days in the US and 95 days in Canada, the 400,000 workers lost $760 million in wages,and GM failed to produce 1.5 million vehicles resulting in a loss of $5 billion in profits. When Chrysler had a 104-day strike in 1950, Ford was able to overtake Chrysler. Strikes were devastating. In 1914, Henry Ford famously paid his workers $5.00 in order to create a middle class that could afford his automobiles. Today, the issue between United Auto Workers and management is not wages but fringe benefits. According to Lee Iacocca, the fault lies with management at Ford, GM and Chrysler who focused on expediency, profits for the next quarter and earning large bonuses for themselves instead of worrying about the long-term impacts of unsustainable benefits for union workers. Regularly, when the UAW threatened to strike, they played management hard and convinced them to accept their demands for better benefits so that short-term management goals could still be maintained.
Thirty And Out: early retirement takes away qualified specialists and then leave the Big 3 to pay their $800 per month pensions (1984 numbers) while they sit at home being unproductive. In reality, the retired guy would work as a cab driver illegally on the side. This results in the best electricians ending up driving cabs. The policy was an UAW driven idea to make way for younger people to take on new jobs but the reality was people live longer than thirty years these days.
Medical Benefits: the Big 3 pay $3 billion per year for hospitals, medical, surgical and dental insurance. This cost means $600 per car sold at Chrysler per year. Iacocca believes that there is immense abuse of the system where a podiatrist had charged Chrysler workers a total of $400,000 a year. There were over 240,000 blood tests done for only 60,000 employees.
Use common sense and experience in management: Iacocca relays this message about common sense that he picked up from Charlie Beacham (top sales guru) from Iacocca’s Chester, Pennsylvania days; “if you can’t tell the difference between a scope of horse crap and vanilla ice cream then there is no hope for you.” Common sense is something you have to be born with. Logical reasoning is a kind of common sense.