The Dozen Auto Companies that Aren’t Going Bankrupt
The “Big Three”–which really should be called the “Broke Three”–have made their pitch for $34 billion in government aid. What’s a few (billion) bucks among friends?
Instead of handing over wads of cash to private companies, wouldn’t it make more sense to simply nationalize the firms? Heck, could the government have done a worse job of running them?
Actually, it isn’t impossible for an American auto company to make money. As the Wall Street Journal points out:
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.
The international car makers aren’t cheering for Detroit’s collapse. Their own production would be hit if such large suppliers as the automotive interior maker Lear were to go down with a GM or Chrysler. They fear, as well, a protectionist backlash. But by the same token, a government lifeline for Detroit punishes these other companies and their American employees for making better business decisions.
The root of this other industry’s success is no secret. In fact, Detroit has already adopted some of its efficiency and employment strategies, though not yet enough. To put it concisely, the transplants operate under conditions imposed by the free market. Detroit lives on Fantasy Island.
Consider labor costs. Take-home wages at the U.S. car makers average $28.42 an hour, according to the Center for Automotive Research. That’s on par with $26 at Toyota, $24 at Honda and $21 at Hyundai. But include benefits, and the picture changes. Hourly labor costs are $44.20 on average for the non-Detroit producers, in line with most manufacturing jobs, but are $73.21 for Detroit.
This $29 cost gap reflects the way Big Three management and unions have conspired to make themselves uncompetitive — increasingly so as their market share has collapsed (see the nearby chart). Over the decades the United Auto Workers won pension and health-care benefits far more generous than in almost any other American industry. As a result, for every UAW member working at a U.S. car maker today, three retirees collect benefits; at GM, the ratio is 4.6 to one.
By some accounts the federal government–president, Congress, Treasury Department, and Federal Reserve–have lent/spent more than seven trillion dollars in bail-outs. Surely it’s time to say no. And the obvious place to start is with ill-managed companies that would be better served by a bankruptcy filing than a federal hand-out.
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I think US auto industry are going down but not Asia cars. Those cars are well known it other countries.
great article.visited your site for first time today,but i must say your write is of top notch and i will surely frequent your site.
We can't do anything about this crisis were facing but to help each other, this manufacturers are in the right spot and decision with this one. As we rearviewed the past, we can see that these car manufacturers are one of the highest business before, they can survive still I can feel.
The Auto market will develop in this year, don't worry.
Very interesting points here - well done.
I mean how much more money can we pour into these guys. I feel for all the innocent people who will be affected, but they have had their chances.
Very good points you've raised here - I enjoyed reading them.
Asia cars survive because they got cheap cars. They are not build for that much pressure not like US autos. Big 3 are the number sellers of trucks and off road vehicles. If they sell those truck cheap they will survive too.
I kinda agree on this, GM would still be selling cars despite the fact that they are in danger... Asian car manufacturers like Toyota and Honda are still strong despite the crisis because of the wuality cars that they are producing... but we will never know...
yeah thats true.. auto industries are doing good despite the crisis... but we are in a wait and watch mode!!!
I think if business is bad let the fail, it is obviously saying that we are not buying those cars anymore. Why put money into saving them when they do not make any money. Give the money to people who deserve it.
When a business has to be bailed out, it signifys that the business is not doing well. Why not put this money into businesses that are starting out, or are doing well to reward them. I hate bailouts.
just now visited the site for the 1st time, impressive article!
just now visited the site for the 1st time, impressive article!