[Marxism] Marxist Economics 101

Louis Proyect lnp3 at panix.com
Wed Jul 13 08:07:40 MDT 2011


NY Times July 12, 2011
With Sonic, G.M. Stands Automaking on Its Head
By BILL VLASIC

ORION TOWNSHIP, Mich. — The only subcompact car being built on 
American soil will soon roll out of an assembly plant here in 
suburban Detroit that is as unusual as the car itself.

The production line has been squeezed into half the space of a 
traditional plant. Welding robots are concentrated in efficient 
clusters, instead of being spaced along the line, while many of 
the workers earn half the typical union wage. Even the first coat 
of rust-proofing has been reformulated so that it is one-hundredth 
as thick as — and thereby cheaper than — the coating on other cars.

One of the oldest axioms in the auto industry is that no company 
can build a subcompact car in the United States and make money 
because they are priced too low. The Ford Fiesta is built in 
Mexico. The Honda Fit is made in several places, including China 
and Brazil. But with Americans — and Detroit — rediscovering small 
cars because of high gasoline prices, General Motors is intent on 
shattering that notion with its new Chevrolet Sonic. The car, with 
a base price of around $14,000, will give G.M. a new entry in the 
lowest tier of the market when it goes on sale this fall. The 
Sonic is also expected to be a breakthrough in establishing a new 
level of cooperation between Detroit and the United Automobile 
Workers.

The radically revamped factory here operates with fewer and 
cheaper workers, many of whom are paid $14 an hour rather than the 
full U.A.W. wage of $28 an hour.

The plant itself is smaller and reconfigured to save money, with 
company executives modeling some of the changes after G.M.’s most 
efficient factories in Germany and Korea. The production line’s 
footprint alone was reduced from a million square feet to 500,000 
— the equivalent of losing the space of more than two Wal-Mart 
Super Stores. The energy bill was cut by powering some operations 
with methane gas from neighboring landfills.

The Sonic will be G.M.’s littlest, and most fuel-efficient, 
conventionally powered vehicle. It was conceived in 2008 before 
the federal government’s bailout of the bankrupt automaker, when 
negotiators from the company and the union began brainstorming 
about what it would take to make a profitable subcompact car in 
the United States rather than in low-wage countries.

“We wanted to prove we could do it,” said Diana D. Tremblay, 
G.M.’s head of global manufacturing.

The U.A.W. tried to persuade the Ford Motor Company to build the 
Fiesta subcompact in the United States. But Ford chose a plant in 
Mexico, where the combined wages and benefits of a production 
worker total less than $10 an hour. By contrast, a full-wage union 
member in the United States costs G.M. close to $60 an hour. Even 
an entry-level wage employee costs about $30 an hour in wages and 
benefits.

While it is not the only factor in producing a profitable 
subcompact, lower employment costs were critical to the decision 
to build the Sonic in Michigan. In a groundbreaking labor 
agreement, the union allowed G.M. to pay 40 percent of its union 
workers at Orion Township an “entry-level” wage that sharply 
reduces overall production costs.

“The entry-level wage structure was an important enabler, because 
obviously the smaller the car the less the margin,” said Ms. Tremblay.

The U.A.W.’s president, Bob King, said the union considered the 
significance of a competitive subcompact to G.M.’s overall product 
lineup. The Sonic is the first subcompact that G.M. has tried to 
build in its home market since the Chevrolet Chevette almost 40 
years ago, aside from a brief joint effort with Toyota to build 
Geo Prizms. The smallest car in its lineup now is the Chevrolet 
Aveo, a subcompact developed by G.M.’s South Korean subsidiary. A 
version of the Sonic to be sold overseas will be built in South Korea.

“We are committed to the success of the company,” Mr. King said 
recently. “We had to talk about a business model that makes sense.”

For all its promise, the Sonic still has to convince consumers 
that G.M. has found the right formula for an attractive and 
affordable subcompact. Previous subcompacts efforts like the Geo 
Prizm and the Aveo were bland and underpowered, and contributed to 
G.M.’s lackluster reputation in the overall car market.

“G.M. has a lot to prove with the Sonic,” said Joseph Phillippi of 
the research firm Auto Trends . “They have to cut costs but still 
put out a competitive car.”

The car itself is a mosaic of innovation to make the Sonic 
lighter, less costly and more fuel-efficient, including 
high-strength steel used in its windshield pillars and the 
ultrathin film applied to prevent rust. The Sonic sedan resembles 
a shrunken version of the Chevrolet Cruze, while the hatchback 
version is distinguished by its short rear overhang and upright 
stance.

The Sonic weighs 500 pounds less and is eight inches shorter than 
the next biggest car G.M. makes, and its little 1.4-.liter 
turbocharged engine will deliver the best gas mileage in the 
company’s fleet. “It will be north of 40 miles per gallon,” said 
Jim Federico, head of G.M.’s global small cars and electric vehicles.

Still, to get the car to meet cost-saving goals, a team of G.M. 
engineers and manufacturing specialists also had to adapt and 
reconfigure the Orion plant, which opened in 1983 and was used to 
build big cars like the Buick Riviera. G.M. spent heavily in 
converting the plant, investing $545 million in new equipment and 
retraining workers — and it shows, from the gleaming floors to the 
banks of fluorescent lighting that brighten the plant and save 
$430,000 a year in energy costs. The plant is also the company’s 
greenest, producing 80 percent less solid waste and using 20 
percent less water, all at a savings.

Various stages along the assembly line, like the body shop and 
trim area, are more compact, with teams of six workers installing 
parts fed to them on automated carts by independent suppliers who 
operate inside the plant. That reduces costly inventory and 
improves productivity. “Normally the suppliers would be five miles 
away versus 50 feet,” said John Barry, a G.M. manager.

The plant over all employs 1,800, a reduction of 25 percent. To 
augment the small profit earned on the Sonic, the workers will 
also make the larger, more upscale Buick Verano on the same line. 
Overall capacity at the plant is 160,000 cars a year. Even the two 
shifts have been fine-tuned to four 10-hour days rather than the 
usual five-day week to better maintain the machinery and save energy.

Every dollar saved is essential for the Sonic to compete, auto 
experts said. And if the car is a winner with consumers — 
production begins in August — the Orion factory could become a model.

“This plant has the potential to redefine American manufacturing,” 
said Harley Shaiken, a labor professor at the University of 
California, Berkeley. “A success here indicates untapped 
capabilities.”




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