Thursday, November 20, 2008

The Future of the Car Industry: From the Unionized Midwest to the Nonunion Foreign Plants in South

As Detroit's auto makers seek a government bailout, the resilience of their foreign rivals could vault the South to the forefront of the U.S. car industry. Foreign makers have been lured to South Carolina, Alabama and other Southern states over the past decade by generous tax benefits and laws that make it easier to build a largely nonunion work force.

That labor flexibility has emerged as a key advantage during the industry downturn, allowing foreign-owned plants to rapidly downshift in ways their unionized U.S. competitors cannot. Looser work rules are allowing German automaker BMW to lay off up to 733 employees at its Greer, S.C., plant by the end of the year. And Toyota said it plans to let go at least 250 people at a Georgetown, Ky., factory in the first quarter of 2009.

Such moves would be largely out of reach for the Big Three U.S. auto makers, which have been saddled with stricter labor rules as vehicle sales have plummeted. Union rules often guaranteed jobs for workers along with generous benefits and wages that surpass those of most other U.S. manufacturing sectors (see CD post on GM's "jobs bank").

The foreign manufacturers -- which are also reaping benefits of advanced production lines and a more popular lineup of models -- are positioned to grab market share from domestic competitors when demand revives. "If the American car companies died, this is what would replace them," said Laurie Harbour-Felax, an auto industry consultant.

~Today's WSJ: "
South Could Gain as Detroit Struggles"

13 Comments:

At 11/20/2008 7:10 AM, Anonymous Anonymous said...

Why aren't the congressman placing any blame on themselves for the Big 3? THEY made the policies for loose credit. THEY made the policies so that good renters became terrible homeowners. THEY made it so housing skyrocketed and the general public (not knowing how to save and live within their means) took out home equity loans to buy larger and larger vehicles. Even Toyota and Honda were getting into the big truck and SUV business. They're not free from guilt.

Yes, the Union costs have been an issue. But they're being addressed. By 2010 (not THAT far away), much of that cost comes off of the Big 3's books. The Big 3 have been actively restructuring over the past 3+ years. It takes time to turn a huge ship. And the roots of the Unions were necessary in the past, it's unfortunate that the Union got greedy and became too powerful. But as an example of being able to make a viable business for the auto industry, Ford was able to actually MAKE A PROFIT earlier this year. It took the financial sector meltdown of a century (again CREATED BY THE POLICY MAKERS) to cause a system wide crash.

Are the Big 3 without sin? Of course not. But are all of those legislatures?!?!? No. They asked the CEOs if they'd cut their pay to $1 per year. Are the policymakers willing to make the same deal for themselves? How dare they think they are not to blame for any of this. Where's THEIR accountability? How much waste/fat/pork are politicians responsible for? Shameful.

I'm shocked that they bailout AIG and those goofballs and then they decide to get tough with the Big 3 while Rome is burning to the ground. Keep the Big 3 afloat now...make necessary punishments/regulations/whatever later. Regardelss, the Big 3 will have to shrink even with the money. But at least there wouldn't be an extra shock to the U.S./World economy that's already on life support.

Are the policymakers regulating/disiplining the banks that are hoarding the BILLIONS that were given to them? Gee..they're still paying out dividends and, oh yeah, Bank of America is buying into some Chinese Firm. How is that not RECKLESS?

 
At 11/20/2008 7:17 AM, Anonymous Anonymous said...

I'd also like to see how much $ the southern Senators are pocketing from the Japanese automakers for their posturing in protecting them and their plants in Alabama and such. Senator Shelby, I'd guess, is getting some kick back from Toyota for his posturing.

 
At 11/20/2008 10:32 AM, Blogger save_the_rustbelt said...

One unspoken piece of the agenda is to destroy unions, and more specifically to destroy pensions for blue collar workers.

Keep those bent backs working as long as possible, when they get tossed out of the factories they can provide cheap labor for Wal-Mart and Home Depot.

The Big 3 and the UAW made plenty of mistakes, and may fade away anyway.

Letting them die quickly in the midst of a credit crisis and a recession may not be such a good idea.

