Defending Detroit (update)
The Washington Post’s car guy, Warren Brown, slams the punditocracy, saying the fault is not in our auto industry, but in ourselves:
Pundits Peddle Revisionism in Attacking U.S. Automakers
Go ahead and look at (the Prius), preferably in Japan, where the Ministry of International Trade and Industry (MITI) has done a marvelous job of coordinating industrial and energy policy into a vehicle development and consumption strategy that makes sense. We have no such government-industry cooperation in the United States. We have no industrial policy, no energy policy, which largely is why we now have a core segment of our natively owned manufacturing infrastructure teetering on the brink of collapse.
Neither the Japanese, nor the Germans, nor the Chinese, nor the Koreans have been as stupid as we’ve been in this country in the management of the automobile industry.
Brown also defends union pay:
It is the rankest hypocrisy for well-paid journalists to decry the “high” pay of UAW-represented employees. I doubt that there is one UAW critic in the media, or on Capitol Hill, who would be willing to settle for a UAW paycheck. I’m almost certain there isn’t one who would be willing to trade his or her relatively cushy employment for a year on an auto plant assembly line.
Criticism of “improvident labor contracts” thus smacks of class bias. It reeks of the notion that some work, such as that involving manual labor, inherently deserves less compensation than others, such as expressing one’s opinion. It’s more baloney.
Update: AutoSavant has a brief history of the decline of Detroit:
Being There: A Michigan Resident’s Take on Detroit’s Woes
So, where did the money go? Well, the State of Michigan pissed the money away on tax cuts that promised long-term prosperity. The Big Three? Dividends. Executive bonuses. Management bonuses. Employee profit sharing. And R&D. For trucks and SUVs.
I used to work with a woman whose brother worked as an engineer in the Ford heavy-duty “light” truck department. During the 9/11 recession, Ford cut R&D on everything. Everything except trucks and SUVs.
Cars? Merely a side business to satisfy fleet buyers and the elderly. One of the biggest Ford dealerships in Lansing ditched cars altogether around 2000 or so.
So what's your take on it Donal?
November 24, 2008 10:23 AM | Reply | Permalink
At my last family function, I was the only one of nine siblings, and our parents, cousins, aunts and uncles not driving a large SUV or truck. All of us in the industrialized world have been generally spoiled by the cheap energy gravy train, so I can partially excuse the Big 3 for servicing their market. But:
-Their management structure is inefficient and bloated.
-Unions were and are a necessary response to management abuses, but in many ways have become as corrupt and bloated as management.
-Even their big vehicles haven't always been that great. I had a Chevy minivan that was shot through with mechanical flaws from day one.
-The Big 3 showed no foresight whatsoever, and have fought tooth and nail against moves towards fuel efficiency.
I still think that some government-directed restructuring, whether pre-bankrupcty or during Chapter 11, must take place. Probably the best we can hope for is to create a leaner transportation industry that can prosper in a time of declining oil production.
November 24, 2008 11:28 AM | Reply | Permalink
I do agree with Warren Brown that the US doesn't have any coherent industrial or energy policy. I'll also raise him two more: we also have no transportation nor regional development policy.
Obama is saying the right things about this now--but putting together a sensible federal policy in these areas is going to be quite a challenge.
On the union front, I also agree with Brown that worker compensation isn't the issue. Corporate culture and innovation are the major problems.
His analysis regarding the bias against manual labor is spot-on. That bias is also translated into assumptions that service sector jobs are inherently low-wage. These assumptions fail to recognize the deep obstacles that make it difficult for workers to organize.
On that note, it will be interesting to see what happens with the "card check" bill [Employee Free Choice Act] that levels the playing field for labor. Obama campaigned on it big time in Michigan and Pennsylvania.
November 24, 2008 6:26 PM | Reply | Permalink
Another good capsule post, Donal.
Union pay is not the issue. Union pensions are. Zero-ing out management doesn't even help that one.
The big 3 should be viewed as manufacturing capacity, not car-making. This also includes supply-chains, 3rd party parts manufacturing, etc. That's why this industry is so huge. And that's why non-US based car companies want the bail-out to occur as well.
However, just as when you declare personal bankruptcy, there should be seriously restrictions made on you. A big 3 bailout would be part of a massive restructuring of the manufacturing capacity to government policy -- be it MPG ratings, building mass transit, etc. The present pension people are also going to have to take a severe hit. Throwing money at that problem doesn't fix anything, it merely drives us deeper in debt and prolongs the inevitable Ponzi scheme crash.
The trouble is that the country probably won't buy into these types of radical changes -- not just yet, anyway. The real message is that business as usual for the country is over. I don't think people have gotten that point -- as evidenced by the types of cars you still see on the road and being sold.
November 24, 2008 7:01 PM | Reply | Permalink
I make this point every chance I get, because I think it is central to a better understanding of not only the 'Big 3' issue, but labor/mgmt economic issues in general:
UAW mfg. wages (even including the infamous benefits and retirement costs) amount to
less than 10% of the mfg. costs of the average vehicle, and MUCH, MUCH LESS than 10% of the average public sales price of a vehicle. Suprised?
There are a number of rough, commonsense ways to arrive at this number. The 'quick' method is to allow 40 hrs/vehicle mfg. time (certainly a HIGH figure) at $75/hr (probably a high estimate). This gets you to $3000 (Again, this is a HIGH number for quick, safe purposes of comparison - the REAL number is almost certainly considerably lower). With a simple hand calculater and maybe an hour on the internet, you could get a better picture by determining total employees, total vehicle production, average vehicle cost, etc. TRY to get that figure to 10% - it can't be done.
Now, what do you hand the dealer when you buy the car? At least $12000 for the very cheapest vehicle, maybe $70000 for the most expensive?
While trying to help the domestic auto makers solve their problems, wouldn't it make sense to spend a bit LESS time on the $3k (high side), and a bit MORE time on the OTHER $9-$67k ( in reality, a low estimated range)?
I think the tendency in so many quarters to focus almost EXCLUSIVELY on the basic labor costs (not only in this example, but in ALL cases - maybe even YOUR case), is highly misleading. The great bulk of what things actually cost is due to many other more important and much larger factors, at least equally subject to gouging, abuse, corruption, and slippage of all kinds.
November 25, 2008 7:58 AM | Reply | Permalink
Does your number count the support staff? Presumably there are a lot of workers delivering parts, fixing assembly machines, cleaning the shop floor, answering phones, etc.
November 25, 2008 9:26 AM | Reply | Permalink
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But isn't that at least partly the fault of the lobbyists employed by the auto industry? They've been fighting sensible government input for as long as I've been alive. Having grown up in Georgia, it's amazing the amount of demonization that I heard CAFE standards get. Yet, our failure to make these even more stringent is at least part of the reasons the big 3 are falling behind, IMO.
November 25, 2008 8:09 AM | Reply | Permalink