Everyone knows that the automobile industry faces some tough challenges. Meeting the fickle needs and tastes of consumers is a major hurdle for companies in the sector. For many buyers, quality remains a top priority, a fact that has redounded to ToyotaMotors'
For companies in the U.S., though, another perhaps more serious problem lurks below the surface. Like the rest of America, the auto industry is struggling with rising health-care costs. Automakers have it particularly bad, though, because they have promised their workers and retirees fairly generous benefits. With competition bearing down and profitability on the wane, though, companies are scrambling to find ways to ease their burden. General Motors, for instance, has concentrated recently on containing prescription drug costs by relying heavily on mail-order programs.
Measures aimed at improving efficiency can go only so far, however. DaimlerChrysler
DaimlerChrysler expects to reap only modest savings in the near term from the new arrangements. Still, the changes are an important breakthrough and could help facilitate bigger adjustments as necessary. Clearly the company has been effective in getting the UAW to recognize that the status quo is unsustainable for DaimlerChrysler the company as well as its employees and retirees. DaimlerChrysler's decision to ask for such concessions earlier rather than later and its evident success in communicating the scope of the problem should make the inevitable future talks with the UAW less contentious. While the burdens on DaimlerChrysler's workers are only likely to grow, the firm at least has created an environment for a smoother transition.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.