A Rational Look at the U.S. Auto Industry

[missreason]

I’m surprised at the ANGER millions of Americans feel towards the
domestic auto industry. This anger is based somewhat on three myths.

MYTH #1: The Big 3 always lose money and always will. FACT: The U.S.
auto manufacturers were making money earlier in 2008, before the deep
recession hit. The auto industry’s problems are not unique. A virtual
Who’s Who of American companies are in trouble, as are foreign
companies.

MYTH #2: The Big 3 are in trouble because they stupidly concentrated
on the production of trucks and SUV’s. FACT: American companies,
because of their high labor costs, do not make any money with smaller
vehicles. You can argue that they should never have agreed to the high
labor contracts, but that’s a different issue. Given the differential
in how much Detroit pays its workers, versus the labor costs of their
foreign competitors, the Big 3 had to produce gas guzzlers, or go
under.

MYTH #3: There is a level playing field worldwide, so U.S. Auto Makers
should be able to survive without government help. FACT: Foreign
governments help their own automakers in many ways. The most important
is government-subsidized health care. America is one of the few major
countries that does not have Universal Health Care. Remove the cost of
health care from domestic auto contracts, and the Big 3 would be in a
much stronger position. I am not endorsing nor opposing Universal
Health Care, just pointing out that Detroit is at a disadvantage
because the American government is less supportive than foreign
governments of their domestic auto industries.

WHAT IS THE SOLUTION? Just about everyone agrees that the U.S. auto
industry cannot survive without a major RESTRUCTURING. First and
foremost, The Big 3 cannot continue to pay significantly more to their
employees than their foreign competitors. Whether a Chapter 11
Bankruptcy Proceeding would be the best way to restructure wage
contracts is a matter of opinion, with experts disagreeing. The recent
“emergency bridge loan” of billions of dollars by the federal
government is providing a very brief window of time for the United
Auto Workers to agree to the painful slashing of their contracts. If
they refuse, then the American car industry is doomed to extinction.

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