KEY POINTS:
Ford and General Motors have threatened to leave Detroit and take their car manufacturing operations overseas if unions do not agree to a massive pay cut for hourly paid workers.
The threat to quit the city they call Motown because of its rich automotive heritage would be a crippling blow to Detroit, which is suffering a prolonged economic downturn and has been hit by the sub-prime mortgage crisis.
Ford and GM are in the thick of negotiations with the United Auto Workers union, the most powerful labour group in the industry. The car-makers say they must dramatically cut manufacturing costs if they are to survive in today's global economy.
Their biggest burden is the labour cost per vehicle - an estimated US$71 ($99) per man hour. Workers earn about US$27 an hour with the remainder made up of overheads such as pensions and healthcare costs for the thousands of retirees on their books.
Ford and GM have made it clear that they expect to reduce the hourly cost from US$71 to about US$50 - a cut of about 30 per cent. The companies are keen not to cut workers' hourly pay, but they insist that other overheads must be reduced.
If a deal cannot be reached, Ford and GM negotiators have said the companies will have no choice but to move their North American operations to countries in Latin America and Asia.
The credit crisis is not helping the ailing US car manufacturers to reverse their fortunes.
Many senior figures in the industry are calling for action from the Federal Reserve to spur markets and the economy. Bob Nardelli, the new Chrysler CEO, has been most vocal in calling for an interest rate cut to help boost consumer activity.
Ford chief executive Alan Mulally said economic conditions were proving to be a "big headwind" working against its turnaround plan.
Sources close to senior GM executives confirmed that the prospect of shifting operations away from North America was very real.
"There are no sacred cows today. Globalisation means just that, it's a worldwide playing field."
-Observer
