Posted on 11/21/2008 6:08:15 AM PST by Kaslin
Who killed the U.S. auto industry?
To hear the media tell it, arrogant corporate chiefs failed to foresee the demand for small, fuel-efficient cars and made gas-guzzling road-hog SUVs no one wanted, while the clever, far-sighted Japanese, Germans and Koreans prepared and built for the future.
I dissent. What killed Detroit was Washington, the government of the United States, politicians, journalists and muckrakers who have long harbored a deep animus against the manufacturing class that ran the smokestack industries that won World War II.
As far back as the 1950s, an intellectual elite that produces mostly methane had its knives out for the auto industry of which Ike's treasury secretary, ex-GM chief Charles Wilson, had boasted, "What's good for America is good for General Motors, and vice versa."
"Engine Charlie" was relentlessly mocked, even in Al Capp's L'il Abner cartoon strip, where a bloviating "General Bullmoose" had as his motto, "What's good for Bullmoose is good for America!"
How did Big Government do in the U.S. auto industry?
Washington imposed a minimum wage higher than the average wage in war-devastated Germany and Japan. The Feds ordered that U.S. plants be made the healthiest and safest worksites in the world, creating OSHA to see to it. It enacted civil rights laws to ensure the labor force reflected our diversity. Environmental laws came next, to ensure U.S. factories became the most pollution-free on earth.
It then clamped fuel efficiency standards on the entire U.S. car fleet.
Next, Washington imposed a corporate tax rate of 35 percent, raking off another 15 percent of autoworkers' wages in Social Security payroll taxes
State governments imposed income and sales taxes, and local governments property taxes to subsidize services and schools.
The United Auto Workers struck repeatedly to win the highest wages and most generous benefits on earth -- vacations, holidays, work breaks, health care, pensions -- for workers and their families, and retirees.
Now there is nothing wrong with making U.S. plants the cleanest and safest on earth or having U.S. autoworkers the highest-paid wage earners.
That is the dream, what we all wanted for America.
And under the 14th Amendment, GM, Ford and Chrysler had to obey the same U.S. laws and pay at the same tax rates. Outside the United States, however, there was and is no equality of standards or taxes.
Thus when America was thrust into the Global Economy, GM and Ford had to compete with cars made overseas in factories in postwar Japan and Germany, then Korea, where health and safety standards were much lower, wages were a fraction of those paid U.S. workers, and taxes were and are often forgiven on exports to the United States.
All three nations built "export-driven" economies.
The Beetle and early Japanese imports were made in factories where wages were far beneath U.S. wages and working conditions would have gotten U.S. auto executives sent to prison.
The competition was manifestly unfair, like forcing Secretariat to carry 100 pounds in his saddlebags in the Derby.
Japan, China and South Korea do not believe in free trade as we understand it. To us, they are our "trading partners." To them, the relationship is not like that of Evans & Novak or Fred Astaire and Ginger Rogers. It is not even like the Redskins and Cowboys. For the Cowboys only want to defeat the Redskins. They do not want to put their franchise out of business and end the competition -- as the Japanese did to our TV industry by dumping Sonys here until they killed it.
While we think the Global Economy is about what is best for the consumer, they think about what is best for the nation.
Like Alexander Hamilton, they understand that manufacturing is the key to national power. And they manipulate currencies, grant tax rebates to their exporters and thieve our technology to win. Last year, as trade expert Bill Hawkins writes, South Korea exported 700,000 cars to us, while importing 5,000 cars from us.
That's Asia's idea of free trade.
How has this Global Economy profited or prospered America?
In the 1950s, we made all our own toys, clothes, shoes, bikes, furniture, motorcycles, cars, cameras, telephones, TVs, etc. You name it. We made it.
Are we better off now that these things are made by foreigners? Are we better off now that we have ceased to be self-sufficient? Are we better off now that the real wages of our workers and median income of our families no longer grow as they once did? Are we better off now that manufacturing, for the first time in U.S. history, employs fewer workers than government?
We no longer build commercial ships. We have but one airplane company, and it outsources. China produces our computers. And if GM goes Chapter 11, America will soon be out of the auto business.
Our politicians and pundits may not understand what is going on. Historians will have no problem explaining the decline and fall of the Americans.
Agreed. So it is a question of who HAS the tanks and the will to claim territory. Who can produce them is not the issue. Heavy industry - like the big 3 - do not have much of a strategic value. Days of the T-34 and the Shermans are long gone
As far as the A-10 being defensive, the retreating Republican Guard in Desert Storm may beg to differ. A tank full of depleted uranium holes will hold its ground pretty well because it won't run any more.
“I read Pat’s well-argued column to say it’s all of the above: UAW, bad management, and Government intrusion into the market.”
If you look at Detroit’s most pressing current problems: labour cost disadvantage, pension and retiree medical costs, too many dealers, too many brands, bad quality, wrong product mix - most of these point to the consequences of caving into the UAW.
Even the product mix is skewed by the unions, if suvs have more profit, it helps offset higher labour costs. The bad quality is partially a result of product cost cutting to offset higher labour costs.
I say unions and bad management are the cause. The transplants thrive with the same regulatory constraints on plants and vehicles, but they were smart enough to locate where they can keep the unions out, and plan their products and build quality for the long term.
