A growing concern among Detroit OEMs – and increasingly Asian and European automakers producing in the US – is the flow of talent out of key Tier 1 companies. As suppliers’ fortunes continue to unravel, sources say senior managers are beginning to depart bankrupt companies such as Delphi, Dura, Dana and Collins & Aikman, not to mention the likes of Lear, Visteon and even Johnson Controls and American Axle.
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Wherever supplier company managers gather in Detroit the career talk is the same — where do we go from here?
Many are heading for greener pastures. In many cases executives are leaving the industry outright — like Lear CFO David Wajsgras, who joined Raytheon earlier this year.
As a result, automakers fear supply chain problems could result – putting the Detroit 3 at an even greater disadvantage against competitors.
“Talent scarcity in the automotive industry is a real issue,” said ArvinMeritor senior vice president Phil Martens, at the annual Management Briefings in Traverse City in August.
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By GlobalDataThe deteriorating financial health of Detroit-based suppliers threatens to cause a mass exodus of managers and engineers who are needed to keep the companies operationally proficient.
Companies in Chapter 11 usually attempt to hold onto talent, but new insolvency rules that went into effect in 2005 make it harder to provide for retention bonuses and other practices.
The changes in the law made it illegal for companies in Chapter 11 to offer the bonuses unless an executive has been offered another job.
Meanwhile, suppliers in rehab have been relatively unsuccessful in getting such incentive packages approved by bankruptcy courts.
Dana CEO Mike Burns has failed to win approval for an incentive compensation package for himself and his team from the courts.
Dana is still seeking court approval for a bonus plan for Burns and five other senior executives. Burns could claim over US$6 million for hitting financial targets if Dana, which filed for Chapter 11 in March, pulls out of reorganization. But a federal bankruptcy judge rejected Dana’s proposed executive bonus plan.
The effort to reward Burns and other execs drew criticism from shareholders, and unions. Burns has said the company’s creditors’ committee has OK’d the proposal.
Supplier executives are growing restless about their futures as they look at the Dana ruling and the decision by Collins and Aikman to sell the company in its entirety or in parts rather than emerge from bankruptcy protection as a stand-alone entity.
Indeed, C&A’s decision to sell is expected to prompt several key senior executives to depart. The future of Mary Ann Wright is being watched closely. The former Ford hybrid vehicle empress typifies the kind of talented individual seen likely to depart from C&A now that the interior trim supplier has decided to sell itself rather than emerge from Chapter 11.
Wright moved from Ford, where she was director of sustainable mobility technologies, to Collins & Aikman in February. She is executive vice president commercial and program management.
Non-automotive talent scouts are increasingly targeting automotive managers.
One reason is that pay levels in the auto business are falling behind other industries. The consultant firm Watson Wyatt has reported that CEO bonuses at publicly traded automotive companies dropped 20 percent in 2005 compared with 2004.
Meanwhile bonuses for CEOs at companies in the S&P 500 increased by 5 percent.
Edmund Chew
edmund.chew@supplierbusiness.com
