Finally - a “Right” Answer to the UAW-Big Three Question

A December 1 issue of BusinessWeek featured and interview with Carlos Ghosn, CEO of Renault and Nissan, conducted by Maria Bartiromo. The interview centered on his thoughts about Detroit and the future of the auto business. Ghosn was neutral on the bailout option but firm that no buyout of Chrysler by Nissan/Renault was in the future. Perhaps Maria Bartiromo is a broker for Chrysler; she was very persistent:

Bartiromo: “Would you consider buying Chrysler outright?”

Ghosn: “No. It’s out of the question.”

Bartiromo: “Can you envision any combination with Chrysler?”

Ghosn: “You’re going to need to line up cash; [ ] for buying assets, working capital and investment. We’re still in an economy where credit and financing are hectic and unpredictable. Some people tell you it’s getting more normal [ ]. But frankly, we are very far from normal financing conditions. I don’t think you’re going to see anybody taking any initiatives.”

Ghosn predictably defends his American counterparts in the face of our judge-and-blame culture:

Bartiromo: “Isn’t part of the problem in Detroit management-related, and hasn’t there been a failure of imagination by U.S. carmakers?”

Ghosn: “I don’t think so—no. I’m on different boards, and I talk to my fellow CEOs in energy, utilities, commodities, etc. Everybody is facing the financial drought. A lot of people are cutting back investments even though they are in very healthy industries because they are scared they won’t find the financing.”

Perhaps Ghosn’s wisdom is best realized in his “don’t judge, don’t blame” response to the following question:

Bartiromo: “Are unions killing the American auto business?”

Ghosn: “Frankly, I don’t think the question is unions. The question is: Do you have the flexibility to operate and be competitive? If a union helps you be flexible, then the union is an asset. If the union forbids or handicaps this flexibility to operate, then you have a problem. We have unions in France and Japan. If you can reach an agreement by which unions help you be flexible and [respond] to the market, in a certain way they become an asset.”

This answer seems to me to be a great example of lean thinking: what problems are being solved or prevented by the presence, structure, philosophy and behavior of the unions? If they are not solving a problem, we need to understand the purpose of the union. Another important question to ask here, perhaps not of Ghosn, but of ourselves is how much hidden involvement from the government complicates management-labor relations?

In a recent post, I offered up a video about Ford’s advanced auto manufacturing plant in Brazil. Proponents suggest that the lack of militant U.S. unions are the key to success in this plant along with a pro-business government. Some friends of the TWI blog, after having seen the video, have suggested that we can’t say this plant is lean because we would really need to put our feet on the floor to gain a better understanding of the Ford/Brazil situation. This is true, but in the video, you see suppliers working on their sub assemblies in the Ford plant. This is more or less a foreign concept to us in the U.S. and demonstrates that Ford management is capable of creating new innovative production ideas in management. Whether or not Ford/Brazil is profitable with this model is an open question here at the TWI Blog, if anyone has some insight to this question, it would be nice of your to share.



At December 17, 2008 at 10:53 PM , Blogger Mark Graban said...

With all due respect to Mr. Ghosn, from other articles about him, I've never detected anything "lean" in his thinking. He appears to be a "glorify the boss" type leader with lots of top-down decisions and such.

I'm not sure if Ghosn is "not blaming" as much as he's being polite and political in case he gets offered a Detroit Three job. Sorry to be cynical, but me thinks you're giving him too much credit and reading things into it that aren't there because you're a lean thinker.

As for the Ford video... I've seen it and I agree it's hard to say if they're "lean." Having suppliers on site might keep inventory down... but that's trivial. How does the Ford plant manage? How do they treat people? If they have a culture like some Ford plants where people are yelled at for pulling the andon cord and stopping the line, then they ain't lean either. The video doesn't tell us enough to know.

At December 18, 2008 at 12:04 AM , Blogger Unknown said...

Hi Mark,

Perhaps I am giving him too much credit. My guess though is that Nissan will come out of this depression "ready" for the new market, and his answer about the unions is probably as "right" as one can be.

Regarding the Ford Brazil plant, you will be pleased to know that Jim Huntzinger and Jeff Maling are keeping you in good company on this one. Sometimes a picture speaks a thousand words, but a video leaves us with a thousand questions. On your points, I agree 110%, we can't know that this plant is "lean".

What we can say though, is that we probably won't see this level of integration in a U.S. plant anytime soon. My point here is that if the U.S. plants were thinking lean and allowed to implement those concepts, perhaps we would have seen this years ago. The evidence that Ford is trying these concepts is good enough for me to know there is a sliver of hope for the U.S., but we have other hurdles to knock down first.

Thanks Mark!

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