Time to Make Detroit Job-Efficient
Holman Jenkins adds a great observation about the auto bailout in today’s WSJ:
What you wouldn’t know is that the single biggest factor in preserving the UAW’s monopolistic power has not been labor law but Congress’s fuel-economy rules. These effectively have required the Big Three to lose tens of billions making small cars at a loss in UAW factories. Not only were the companies obliged to forgo profits they might have earned importing such cars, but CAFE deprived them of crucial leverage to control labor costs by threatening to move jobs to a factory in Spain or Taiwan or Poland. (Let’s face it, that’s what other successful U.S. manufacturers do.)
All this was deliberately designed to give the UAW the means to defend uncompetitive wages in the face of a globalizing auto business. It had nothing to do with making sure Americans have high-mileage cars. Yet not a single legislator last week breathed a hint of recognition that something might be behind Detroit’s woes other than an improbable series of “stupid decisions” (as another Massachusetts congressman put it) by 18 CEOs over 30 years.
Read the rest of the piece because Jenkins makes some good points and we’re going to back in the middle of the Detroit free-for-all on Monday. There’s no excuse for the Auto CEOs to have come to Washington without a better plan. Yet, it reminds us that not a single bank executive has been asked to submit a plan or justify their bailout. In the annals of mismanagment, Wall Street has it over Detroit by a mile. And the Wall Street CEOs can’t blame foreign competition or labor unions for having driven the banking system over a cliff.
Source:
A Car Wreck Made in Washington
Can Democrats afford to let Detroit succeed?
HOLMAN JENKINS
Wall Street Journal, November 26, 2008
http://online.wsj.com/article/SB122765959966358461.html
November 26th, 2008 at 1:35 pm
You should know better than to take any claim of the WSJ editorial page at face value. They lie with the facility that most people breath.
First, he overstated the effect of the separate fleetd (Domestic auto, imported auto, light truck) because of the fungability of credits.
Second, he ignores the fact that UAW is now less expensive than the transplants, and the additional costs are ENTIRELY an artifact of having more retired and older workers.
As to big 3 (big 2 1/2) management, they are blithering idiots, and they have been for years.
Flying to Congress to beg for money on a private jet is stupid.
I will also note that Ford is doing better (though not well) than the rest of the big 3 (big 2 1/2) because decisions made over the last decade to attempt to address things like global warming, and so had product to match a need for increased fuel economy.
I would also note that however incompetent the management of the big 3 (big 2 1/2) has been, it pales to that of Wall Street, where they have not just wrecked their own businesses, but the whole economy.
Proof positive that excessive bonuses do actually reduce performance, as research has shown, see http://40yrs.blogspot.com/2008/11/big-bonuses-make-you-stupid.html
http://40yrs.blogspot.com/2008/11/big-bonuses-make-you-stupid.html
November 26th, 2008 at 1:59 pm
I heard about you from KFI and the John & Ken Show. Besides the union and management at the bargaining table, can’t the american people have a consumerist present to represent their concerns? While some may argue that would just drive the cost of cars up, wouldn’t it actually have produced more pressure on the unions and management to not be so narcissistic in their negotiations?
~~~
EDITOR: That would be Barry — this article was written by Marion Maneker
November 26th, 2008 at 2:16 pm
Hate to admit it, but I’m eating a sandwich and couldn’t stomach reading the whole article. But seeing some of the other things he’s written, I’m surprised he’s not on the staff of the AEI.
This is simply part of the right wing movement that sees a chance to break a union and to deflect blame from the same kind of executive incompetence that we have seen in Wall Street. It’s also a chance to beat the drum for outsourcing. BTW, illustrating the wonderful, low cost manufacturing model of China, there are reports of rioting due to layoffs in toy factories. Yes, the UAW contracts and retirement packages are a problem and need to be revised to comport with reality, unfortunately probably with the help of taxpayers.
But, if the basic thesis is correct, why is it that the Big 3 themselves have lobbied so hard against higher CAFE standards for so long? Is anyone so naive as to really believe that it is the UAW’s fault that GM and Chrysler have such crappy dinosaur designs? I needed a new car last Fall. I wanted something in the Camry-Avalon class and was willing to go with American. But, I wanted vehicle stability control. No Detroit vehicle even made the first cut because it wasn’t available even as an option on the competitve models. I could get it with Honda and Toyota. Was that the UAW’s fault? Didn’t know the engineers were union members.
When the stability problems with the behemoth Explorer SUV’s were uncovered, there was pilgrimage of car industry lobbyists to the the congressional committee members to make sure nothing was actually done. With John Dingell in a powerful chairmanship, it was pretty easy for them to block changes.
GM had cars with airbags that worked great back in the late 1970’s, yet it fought the airbag regulations tooth and nail.
There has just been a long-term management culture there that seems to view change or innovation as a danger and something to be put off as long as they can keep things going and hang onto their positions.
November 26th, 2008 at 3:33 pm
“These effectively have required the Big Three to lose tens of billions making small cars at a loss in UAW factories.”
Yeah right! The WSJ is on my Do-Not-Suscribe list for a good reason. This article is one of them.
