Mercruiser Speaks Out
Stillwater OK Newspress Friday 26 June 1998 By Greg LowerOfficials at the Stillwater MerCruiser plant are keeping an eye on negotiations between General Motors and the United Auto Workers to see if the strike that has shut down several GM plants could impact the Stillwater facility.
"If you can't get engines, that's always a possibility," said Barry Eller, senior vice president and general manager of the Stillwater MerCruiser plant, told the NewsPress Thursday.
The factory has reportedly had shortages of GM parts, but Eller said production will not face a shutdown or slowdown if the strike ends by the end of July.
"If it goes into August or September, its a crap shoot," Eller said.
The Oklahoma City General Motors assembly plant is one of 24 out of 30 plants shut since the strike began.
GM has furloughed 136,700 workers, including 2,700 in Oklahoma, and reduced or shut down 100 parts plants in the U.S., Mexico and Canada.
Eller said the MerCruiser plant has had periodic shortages of parts from various suppliers.
"We have shortages from GM when they UAW is not on strike," he said.
Some engines that MerCruiser receives are from plants in Mexico that are not affected by the UAW strike, and Eller said the Stillwater plant may get parts from other places.
The UAW is holding a convention in Las Vegas, but negotiations have reportedly intensified.
Eller said officials are staying close to negotiations and doing everything they can to communicate with workers.
He said he would not guess what impact he strike would have it continues past July.
"I would rather deal with facts and I don't have any facts," Eller said.
Stillwater Newspress 2 July 1998 by Greg LowerOfficials at Stillwater's MerCruiser plant have firmed up the numbers in their inventory enough to know they can make it through July but could face difficulties if the strike by the United Auto Workers union against General Motors does not end this month.
"We do know exactly where we stand," said Vic Schutte, vice president of operations at the Stillwater MerCruiser plant.
The UAW strike has idled 24 of 30 GM plants in North America, including an Oklahoma City assembly plant. GM also provides parts for MerCruiser's stern-drive engines in Stillwater along with other original equipment manufacturers.
"They are the supplier for a wide variety of OEM's," Schutte said.
GM supplies "long blocks," or basic engines that contain the engine block, crankshaft, connecting rod and piston assembly, but without components like the intake or exhaust manifold, carburetor or generator.
GM provides approximately 9,000 long blocks a month from three plants in Flint Mich., Toluca, Mexico and Tonowanda, New York.
GM also supplies a variety of other components, Schutte said, including starters, wire harnesses and fuel component systems.
"We'll run out of blocks before we run out of components," Schutte said.
The MerCruiser plant has a total employment of more than 1,100 of whom 800 work in production.
Since the Mexican plant is not affected by the strike, MerCruiser could still maintain some production after the end of July.
"We're not completely out of product," said Schutte.
He said he is hopeful that one of two things will happen, either the strike settles or that GM and workers continue production for original equipment manufacturers like MerCruiser.
"We could be in some serious trouble without GM going back to work," Schutte said.
MerCruiser studying its options
Stillwater Newspress 9 July 1998 by Greg LowerProduction is continuing at the Stillwater MerCruiser plant, but officials are considering options if the General Motors strike continues.
"Right now, we're doing a lot of "what if" planning," said Creed Jones, director of Human Resources at the plant.
General Motors supplies long blocks and some components for MerCruiser's marine engines. Long blocks are the basic engine assembly, including engine block, crankshaft and pistons, and come from three GM plants, two of which have been idled by a strike by the United Auto Workers.
Jones said the Stillwater plant has different inventories for different products. The inventory for most products will run out July 27 or 28, but inventory for a few products extends into August. Jones said the plant may change the mix of its products if the strike continues.
Another possibility is a switch to a four-day work week, Jones said. Without a resolution in the strike, the potential exists for the Stillwater plant to shut down in mid to late August.
On the other hand, one possible agrement could keep the Stillwater plant running without a glitch. Under the agreement, UAW workers could return to work to produce products for non-GM companies like MerCruiser.
They could send some workers back into the plant," Jones said. That agreement could come about if the strike is not settled by next week.
But if that agreement does not go through, and the strike continues, Jones said the question is what priority the MerCruiser plant will be.
"It going to be resolved eventually," he said. Jones said the MerCruiser plant could face problems if the strike continues much longer and GM decides to get its own plants running first when the strike is resolved.
Officials should have a much clearer picture by the middle of next week if the strike is not resolved. Jones said talks between GM and the UAW have intensified, and negotiators say they are seeing some progress.
That's certainly a much better situation than it was a week ago when they weren't even talking to each other," Jones said.
Stillwater Newspress 18 July 1998 By Greg LowerThe Stillwater MerCruiser plant will continue to receive General Motors engines, despite the continuing strike by the United Auto Workers.
Vice President of Operations Vic Schutte said he received work late Wednesday afternoon that GM would continue to produce marine long blocks.
