Against The Bailout

Let’s be clear: there is not a widespread problem in the automobile industry- Toyota, for example, will earn a profit this year of $5.9 billion.

Nor is there a widespread problem with the automobile industry in the United States- Volkswagen, for example, is opening a massive new plant in Tennessee.

The only folks in the auto industry in deep, deep trouble are the Big Three- Ford, Chrysler, and GM.

Want to know why? Well, this little graphic, from Investor’s Business Daily should help you figure it out:
Auto Bailout gap

As the accompanying editorial points out:

As the chart shows, gold-plated union contracts are a big reason for U.S. automakers’ woes (though managerial incompetence at the Big Three also played a role). The average Big Three worker made $73.26 an hour in 2006; the average worker at a foreign transplant, $44.20. Bailout foes wanted the gap to be shrunk by the end of next year.

A chart making the rounds on the Internet tells it all: Last year, Toyota made 9.37 million vehicles. GM, virtually the same number. Yet, Toyota made a profit of $38.7 billion on its global operations, or $1,874 per car, while GM lost $38.7 billion, or $4,055 a car, almost entirely due to its operations in the U.S.

Even so, the UAW vowed to make no big changes unto 2011, when their current deal expires. That basically would lock in the Big Three’s lack of competitiveness for at least three more years, requiring billions and billions more in bailouts or bankruptcy.

Columnist David R. Stokes notes the difference between union and non-union shops in cost:

Workers at a Toyota plant in Kentucky, a non-union shop, receive about $47.00 per hour in wages and benefits. That translates to about $98,000.00 per year (not counting overtime). Those doing essentially the same job at GM, Ford, or Chrysler – whose assembly line workers are members of the United Auto Workers union – receive roughly $71.00 per hour – or about $150,000.00 annually (again, minus any overtime).

And yet despite the obvious need for reform, I am doubtful the powerful United Auto Workers union will be forced to make the sacrifices needed to be competitive. Echoing a point I made before the election, Stokes explains why the UAW probably knows it will soon get whatever it wants:

The United Auto Workers is a formidable foe with a new best friend moving into the White House.

We will soon find out if President Bush or our new president intend to “reward failure.”

1 Comment »

  1. Administrator said,

    December 16, 2008 @ 6:30 pm

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