Let Detroit Fail
Mitt Romney explains what to do about American auto makers, and it isn’t a bailout.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Republicans would have been wise to nominate this guy for president. I might have voted for him.
November 19th, 2008 at 11:14 pm
right on! I’ve heard arguments saying that the Auto workers’ unions should be given less power, because they are costing US auto manufacturers a fortune. Both solutions work better than a bailout.
November 20th, 2008 at 9:47 am
My name is Steve and I copy other FRIENDS posts!
November 20th, 2008 at 10:05 am
My name is Michael, I wrote this post, and great minds think alike. And so do we.
November 20th, 2008 at 12:44 pm
Let me see if I understand this argument correctly: the US is losing its competitive advantage to countries like Germany and Japan because US workers are so much more heavily unionized that they are too expensive to the employers. In this particular instance the argument is being applied to the automotive industry, but no doubt the same will be said of electronics or some other industry in the near future.
If that is the argument, I’m not sure it is congruent with reality. Japan and Germany both have more unionized workforces than the US.
November 21st, 2008 at 3:18 am
I’m pro-reduction of government interference in free trade. That is all.
November 21st, 2008 at 11:40 am
My argument is that the current union agreements are wholly unsustainable and that both auto executives and union leaders must be forced to renegotiate if they want to keep their jobs. The market is forcing them to do this, that is if the government will allow it by staying the hell out of it.
November 21st, 2008 at 11:52 am
Then why all the emphasis on “competitors like BMW, Honda, Nissan and Toyota” or “Taurus… compet(ing) with Toyota’s Avalon. Of course the Avalon feels like a better product” or “this disadvantage”?
It sounds to me like this is an argument specifically about the relative quality of two categories of product, followed up by blaming unions for the fact that one is lower quality. I don’t really feel like making an argument about the overall efficacy of unions, but I think in this specific instance unions are a scapegoat for a problem (the relative success of foreign cars) that cannot be explained by the presence of unions (since foreign labor is even more unionized).
November 21st, 2008 at 3:36 pm
It is an argument about the relative quality of two similarly priced products, the reason there is a difference in quality, and what to do to fix it.
The reason that, for the same price, Detroit produces a lower quality product than Toyota is that it pays higher salaries and gives more benefits to its employees. Thus, of the money you pay for that car, more goes to the worker and less goes to the car itself. These higher salaries and benefits were pushed for by unions, even though they make the Detroit auto makers less competitive. Romney is arguing that the tax payer should not be on the hook for this poor business decision.
Furthermore, you assume that BMWs, Toyotas, Nissans, etc, are built in Germany and Japan. A majority of “foreign” cars are actually built in America by non-union workers, because labor costs in their home countries are too high due to, you guessed it, strong unions.
November 21st, 2008 at 5:18 pm
“A majority of “foreign” cars are actually built in America by non-union workers, because labor costs in their home countries are too high due to, you guessed it, strong unions.”
If that is the case, I essentially agree with you.
It also means that US jobs aren’t - in the foreseeable future at least - threatened by Ford and GM being replaced by Honda and BMW, so why even worry about it, much less bail them out?
I’m still a bit skeptical of the ‘blame the unions’ rhetoric though. It’s not as though Ford couldn’t try to hire more nonunion workers.
November 22nd, 2008 at 12:42 pm
My guess is that the union contract limits the number of non-union workers Ford can hire.