The Auto Industry: What’s Happening With Your Money?

Have you ever wondered what will GM and Chrysler do with the bailout money they received from the U.S. Government? Well GM has decided to take $1 billion of that and invest it in Brazil to avoid the kind of problems they face in the home market.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the government and will be used to "complete the renovation of the line of products up to 2012."

It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.Meanwhile, he cut the company's revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.

What kind of problems do the U.S. Automakers face? One big one is the UAW. Here is just one example: Ford also operates a state of the art factory in Brazil. (remember they didn’t ask for bailout funds!) This factory streamlines production and makes operations more efficient. Ford can make 5 different types of vehicles here. This is because Ford allows suppliers to be integrated into the assembly line process. So the suppliers making the seats, the dashboards, the fuel systems … they have assembly lines right inside the Ford factory. Makes sense, rather than relying on shipments of parts. No waiting. No shipment costs or delays. Ford even has it’s own shipping port for exporting vehicles right outside the plant.
Wonder why it’s in Brazil? The UAW is opposed to this type of innovative manufacturing. They are opposed to innovation that would actually help their employer because they stand the risk of losing jobs. And if they lose jobs, they lose power.
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