Setting Up Their Own Failure, The Automotive Industry

The automtive industry is in peril and the only options according to our appointed leaders are either bail out or let fail.  However, myself and others feel there is a gray area to the economic problem facing domestic auto makers.  Specifically in the way we handle imports, current goals by the Big 3, and the impact unions have on the cost of a new car.  I intend to detail some other ideas that could benefit us in the long run and dont’ involve a black or white approach to the US economy.

Low Domestic Sales

Tariffs could be the automotive industries new best friend and it can be implemented almost immediately.  The immediate effect would be higher priced imports, thus giving domestics an advantage in the market place.  Those opposed to Tariff increases stand behind unfair trade and potential to damage world trading, but I feel now is the time to act.  Furthermore there would be more incentive for manufacturers to bring their plants to the US, providing more jobs for Americans.

Domestic cars and trucks are quality vehicles and often times can compete equally with their import counter parts.  Somewhere within recent years there has been a stima placed on domestic vehicles and the idea that buying imports was the ‘green’ thing to do.  In reality domestics compete on a level playing field in fuel economy, quality, and dependability.  Therefore I believe the real deal breaker amongst new car buyers is price and we have a tool to tilt the scales in the domestic’s direction.

Automotive Industry Goals

I’m beside myself at the expectations automotive manufacturers have on the American consumer.  For example, for their sales models to succeed they expect people to buy new cars every 3 years.  How is this possible in a thriving economy, let alone in one that’s tanking?  The cost of a new car is far too high to expect buyers to be looking at a new vehicle every 3 years.  Also, consider the quality of cars nowadays, they last much longer than 3 years so replacement is not necessary, but a want.

Scaling back on production should be a new goal for domestic automotive makers.  Americans cannot afford the replacement cost of a new vehicle every 3 years, nor should they have to.  Banks have helped in furthering this belief of ‘need’ to replace a vehicle every 3 years and that’s how people become upside down on their car loans.  Up until recent months most banks were happy to take zero down on a new vehicle AND roll over their previous vehicle purchase balance.

Unions Are Costing Too Much

Despite what this article may lead you to believe, I am not anti-union.  I just believe Unions have a time and a place, the domestic automotive industry does not fit that bill.  It wasn’t too long ago that GM started buying out UAW workers to replace them with comparable lower cost workers.  The structural costs of keeping union workers on the line was driving the cost of vehicles through the roof and eating into GM’s profits.

As of September 2007 the hourly wage, including benefits, or a UAW worker was over $70 per hour.  Toyota employees on the other hand were only being paid around $50 per hour for the same work.  Considering how many employees are involved in the UAW, union dues being paid, and quality of labor these higher wages are just not justified.  It’s costing the Big 3 too much money to produce a similar vehicle to imports, to start saving American jobs in the long run wages and benefits need to start being cut now.

I feel now is the time to start eliminating union involvement in the auto industry.  For domestic auto makers to be competitive in a world market it’s going to take getting lean and the union currently holds the fat.  Membership of the UAW has been taking a steady dive since 1979 and perhaps 2008 or early 2009 should finally be the nail in the coffin.

I’m against a bailout and look forward to the return of a free market.

One thought on “Setting Up Their Own Failure, The Automotive Industry

  1. Car mechanic mark

    Your three bullet points are right on target. I work for a large government fleet as a mechanic. Our fleet is all ford , dodge and Chevrolet. We are due to replace these vehicles in the last quarter of 2009. Could you imagine if we had to buy 2300 Toyota’s. It would not seem right.

    I would also like to state that I support the unpopular car Czar Idea. As long as it is someone who the industry respects like Lee Iacocca or Carol Shelby or both! Imagine the all new 2009 Carol Shelby edition Hybrid K-car!

    Reply

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