Health problems at the Big Three

Health problems at the Big Three
It's not creative production or fewer unions that distinguish other car-producing nations from the US, it's universal healthcare

Michael Paarlberg
guardian.co.uk, Friday 30 January 2009 20.00 GMT
Article history


The civil war never ended, the business press tells us. When Detroit's Big Three CEOs jet-setted to Washington pleading for alms, they provoked a tongue-lashing from Senate Republicans, in particular from southern states hosting transplant car makers from Japan, Germany and Korea. "The financial situation facing the Big Three is not a national problem, but their problem," said Alabama's Richard Shelby. BusinessWeek, Slate, the Wall St Journal and others weighed in on this new salvo in the war between the states. The standard compare-and-contrast lesson reads as follows:

We have, to the north, Michigan. Cold, depressed, hemorrhaging jobs and population: here the economy is dominated by 1950s dinosaurs GM, Ford and Chrysler – all of them cash-strapped, at the mercy of intransigent unions and incapable of making cars that anyone in their right mind would want to buy.

To the south lies Alabama. Fifteen years ago it produced no automobiles. But today, thanks to generous state subsidies, corporate tax abatements and right to work laws, Toyota, Honda and Mercedes-Benz have moved in and made themselves at home. They provide jobs and produce quality vehicles, earning them a place of honour on the state mantle next to Bear Bryant's houndstooth fedoras.

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But there is still a difference – GM is unionised. No car company, no matter how creative in its assembly process, can survive the high costs of union labour. Except that every foreign car manufacturer operating in the US does exactly that – in their own countries. The fact that Toyota is unionised in Japan – as are BMW in Germany, Volvo in Sweden and Hyundai in Korea – but not in the US says more about the weakness of both labour law and unions in the US than the unprofitability of union labour.

Labour costs are indeed high. However it's not wages that drive them, and slashing car workers' take-home pay – as Tennessee Senator Bob Corker has demanded – won't change the cost calculus for GM. All it will do is lower salaries for Toyota workers in Alabama. Foreign car makers in the US remain union-free precisely because they keep their wages benchmarked to those earned by Big Three car workers, in order to minimise the "union difference" that might impel their employees to unionise (currently that difference stands at about $29 an hour at GM to $25 at Toyota). That, plus right to work laws and the thriving "union avoidance" industry stack the odds against any UAW organisers who manage to sneak past plant guards and Jackson Lewis consultants.

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http://www.guardian.co.uk/commentisfree/cifamerica/2009/jan/30/automotive-trade-unions-car-economy

If China and/or India ramp up their production of cheaply made vehicles, and are permitted to export them to the US. Wal*Mart-like dealerships could begin to spring up throughout the country, selling vehicles to the "new" brand of middle-class consumers, most of whom may be unable to afford or qualify for anything else, with the exception of older vehicles, if replacement parts and service are readily available.

The domestics (if any are left by then) may fold, and the Japanese and Koreans could either pull their operations out of the country or perhaps drastically cut wages and benefits (peasant-level) to remain competitive.

has been a way of life thru out my years on this old planet , lets these johney come latelys bring there wages up to us car makers wages and forget this gutting of our good wages for crap wages from japan