Monday, April 14, 2014

Blame Games

As General Motors recalls millions of cars over unsafe ignition barrels, stories are coming out again dragging "olde GM" out of its grave (which is yet to be filled). 

An article in Detroit News Auto Insider from Bryce G Hoffman reports Bad Blood Cited Between General Motors and Ignition Switch Supplier Delphi from when they separated in 2002. 

The article goes on to explain the toxic relationship between GM and it's suppliers, particularly in regard to applying cost pressures, so much so that Delphi began shipping sub standard parts. 

Sorry Delphi, but if you can't produce a component of the appropriate level of quality for the price you agreed, then don't deliver it. As much as this article appears to be pointing to big bully General Motors exercising it's position over Delphi (which is nothing new, Supermarkets do it to farmers ALL THE TIME), at the end of the day, if you can't be competitive (whether that be through diversification or unique capability), you're out of business. That is exactly what the "free market" does.

In the case of Delphi Automotive, who have over 160,000 employees, if they can't compete in a global market, then they need to state their case to the appropriate authority whom can assist in their future security if it is so deemed to be in the best interests of that authority.

In case you have problems with reading between the lines, I'm talking about government assistance to ensure that particular industry and infrastructure are supported, such that the effect applies a positive outcome for the nations productivity (or employment). 

In Australia we have had similar issues which resulted in the announced closure of Ford Australia, Toyota Australia and Holden. Personally, as a tax payer, I was more than happy to lay out what added up to less than $20/ year of my income tax, to support tens of thousands of jobs. 

Now that I have rattled the "protectionism" tree, I'm sure plenty of communist hating tea baggers would be shaking their proverbial fists and burning hammer and sickle tea towels left, right and centre, because that's how stupid the system is. 

EVERYTHING in this world is about balance. The current trend of all encompassing free trade agreements and economic co-operation is ONLY good for the people running companies that import/export to the rest of the world. It's not good for the regular citizen, because everything has a cost.

One of the reasons Australia can't compete with other labour markets is because many other labour markets do not meet the same working standards as Australia. For example, though auto workers in Thailand have the right to form unions, union members have to work in the same company, so if you're fired, you are no longer a union member. The Thailand government is yet to implement International Labor Organization (ILO) Convention 87 on freedom of association and Convention 98 on the right to organize and bargain collectively.

So basically they've got "Work Choices".

That's not to say that protectionism is an ideal scenario either. Where companies take advantage, protectionism can lead to "milking of the teat", but that is simply circumvented through appropriate performance requirements. 

We as a society need to think about our decisions, and, ensure that we do not prioritise the opportunity to get a cheaper TV over the opportunity for the bulk of our society to obtain gainful rewarding employment.

Delphi Automotive is a significant employer and the value of that work force enabling a tax base for it's regional or national economies should have justified activity, by government, to ensure that agreed levels of workers rights and quality of materials could be provided at a competitive cost for supply to General Motors.

Tariffs not only aid local manufacture, they protect rights for workers that most of the world cannot afford, or are not willing to pay. Maybe Delphi would not have sacrificed quality on their components. 

If they were competing against domestic competition, then that's just business.

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