The transplants have done a masterful job of aligning with the southern cracker wing of the GOP. Come to think of it, if present trends continue the southern cracker wing may be the only viable wing of the GOP, as it becomes a permanent minority party.

 
At 11/20/2008 11:42 AM, Anonymous jrich said...

Anon 7.17...for whom was Senator Shelby posturing when he led the opposition to the bank bailout? I'm sure Regions (one of the top 10 banks in the country and headquartered in Birmingham, Alabama) was rooting for the bailout the whole way.

 
At 11/20/2008 12:38 PM, Blogger Colin said...

No one is advocating destroying the unions. The unions have done that themselves. We just don't believe it is our job to save them.

 
At 11/20/2008 1:11 PM, Anonymous Anonymous said...

Don't think that the Big 3 don't want the unions. That's why the union costs will be coming off of the Big 3 books in 2010. If it's the unions you have issues with, then focus on the unions and not the Big 3. There are way more people affected with the Big 3 that are not part of the union.

 
At 11/20/2008 1:11 PM, Anonymous Anonymous said...

Oops...I meant "Don't think the Big 3 WANT the unions..."

 
At 11/20/2008 3:49 PM, Anonymous Eric H said...

"focus on the unions and not the Big 3"

It is the Big 3 that is asking for my money AFTER I have bought their vehicles, paid 67% markup on parts, been turned away for "discontinued" parts on 8 year old vehicles, etc.

The Big 3 can go withdraw their bailout from their own "job bank".

 
At 11/20/2008 4:01 PM, Anonymous Michael Smith said...

Is the UAW so irrational that it will see its jobs disappear entirely rather than renegotiate a contract that cuts GM, Ford and Chrysler's costs?

Unbelievable.

 
At 11/20/2008 5:44 PM, Anonymous Anonymous said...

"Is the UAW so irrational that it will see its jobs disappear entirely rather than renegotiate a contract that cuts GM, Ford and Chrysler's costs?

Unbelievable."

No. They are probably pretty certain of some sort of federal aid. They have had the 25 billion for 're-tooling' passed by Congress (the energy efficiency gift).

The UAW's long term strategy is to get those southern plants unionized. They probably have a good chance with Obama as president. The end of secret ballots is going to be pretty nasty for consumers.

 
At 11/21/2008 6:58 PM, Blogger @sethstorm said...

One unspoken piece of the agenda is to destroy unions, and more specifically to destroy pensions for blue collar workers.

Save_the_rustbelt:
I agree 100% on that idea. The only problem is that you won't have any of the opposition want to admit it. Of course they will speak of it loudly if they are given the victory they secretly want.


The transplants have done a masterful job of aligning with the southern cracker wing of the GOP. Come to think of it, if present trends continue the southern cracker wing may be the only viable wing of the GOP, as it becomes a permanent minority party.

Now if you take down the pillars that have driven unionbusting in the last 30 years, the South loses its advantage.


Senator Shelby, I'd guess, is getting some kick back from Toyota for his posturing.

Never mind what states such as West Virginia (safely in Toyota's control) get for theirs.

 
At 11/21/2008 8:57 PM, Anonymous jrich said...

I'm not sure about other Senators, but the argument that Senator Shelby in particular enjoys some kind of kickback from Hyundai, Honda or Mercedes because they're in Alabama would hold a lot more water if Mr. Shelby had supported the financial sector bailout before the current Big 3 bailout.

As I pointed out above, Regions Bank, headquartered in Birmingham, stands to benefit from the financial bailout, yet Senator Shelby (and Senator Sessions)stood against that bailout. Logically, if they were "posturing" or enjoying "kickbacks," they should have voted for the previous bailout for the sake of a bank the size of Regions.

Of course, the argument for kickbacks specifically for Mr. Shelby would also make more sense if it actually involved a automaker that operates in his state, but since when were logic or facts ever really important, right?

 
At 11/22/2008 11:54 AM, Blogger dr droock said...

I usually disagree with much I find here. But I think this one is right on the money. Nice!

 

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