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The Auto Industry: To Rescue or Not To Rescue
By Jon Menaster | December 1, 2008
Today’s Wall Street Journal has an interesting opinion piece entitled America’s Other Auto Industry: There is such a thing as a profitable car maker in this country. The article is all about while the big US automakers are struggling to stay afloat, the non-US automakers who have manufacturing plants here in the US are still making it happen. One of the biggest reasons: unionized labor. US companies have them, foreign companies don’t, for the most part. Who are these foreign companies? According to the article:
These are the 12 “foreign,” or so-called transplant, producers making cars across America’s South and Midwest. Toyota, BMW, Kia and others now make 54% of the cars Americans buy. The internationals also employ some 113,000 Americans, compared with 239,000 at U.S.-owned carmakers, and several times that number indirectly.
I think that the unions need to realize that they have to work with the automakers to come to a fair deal; it’s better to have some form of auto industry in the US than none (at least for the workers). I also think it’s interesting to note that the US owned carmakers employ a little more than twice as many as foreign producers do; not the hundreds of thousands (or even millions) that pundits have been throwing around as of late.
However, it’s also important to realize that the US auto companies knew that they had higher labor prices due to union contracts which have been around forever, perhaps they should have looked into other avenues to lower costs and become more competitive? Maybe even spending more money on R&D and coming up with a fancy electric car (a la Tesla) or some sort of hybrid that consumers are willing to pay more for due to some sort of “I’m saving the planet” hysteria, which will allow them to exploit the so-called environmentalists and earn higher profits than they would otherwise.
So what’s the verdict? As the article explains:
There’s no natural law that America must have a Detroit automotive industry, any more than steel had to be made for all time in Bethlehem, Pennsylvania or textiles in New England. Britain sold off all its car plants to foreigners and was no less an advanced economy as a result, though it was a healthier one. Detroit may yet adjust to avoid destruction in the best spirit of American capitalism. The other American car industry is a model for how to do it.
I agree completely - if Detroit is going to be saved it must do so on its own, and not at the expense of the taxpayers. Giving the big automakers a bailout without a complete re-tooling of the way they do business would just result in another outstretched hand six months down the line. After that, maybe another industry or two would ask for the same thing. Government should try and stay out of the free market whenever possible, a lesson that has seemingly been unlearned over the past year or so.
Topics: Business |