General Motors’ (GM) CEO Rick Wagoner said in a December 6, 2005 Wall Street Journal article that forty years prior the Big 3 U.S. automakers – Chrysler, Ford and GM plus the United Auto Workers Union (UAW) -- let’s call them the Big 4 -- had entered into a social contract to raise America’s standard of living by generously increasing the wages and benefits of its workers. “Today,” he said, “we are maligned for our poor judgment in ‘giving away’ such benefits.”

What his words really meant was that through the collusion of UAW greed and corporate arrogance the Big 4 had entered into a bargain with the devil which put at risk the future of the auto industry, the investment of the stock holders, and the welfare of workers and their families. It also put at risk ten percent of America’s manufacturing base. There are three things that must be done to get the Big 4 back on track

At the time the agreement was signed, the Big 4 were king and queen of America’s industrial sector. Since there was little foreign competition, the captive American public had to pay whatever price the Big 4 automakers demanded for their cars. Like Robin Hood and his merry men, they gleefully divided the spoils among themselves. Then along came the Japanese, Koreans and Germans, and Detroit found itself needing a spine adjustment, but was afraid to go to the chiropractor.

Located deep inside the rust belt of Buffalo, New York, is Gibraltar Steel Corporation. In 1972 it was one of many of America’s failed – about to be padlocked steel mills. Big Steel had, without so much as a whimper, laid down its skimming ladles, banked its blast furnaces for the last time, and capitulated to the competition of foreign steel.

During WWII the steel industries of Europe and Japan were destroyed. After 1945 they were rebuilt using the latest technology. America’s steel plants had been built in the early 1900s and were out dated as soon as the first foreign steel mill came on line. The inevitable destruction of America’s steel industry loomed large.

But the steel industry’s union and corporate leaders, rather than suffer the pain of getting their backbones adjusted, chose a gentler course of surrender. They extended the profitable life of America’s outdated, outmoded steel mills for as long as possible. Then, when they were no longer able to wring out even the smallest amount of profit against the competition of the newly built foreign steel mills, they quietly closed and padlocked their doors.

A repeat of Big Steel’s misfortunes in the sixties is what Detroit’s Big 4 face today. If the U.S. auto manufacturing industry collapses, accountants can move to other industries and do their accounting. Engineers can engineer other products at other companies. But the men and women who make up most of the work force, those who tighten chassis bolts at an assembly line station or pop in windshields, are essentially unemployable.

Should the U.S. auto industry disappear, for all practical purposes, these workers’ lives end. They won’t be able to afford to pay their house mortgages, they will not be able to make their car payments, and they will no longer be able to send their children to private schools or colleges. They will desperately need jobs, and no amount of federal government manipulation will save them, not to mention saving the employees of sub-related companies.

The shame of Big Steel’s collapse was that when they finally realized that they were facing the possibility that America was losing its entire steel industry, no leader in management, labor, or the U.S. Congress stood up and shook their fist in the face of America’s foreign competition. No CEO led a rush to the barricades shouting, “Someone will always make and sell steel at a profit in this country, and it might as well be the United States of America!”

But in Buffalo, New York one man did shake his fist, Dr. Ken Lipke, a practicing chiropractor. He bought a small steel plant using as collateral intestinal fortitude, concern
for his unemployed steel worker patients, and just plain old raw determination. Faced with protecting a few jobs or no jobs at all the local steel workers very astutely made huge wage and benefit concessions to their new owner-to-be, Dr. Lipke.

In 1972 when Dr. Lipke assumed ownership of what later came to be named Gibraltar Steel Corporation, its annual sales were $9 million. In 2004 sales exceeded $1 billion. In March 2005 Gibraltar recorded its first $100 million sales month and hasn’t looked back since.

One wonders what America’s steel industry would look like today if Big Steel’s leaders had had their spines adjusted by Dr. Lipke. Perhaps America’s rust belt would be a little less rusty and a few of the steel mills in Europe and Japan might be padlocked.

Today the U.S. auto industry is teetering on the lip of the same abyss Big Steel teetered on in the 1960s. And like Big Steel in the sixties, its corporate survival is at stake, not to mention its workers’ jobs and the future welfare of their children and grandchildren.

So how does Detroit’s Big 4 intend to meet its awesome international challenge?  The plan they have chosen is similar to the one Big Steel chose: significantly decrease production to keep up with lost sales. Then as more sales are lost, which they undoubtedly will be, cut more production to keep up with the loss of more sales. When even more sales are lost and even more workers are laid off, then even more plants are closed. Wow! What a wonderful formula for global success.

Still the President-Elect, Congress, the federal government, corporate America, and the UAW just don’t seem to get it. If the Big 4 goes under, the U.S. will lose nearly 10% of its industrial base. Can the national economy absorb such a vicious body blow and stay on its feet? Do the Congress and the President-Elect really understand what will happen if overnight 4% of the nation’s GNP vanishes and takes with it auto dealerships, parts suppliers, transportation companies, financial institutions, and all the other auto industry  and sub-related companies and jobs.