Trade restrictions are a red herring, Detroit can’t expect to sell large numbers of cars in a high gas tax country like Korea - hell, they are struggling in their home market where gas is 1/3 of the price.
GM management was/is weak, greedy and stupid. I was rereading “On a clear day you can see GM” last night. Even by the mid-60’s according to DeLorean, GM’s market research was showing there was a clear movement of younger buyers to smaller cars. GM’s outside directors were asking why GM wasn’t doing anything on small cars. The answer was that big cars were more profitable, so who cares. That’s short sighted when you intend to be in business in the future, but it works if you are only interested in the easiest path to next year.
If GM started a long term strategy 30 years ago to move to Dixie like the transplants did and get the UAW out of there we wouldn’t be commenting on this news story tonight. If GM had also taken it’s own market research seriously and planned its products for the future and kept the quality up they would still have 50% of the market.
That is so right. They’ll take the money, invest in India and China, and not bother innovating new products with new technology. This is why China is becoming so successful is because they’re designing new products with new technology and paying their engineers a bundle to do it.
That is EXACTLY what scares me. And congress is too stupid to stop them. Let me repeat. TOO STUPID ! !
I live here and come from a GM family. You have exactly nailed it. Every aspect. I commend you. Others read what he said. But it is solvable with a lot of pain. More pain if they go bankrupt
Thanks for the compliment.
One other point I wanted to make, but the post was getting too long. Auto assembly is almost uniquely vulnerable to strikes because of just-in-time. Detroit needed to switch to JIT to be competitive with the transplants.
But JIT gives the most self destructive morons in the chain the ability to shut down the entire operation. (see Americal Axle strike).
GM parts suppliers are much more heavily unionized with UAW locals that are more militant and brain-dead (again see American Axle strike).
Any turnaround for GM has to deal with the UAW issue for both GM and it’s suppliers. Either a no strike contract, or better yet, get them out of there.
J.I.T. or "just in time" manufacturing is a good idea in concept, however, it lends itself to incredible logistical problems many of the practitioners and advocates don't want to admit. ("Lean Manufacturing," another touchy-feely nomenclature, is the same.)
I view it as a useless middle management excuse for not enforcing the unpopular idea of an efficient workforce. A 'leave it for the other guy' or 'blame it on the other guy' mentality instead of people actually being expected to get the work done. "Collaborative education" is another similiar crutch.
This whole New Age management style avoids actually compensating the more productive employees in favor of making the less productive "feel better" about their jobs. If one person can do the work of three, this management style stifles that productivity and innovation.
Oswald
True-but you got Wall Street et al brainwashing Americans into believing their evolving finance based economy is a good thing. It’s not. America will find herself broke as we are now and second rate. These rats think they are more important than they are.
I almost threw up last night listening to one of the finance channels talk about how Citibank ‘was to big to fail’ and would be bought out-not even American owned anymore, while the auto industry should just fold-there must be blood you see-but not theirs. They believe they can push paper around, but this does nothing to create real wealth. You must have something to offer the world in terms of hard goods.
Also, the idea that Americans should not receive decent wages, benefits or any sort or retirement is awful. I don’t mean unions either. I mean ordinary people. We will have no money to buy homes, cars or even to send our children to college if they get their way. This economy will make a few influential wall street bankers rich, but the rest of us will be facing a much reduced standard of living.
Good to see you back. I think we agree about the value added of the financial economy vs. the real economy - if not on the preferred strategy to save GM.
Wrt GM, one of the things that has really confused me is the lack of Wall Street pressure for a bailout that avoids bankruptcy. Reason, there is $1 trillion (!) of credit default swaps written against a GM debt default.
http://www.globalresearch.ca/index.php?context=va&aid=10535
I’m just surprised that the people who will have to pay up in the event GM bankruptcy occurs have not been more aggressive in supporting the bailout.
The UAW wasn't the only factor, but they sure as heck pulled the trigger.
5.56mm
If that theoretical battle you submit lasts more than a week or two, you bet your bippy that manufacturing capability starts to matter.
PJB is frothing at the mouth again.
Big deal. Who cares about these smokestack dinosaurs, anyway? After all, we can still fall back on the lucrative money changing and paper pushing industries of banking, finance, and stock and bond trading. Oh, wait a minute. Never mind.
Everyone has an idea how the big three can be saved including chapter 11 and a new start. I suggest four things that will get the big three back in business. 1. The government should immediately eliminate all 8 cylinder engines and replace them with small sixes and 4 cycle. 2 Reduce the union workers wages by at least 20 % and tell them if they don’t like it go get a job somewhere else. 3 Reduce upper managers and CEO wages by 30% to 40% depending on their level. 3 Reduce all pork including private jets and travel. 4 If all of these don’t work then the government should eliminate the import and manufacture of all foreign cars in the USA. If this does not get the hourly wage to manufacture cars by the big down to $48 nothing will.Its about time we stop relying on foreign countries to provide our important products. I might add that no one seems to know why it cost $48 to produce a foreign car in the USA and $75 to produce an American car using the same labor and paying the same taxes. If the other twenty seven dollars is needed to pay the big USA management wages then why don’t the big three fully change their companies to the identical structure as the smart foreigners? Its amazing the big three has lasted this long.
We need to make our own steel again - that truly is a national secrity requirement.
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