As long as Toyota and Honda can pay their US workers a third of what GM, Ford and Chrysler are effectively paying, the latter are going to lose market share and cut jobs.
A solution to the future of the American auto industry has to entail the following elements:
A nationalised health care system; amendments to the constitution of Michigan to eliminate the possibility of forming new communities; enlargement of the city of Detroit to include the entire metro area in a single administration; a large national investment programme in the Detroit metro area to create new industries; strong regulatory oversight of abuse of monopsony power and incentives for vertical integration (a breakup of the big three is an alternative that will partially eliminate the need for this), and strong and progressively tightening national emission standards for cars.
Anything else is just a stay of execution.
Chrysler and GM should both be allowed to go bankrupt, IMO. They are poorly managed companies that are locked in on a path to further decline. Maybe Ford can be turned around. GM and Chrysler are hopeless.
Wow. You couldn't be more wrong. I mean I assume that this has to be snark.
I'm going to say to you the same thing that I said over at Economic Populist when a similar sentiment was expressed.
Consider. 1) If there is not GM, a vital component of the US industrial base that has been our fallback when threatened by foreign enemies is destroyed leaving us at the mercy of enemies who have a very different idea of how the world works than us. 2)The absence of a domestic automotive industry will mean that efforts by the government to reduce our dependence on foreign energy sources will be in the hands of foreign nations. The Japanese transplants have a policy of matching UAW wage rates negotiated with the Big 3. That wage is ~$28 hour. Toyota was caught saying that wages would be cut from the current rate matching UAW wage rates to around $12-14/ hour once GM was pushed beneath the water. Honda doesn't even match pay now. It pays $12-$14 hour in Ohio and Indiana. Unemployment is already floating around 9% in Kokomo and Elkhart in Indiana, Detroit in Michigan, and Flint. Flint's been fucked for a while. If GM falls, so do Indiana, Michigan, and Ohio. The economies of these states are intimately tied to the auto industry, and a GM collapse would mean that unemployment would most likely climb into the double digits. I honestly think that the unemployment brought by a GM collapse in these states would be, far, far worse than the Depression. The ripples would be dramatic. UAW wages keep towns afloat. If those disappear, then the jobs that they support do as well. And before you start praising the Japanese carmakers, read this article. Toyota has greenwashed its labor record. And even in environmental terms, the company has used the decline of GM to expand its presence in SUVs and trucks. Toyota is no facing the same problems with an aging workforce that have caused GM such problems.
1) If there is not GM, a vital component of the US industrial base that has been our fallback when threatened by foreign enemies is destroyed leaving us at the mercy of enemies who have a very different idea of how the world works than us.
2)The absence of a domestic automotive industry will mean that efforts by the government to reduce our dependence on foreign energy sources will be in the hands of foreign nations.
Toyota has had a policy of matching the rate negotiated by the UAW with the Big Three. Pattern bargaining, where one company is chosen as the strike target, and the pattern set by the contract with the lead company is taken as the model for the other two, has meant that the auto industry has had a labor relations model very similar to peak associational bargaining in Europe.
Throughout the Auto states (Indiana, Michigan, Ohio) UAW wages support a large secondary economy. Michigan has lost the most historically from the decline of the American auto industry, but the economy of Indiana is far more dependent on the industry than either of the other two states. Get rid of GM and Chrysler and the economy in these states collapses. All likelihood is that the next release of state level unemployment will show that Michigan has unemployment over 9%.
The collapse of GM would quickly lead to anywhere from 1/10th to 1/4 of the labor force being unemployed in Michigan. The effect would be similar in Indiana and Ohio. That kind of economic shock would insure that the US would see an economic depression.
And as for Ford. Honestly, it's the least prepared to transition to a market dominated by small cars. Ford has clean diesel tech used in the UK that allows the Fiesta to get 65 mpg (and that's US gallons, not imperial)
So why then is it that the "market" is punishing GM and Chrysler, while rewarding Ford?