On November 22, 2005 Ford CEO Bill Ford stated at a speech he gave at the National Press Club in Washington DC that Ford, “…can compete with Toyota, but we can’t compete with Japan.” Supposedly this was because Japan Inc. provided unfair economic advantages to its auto companies; therefore, the U.S. Auto industry was supposedly forced to compete on an un-fair, un-level playing field.

The facts didn’t then and they don’t now support that assertion. Foreign automakers are beating the Big 4 with cars assembled in North American factories by American workers using mostly American-made parts, engineered and designed by Americans. Toyota’s biggest problem is increasing production fast enough to keep up with expanding sales. So what does this tell us about what’s going on in North America? It tells us that there are plenty of American customers willing and able to buy all the cars that the Big 4 can produce.

Think about it. When I was growing up buyers would almost kill to get their hands on the latest models fresh off the assembly lines and would proudly park them in their driveways for the entire neighborhood to admire. Dealers could hardly keep new cars in their show rooms. Back then your choice of cars made a statement about who you were and the life style you chose to live. After the opera or theater when you said to the parking lot attendant, “mine is the silver Cadillac,” he knew exactly which car you were talking about and went straight to where it was parked and got it for you.

What’s the message here? It’s simply that just matching the efficiency and productivity of foreign manufacturers isn’t good enough. To win the auto manufacturers competition, the Big 4 has to beat the socks off of the foreign manufacturers in every area starting with  design, then productivity, efficiency of manufacture and assembly, plus sales and service.

We are Americans. With inspired leadership we can out design, out engineer, out work and out produce any foreign manufacturer. But is the current crop of Big 4 leaders equal to the task? Are they strong enough and resourceful enough to get the job done, or do they need a major spinal adjustment?

It doesn’t take a genius to figure out that car manufacturers with non-union work forces make a profit, while manufacturers with union work forces lose money. So long as the UAW refuses to admit this reality and continues to haggle over trimming bloated pay and benefits and inflated retirement packages, plus redundant life-time work contracts, little progress will be made and the American auto industry will continue to wither and falter.  If the UAW isn’t willing to face these cold, hard facts then the last one out of Detroit can padlock the factory doors.

While it doesn’t make sense for Congress to bail out failing U.S. auto companies, Congress can be helpful in leveling the playing field in other ways. For example, when you add up the costs of abusive lawsuits which is about $1,000 per car, and add to it the cost of bloated union contracts which is more than another $1,000 per car, the Big 4 have to ante up and charge their customers $2,500 or more per car than do foreign manufacturers. It’s hard to successfully compete under such conditions.

Here’s another example of how Congress can help the American auto industry. Every car sold in the U.S. is certified as having met the safety requirements of Federal Motor Vehicle Safety Standard 301. Yet our court system allows slick lawyers to convince juries that the government regulated fuel systems are not safe and that they are the cause of deaths and injuries, and that multiple millions of dollars should be awarded to lawyers and plaintiffs because manufacturers supposedly failed to build cars with safe fuel or other kinds of federally certified safe systems . Congress should limit jury awards to actual damages or medical expenses incurred.

Perhaps judges should be required to instruct juries, before their deliberations, that there is no corporate pot of gold to be raided for awarding settlements. The money juries award to plaintiffs and their lawyers is passed on by the Big 4 to buyers of their new cars. It’s the jury members themselves and their families who, in the end, must pay the exorbitant settlement fees they assess. But the juries don’t realize it.

Perhaps it’s time for a noisy, messy, old fashioned labor union strike, the kind in which I once walked picket lines as a member of the United Steel Workers’ Union. I can hear the UAW members shouting now, “We won’t go back to work until productivity increases by 25%.” Just wishful thinking on my part …

The point is that if the Big 4 doesn’t change now, more than the corporations will die and the UAW will become irrelevant. Who pays any attention to the United Steel Workers today?

To win the automakers’ fight, and it is a fight, the President-Elect, members of Congress and the Big 4 are going to have to realize that it is round 15 of the world heavyweight auto manufacturing championship bout. Nothing can be spared or held back. Everything has to be put on the chopping block and sorted out in the blood of the battlefield. Should the effort fail, America’s auto manufacturers will go to where elephants go to die – alone, while smiling foreign automakers increase their U.S. production and sales.

For the Big 4 to survive and prosper, three things must happen. First, the UAW must eliminate life-time employment contracts and reduce union wages, retirement and medical benefit packages, to approximately the same level as automakers employed by foreign companies here in the U.S. Second, management and labor must relentlessly make quantum leaps in efficiency and productivity. And third, the U.S. Congress must stop the financial drain of abusive law suites on America’s auto and other industries.

There can be no sacrifice too great to make, no stone too heavy not to be over turned, no effort too exhausting not to be attempted. Looking out for the future of Detroit’s corporations, its stock holders, its workers and their families must become an all consuming fire for the union and the auto industry.

Finally, we are Americans. Americans shrink neither from competition nor conflict. And when we fight -- and when we compete -- we win!