"MerCruiser will not be interrupted in its flow of stern-drive engines," said Schutte. He said the action underscores GM's commitment to produce for its outside customers.
Two strikes by 9,200 workers at Flint, Mich., GM plants have idled 179,000 workers at 25 assembly plants and 100 parts plants, including an Oklahoma City plant and two of three plants that produce long blocks.
Long blocks are basic engine assemblies, including engine block, crankshaft and pistons, which MerCruiser uses to build completed stern-drive marine engines. GM provides approximately 9,000 long blocks a month from plants in Flint, Toluca, Mexico and Tonowanda, New York.
The strike, now entering its seventh week, has reportedly cost GM $1.2 billion. MerCruiser officials here had considered several options, including changing the mix of its products, a shortened work week or even a shutdown, if the strike continues into August.
Schutte said he still hopes the UAW and GM will settle the overall strike. He said the continued strike still carries some concerns.
"We're very appreciative of their actions," he said.
The GM strike is just one of many difficulties MerCruiser has had to overcome while working with
General Motors. Although MerCruiser is the "whale" of the OEM engine consumers and dominates
the marine market even to the extent of being involved in FTC monopoly investigations, it is a small "minnow"
to the automotive super-power. What seems like a huge consumer from one side of the fence is seen
as a "flyspeck" from the other side. GM changes engine designs, brings out new models, and discontinues models
with little concern for what havoc it might create at MerCruiser (or other marine OEM's). MerCruiser is
held captive to take whatever engines GM is willing to send them, whenever they send them.
Obviously, things are not quite as bad as portrayed in the paragraph above, but I believe the "challenge" of dealing with General Motors is what has made MerCruiser what it is today. While assisting in a planning effort there are few years ago I attempted to identify MerCruiser's "core competencies / core technologies." I asked employees and executives what business they thought MerCruiser was really in and what did MerCruiser do better than anyone else. Typical answers were
It is my contention, they are in the marinization business. Marinization is their core competency. They have the knowledge, engineering skills, cad systems, bill of material, inventory control and purchasing systems, component suppliers, die cast facilities, production equipment, test facilities, service department, management and adaptable work force to take whatever engine GM throws at them and rapidly make it work reliably in a marine application. They do this faster and better than anyone else. MerCruiser has accepted the GM "challenge" and it has made them stronger. This strike is no different, they will come out stronger and even more adaptable.
Now, MerCruiser says GM is going to go ahead and produce the engines while they are still on strike. I'm wondering how smooth this will be. I certainly wouldn't want to be one of the guys walking across the picket line in Flint every morning to get to my job. Also, besides production, the entire system has to come up; purchasing, shipping, personnel, etc. I'm thinking this may not be as easy as just throwing a switch to start the line.
Earlier the newspaper interviews say if the strike was over very soon, all would be well.
That raises three points. First, the difficulties of working with GM is making them maintain a heck of an inventory. Second, they are assuming that when the strike is over the pipeline will be turned back on. Third, tough to imagine this not coming out with a price increase to MerCruiser which will be passed on to the consumer.
MerCruiser having the inventory to continue production for over 6 weeks implies they either normally carry a huge inventory or sandbagged against the strike. Large inventories (of engines or final production units) result in high carrying and storage costs, not finding problems until you have a lot of units with those problems, out of date inventory, and other difficulties. However, no inventory with a GM strike on, results in a closed plant. Finding the correct balance is what they pay the execs big bucks for.
When work resumes at General Motors, GM may be more concerned with getting its car lines up and running than dealing with OEM problems. Many startup problems occur after a shutdown. If things did run smooth, it might still be quite a while before engines started shipping and they might have a few "surprises" in them. There could be a battle for freight space coming out of GM plants when things startup. If early production were to contain some problems discovered on the assembly lines in Stillwater, the cycle would have to be repeated. My prediction, is MerCruiser is not out of the woods yet, but obviously that is not news to them.
Price increases in an industry already viewed by some as a "hole in the water you pour money into" can't be good for business. The NMMA and others are trying to promote boating as a family activity and rekindle some of the "glory days" of boating. That is tougher to do in face of rising costs.
What about the next guy down the food chain, the boat builders? When it comes to choosing who gets units and who doesn't it could get real nasty between the independents and the captive Brunswick companies. Then it continues one more step on to the boat dealers. There should be more than enough material in the pipeline to avoid problems at the dealer and consumer level at this time of year. By the time boats now being built are delivered to dealers the major buying season will be over.
Hopefully the strike will come to an end soon and there is enough "float" in everybody's inventory to keep their people employed. If not, GM is not going to be making very many friends in the boating industry.
The whole "GM situation" makes Toyota's entry into the industry more interesting. They will not be hindered by GM. If they end up in the stern drive business, things could get exciting. The questions are, "Is MerCruiser developing the right core competencies?" Is the ability to marinize whatever GM throws at them really what is important to the consumer? Can Toyota , freed of the GM problems, focus its efforts closer to the consumer? Time will tell.
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