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Suppliers Suffering in GM Strike; Robots Rev Up

Sept. 27, 2019
Let’s find middle ground, and soon.

Over the last couple of weeks, IndustryWeek featured articles related to the strike by the United Auto Worker at General Motors plants in the United States and Canada. In my working days, I had significant exposure to unions and always found it relatively easy to find common ground in working with them. And I’ve found that there is always common ground if both sides want to find it. Unfortunately, all too often, that isn’t how it turns out. Sometimes companies and at other times unions stake out and hold to extreme positions—sort of like is happening in Washington, DC these days—hoping to coerce the other side into reaching an agreement that is in the interest of only one party. This is called positional—as opposed to collaborative--negotiations. Let’s hope that’s not what’s happening with GM and the UAW.

It needs to be pointed out—as I did earlier this year in an article when GM closed their Lordstown, Ohio plant—that the negative economic impact of an OEM’s production lines is far greater than just on the union and company involved. Industry statistics cite an average of 3.5 supplier employees lose their jobs for every OEM worker idled. These suppliers are, for the most part, small- and medium-sized manufacturers who don’t have the financial wherewithal of a company like General Motors. Consequently, they suffer more financially, and that suffering tends to begin very soon after the start of their customer’s production stoppage. And, at least in my experience, it doesn’t take long for an OEM’s stoppage to threaten the very financial viability of its supplier/manufacturers. So I think it’s in the best interests of a whole lot of people—and the economy of the United States—that the two sides find middle ground soon.

Europe and Japan are not China, Redux.

The 17 September article –Toyota Invests $391 Million in Texas as US – Japan Tariff Talks Loom—is another indication that most of the other countries in the world address trade much like the United States; i.e., quasi- Free Enterprise. The title of the article might lead one to believe Toyota is making this investment in response to our country’s threatened tariffs. I highly doubt this. Toyota has very solid business plans and it’s likely Toyota planned that investment, tariffs or not.

Paul Ericksen's columns are part of IndustryWeek's Supply Chain Initiative.

In an earlier article, I wrote that Europe and Japan are not China, and justified it by laying out the facts of the tremendous investment companies from these countries have made in the U.S. And due to this investment of millions here, untold amounts of money have been spent with domestic suppliers. There is a risk that if the U.S. deals with all of our trade partners in a positional way—the way we are negotiating with China--we’ll alienate the rest of the world, which may not be as willing to support the U.S. in other areas. And it is a certainly at some point going forward we’ll need help relative to maintain our national interests, such as with the current impasse with Iran.

Freighted Argument

An August 19 article in Materials Handling & Logistics, Aging Drivers, Higher Volumes, Competition Causing Driver Shortage, discusses a trend that could greatly hamper transportation between Original Equipment Managers and their supply chains. A truck driver shortage exists that has the potential to gum up the movement of goods and materials in this country. In 2018, the American Trucking Association (AEA) said that the industry was short about 68,000 drivers. Freight is the lifeblood of the economy since, for the most part, manufacturers today are not vertically but horizontally integrated. This means that an extensive network of suppliers contribute to the production of most consumer products, as well as Original Equipment Manufacturer distribution of finished product. In 2018, this shortage led carriers to compete for drivers putting upward pressure on wages and costs. This is a good thing for drivers ,but not necessarily for consumers.

I’ve always respected truck drivers and the job they do. They are highly trained, hard- working individuals dedicated to their jobs. While very few actually get rich, for the most part driver compensation positions them well up into the middle class. But for a variety of factors—including the ongoing increase in the U.S. economy and the fact that a large percentage of today’s current drivers are reaching retirement age—the driver shortage looks to continue and/or increase in the future. For instance, the AEA projects that the industry will need about 110,000 additional workers each year over the next 10 years just to maintain the status quo. The article goes on to talk about the need for carriers to ramp up recruiting efforts and increase compensation. While that may be important, I also think you’ll see carrier accelerate their development and use of driverless vehicles to address the problem.

Robotics was a featured topic in a couple of my recent articles and it is not a secret that robotically driven trucks are being developed. While some real-life drivers will be always be necessary—at least in the near- to mid-future—going forward, I expect you’ll see more and more carriers consider “robotic driving” and try to implement it into some of their more routine truck routes.  And once this happens, there will likely be more development such that a higher and higher percentage of trucks will be driven without humans in the cab.

If that happens, that will eliminate the driver shortage but take a lot of jobs out of the economy. So we get back to the issue of training our citizens for jobs-of-the-future and how best to accomplish it; i.e., through private industry or a collaborate partnership between government and private industry.

Paul Ericksen is IndustryWeek’s supply chain advisor. He has 38 years of experience in industry, primarily in supply management at two large original equipment manufacturers.

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