Has Holman Jenkins ever <a “href=http://www.businessweek.com/magazine/content/08_37/b4099060491065.htm?chan=autos_autos+–+lifestyle+subindex+page_top+stories” heard of the Ford ECOnetic?
“Ford’s 2009 Fiesta ECOnetic [a sporty subcompact that seats five, offers a navigation system, and gets a whopping 65 miles to the gallon] goes on sale in November. But here’s the catch: Despite the car’s potential to transform Ford’s image and help it compete with Toyota Motor (TM) and Honda Motor (HMC) in its home market, the company will sell the little fuel sipper only in Europe. “We know it’s an awesome vehicle,” says Ford America President Mark Fields. “But there are business reasons why we can’t sell it in the U.S.” The main one: The Fiesta ECOnetic runs on diesel.”
Let me get this straight: Diesel, thanks to tax surcharges cost more than gasoline, say 45 cents to a dollar more per gallon. The ECOnetic give you 65 miles per gallon…do the math!
Does one save or not?
Answer is yes.
“Yet while half of all cars sold in Europe last year ran on diesel, the U.S. market remains relatively unfriendly to the fuel.”
That was then, we are now. With the severe economic downturn, how unfriendly would you remain to a car that save you a sizeable amount of money?
Another point in this article that requires explanation: How is it that CAFE standards prevented the automakers to import cars meeting that standard? Are we to believe that CAFE regulations mandate American-made design and assembly? Is there text in the law that specifically states that UAW shall be the sole makers of CAFE-compliant cars, as the article suggest? Not quite, since CAFE is a federal standard; all automakers present in the US market must comply. Did Toyota, Honda et al. were also “effectively required to lose tens of billions making small cars”?
As for the suggestion of Mr. Maneker to read the rest of the article, I say “Thank you, but I’ll pass”. I do not need to eat the whole meal to know if a cook is horrible or not.
November 26th, 2008 at 3:35 pm
Just realized that WordPress is hostile to Preview Your Post feature, as well as allowing a poster to include links.
Sorry for the resulting garbage on my previous post.
November 26th, 2008 at 5:34 pm
In fact, Toyota and Honda make (some of) their small, fuel-efficient, _best-selling_ cars **in the US**. This smells like a con job attacking both unions and CAFE at once… I think Jenkins overreached, though.
November 26th, 2008 at 6:34 pm
The WSJ Opinion pages, eh? Wait, let me guess. Deregulation combined with eliminating competitive bargaining is the solution. What’s the problem again?
“What you wouldn’t know is that the single biggest factor in preserving the UAW’s monopolistic power has not been labor law but Congress’s fuel-economy rules. These effectively have required the Big Three to lose tens of billions making small cars at a loss in UAW factories.”
If this was a “great observation,” then Mr. Jenkins would have drawn this out with pretty little pictures for us plebes. The CAFE laws are rather complex and so the claim that CAFE rules “effectively have required” anything justifies some explanation… or maybe it’s just smoke to cloud the issue.
Here in the real world, the single biggest factor in driving up manufacturing costs for the Big Three has been the burden of a large retiree pool that draws heavily on the pension and health care plans. Nationalize health care in this country and the auto industry will have breathing room, as will state and local governments, high tech, and every other sector we have left. We have the least efficient health care in the first world. This creates an enormous drag on our competitiveness in the world markets.
November 27th, 2008 at 9:44 am
Francois:
You can insert raw html, but can’t preview it. Also, you can just copy and paste links and Wordpress recognizes them and posts them as links. But they do not look pretty.
November 28th, 2008 at 2:02 pm
Just apply the sniff test and see if the Japanese car companies can make money in the same markets as the American car companies.
If they can (and they CLEARLY can), then it is not the regulations that they both operate under.
I spent a good chunk of my life in General Motors (and am even a graduate of the faded-away General Motors Institute, so I have some deeper understanding of how GM works than the normal man in the street), and I contend that the problems of GM (and by extension the American auto industry) lie about half with the UAW and half with the bloated, incompetent management structure of the car companies.
Just ask Ross Perot, who abandoned his attempts to wake up GM (amid board meetings with members literally falling sleep), and sold off the goodly chunk of it that he acquired when he sold them EDS.
What we have here is a contest between the UAW and corporate management to see which of them can tear the biggest chunk of flesh from the corporation. Both are equally complicit in their destruction of the car companies.
Bankruptcy — chapter 7 not 11 — is the best answer for these morons. We don’t need an American auto industry, at least not one run by these two power groups. If you want to sweep out the UAW, then you have dealt with only half the problem. Getting rid of all of the senior management, and a lot of the management below them, restructuring the companies for fewer feudal power centers and redundancy, and eliminating about half the layers of management would be a good start on fixing the other half of the problems. But it’s a lot easier to simply sweep the whole mess into the dustbin of history.
Holman Jenkins is an ideological idiot, driven not by any desire to fix the domestic auto industry, but rather to attack unions and anything even vaguely associated with democrats. He’s one of the neocon buffoons that occupy the editorial section of the WSJ, and one of the reasons that the Journal is steadily shrinking in every aspect of its existence.