Because the people making decisions in my country look upon the crisis in the auto industry as an opportunity to attack the power of organized labor. The current market valuation of these firms is reflective of political, not economic, forces. If GM and Chrysler recover, the opportunity to kill off the UAW fades away.
There is class consciousness in America, but it's a characteristic of the upper, monied classes. They understand that taking a personal loss in order to perpetuate an economic order that benefits them as a group over the masses is a good long term policy even if it means taking a hit in the short term. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
NPR: GM vs. Toyota: By the Numbers
Number of Plants in North America Source: GM & Toyota GM: 77, all unionized. Plans to close 12 facilities by 2008 (see press release). Toyota: 12, three unionized in Long Beach, Calif., Fremont, Calif., and Tijuana, Mexico.
Source: GM & Toyota
GM: 77, all unionized. Plans to close 12 facilities by 2008 (see press release).
Toyota: 12, three unionized in Long Beach, Calif., Fremont, Calif., and Tijuana, Mexico.
Average Labor Cost per U.S. Hourly Worker Source: GM & Toyota GM: $73.73 Toyota: $48
GM: $73.73
Toyota: $48
I don't see that it's true that the manufacturing power of GM is somehow needed for military reasons. Any war big enough to require the complete conversion of the GM factories to military production is a war in which very little of humanity is left after a very short time (and the GM factories are reduced to smoldering radioactive waste at any rate).
I honestly don't get what you're saying about Ford. Why would they be the least prepared? And what you're saying about GM and Chrysler's market valuation not being determined by economic contingencies is off in some other reality than the one we live in. Yes, Republicans and a lot of New Dems want to kill the unions. Doesn't determine the fact that the companies are making huge losses because they have sucky cars they're selling for too little money.
GM and Chrysler (Ford, too) are simply in a very poor position right now. I recommend reading the report 'Sustainable Value in Automobile Manufacturing'. There is simply no area in which these companies are efficient, are not trailing their competitors by a significant margin.
These industries are dying due to a number of factors. If these factors are not alleviated, you can pump money in endlessly. But it might be a better idea to improve the economies of the rust belt states by spending that money on something else. As in, provide a comprehensive social reinvestment programme to diversify the economies. It's what the Dutch government did when it closed down the (state-run) coal mining industry in Limburg. Worked out splendidly.
I think that GM's company structure lends itself poorly to global competition. If the US govt. takes over, it should at least sell all foreign factories and brands and move to transform the US business to a 1 or 2 brand model.
After the 2007 GM-UAW contract, hourly labor costs (wage+ benefits) are now lower at GM plants than at most Toyota plants. And hourly labor costs are rising at Toyota as American employees begin to retire.
I'm sorry to say this, but you're not very well informed on this issue, and you've drunk the corporate kool-aid. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
You might as well start from scratch.
And when General Motors can only retain its profitability by paying its workers decidedly less, and moving part of their retirement packages to 401(k)s which can be wiped out in any market crisis - what's the point?
ManfromMiddletown:
I'm sorry to say this, but you're not very well informed on this issue, and you've drunk the corporate kool-aid.
Would you rather spend that amount of time, planning and money on an industry that is highly labour-extensive, produces large negative externalities and has a questionable future, or would you spend it on something else?
As green proponents in charge of crush-and-swap schemes, or working in a combined way with new emissions and energy efficiency standards, GM, Chrysler and Ford could become a useful asset rather than another drain on resources.
In terms of the wider economy, they're collateral damage. A bolder move would be to nationalise big oil. They've worked so hard to own the government, the government should repay the favour. When Exxon's profits are $40bn, managed at the same time that pump prices have been the highest in living memory, there's plenty of room there for more efficient government management of the energy economy with some aggressive intervention.
Nationalising big oil would also remove one of the biggest funding and lobbying blocks against sane transport and energy policies.
I have long despaired of the lack of vision of automotive executives. But better national policy would help steer them in the right direction. They have to figure out that they must build what the country needs, not what they want to sell. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
