Sunday, December 14, 2008

Big Three, Meet the Anti-Detroit "Little Eight"

SLATE.COM -- Time was, the Big Three were the U.S. auto industry. No longer. Over the past two decades, enticed by cheap labor and massive incentives, a second auto industry has emerged: nonunion, Southern-based, and foreign-owned. Large plants, with names of Asian and European carmakers emblazoned upon them, now dot the Southern landscape. By moving aggressively into Kentucky, Tennessee, Alabama, Mississippi, South Carolina, Georgia, and Texas, foreign manufacturers—call them the "Little Eight"—have transformed the economic geography of the nation's auto industry and the political debate surrounding its future.

Today's Southern solons have watched their local economies blossom thanks to a younger, more-vibrant auto industry unencumbered by the Big Three's legacy costs and union work rules—a sort of anti-Detroit that has the flexibility and ability to turn profits by making the types of cars that Americans actually want to buy.

19 Comments:

At 12/14/2008 10:27 AM, Blogger Walt G. said...

The UAW can do something about the work rules, and we have. Maybe we will have to see how the U.S. deals with Social Security, Medicare, and the national debt and copy them about legacy costs. If they have the guts to throw old people out in the cold, maybe we will do likewise. You know, Toyota workers will retire in a few years with decimated 401(k)s; they will be needing some help from somewhere. Legacy costs can get transferred to the public very quickly.

Where did all the money to build those plants in the South come from? And who paid to train their workforce? They were heavily subsidized by governments, too. Don’t let hatred of unions cloud your judgment on how businesses operate in the U.S. in the 21st century.

 
At 12/14/2008 11:18 AM, Blogger @sethstorm said...

In other words look forward to the models that don't know about affordable performance. They only listen to the "lifestyle environmentalists" and produce accordingly. Then they make a nod to affordable,powerful trucks while forgetting to do the same thing to cars.

The South is not the solution to our problems. It is the problem.


Don’t let hatred of unions cloud your judgment on how businesses operate in the U.S. in the 21st century.

They're stuck on fulfilling the demand of the 1980's - finish off the unions, break Detroit.

Language like "Anti-Detroit" in this context is more proof of such division.

 
At 12/14/2008 12:15 PM, Blogger Plamen said...

Walt G., you say: "They were heavily subsidized by governments, too."

Fair enough... but they MAKE A PROFIT and pay taxes, thus returning the money invested by governments in luring them! The Detroit Three cannot make money with all the subsidies they have received, and are now asking the government to take from you and me, and subsidize them when no sane lender would. All the while until very recently there were thousands of employees there getting paid wages they could not get anywhere else with the skills/education they have, for doing exactly squat.

Do not let love of unions cloud your judgment about how businesses operate in the world in any century.

 
At 12/14/2008 12:25 PM, Blogger Walt G. said...

Plamen,

I agree. What we've done in the past will not work in the future. I think the 2007 agreement is a landmark agreement; even our detractors agree. Everyone who criticizes the UAW should read it. I don't think it was too little, but it might have been too late.

As far as the Japanese business practices, even I could take a bunch of healthy 20 and 30-year-old white guys and make money building cars (they try to weed out non-whites and females from their workforce). If the Japanese do not support these guys in 30 or 40 years, U.S. society will.

 
At 12/14/2008 2:31 PM, Blogger Kazimer said...

" Christopher Hayes of The Nation magazine was interviewed on MSNBC’s Countdown with Keith Olbermann show last week and pointed out what he called “the worst-kept secret in Washington.”

Hayes was referring to the glaring double standard that these Southern senators, Alabama’s Senator Richard Shelby in particular, have displayed.

“They’ve been throwing taxpayer dollars at Toyota for years in Alabama and no one raises a stink about that” Hayes said.

In fact, as Olbermann noted, Alabama alone has given more in tax subsides per job to foreign automakers than Detroit was asking for in the bailout plan to save jobs at American companies.

The Big Three haven’t been competing against Toyota and Honda and Nissan; they’ve been competing against Japan.

Unlike America, that nation actually has an industrial policy. While our government talked about the virtues of free trade, the Japanese government worked hand in glove with their automakers to help make them the world leaders.

Japan is aggressively trying to do with autos what they did with consumer electronics – undercut American manufacturers, drive them out of business and capture the American market.

Japan heavily subsidizes their automakers, they fund their research, they manipulate their currency, and they erect trade barriers that make it virtually impossible for American automakers to export to their country.

Think the fact that Pacific Rim nations buy up 80-percent of our government debt has something to do with keeping our government from enacting policies to level the playing field? The bank that holds your mortgage doesn't dance to your tune, you dance to the tune of the bank that holds your mortgage.

I don’t care what you’re manufacturing or if your CEO is Albert Einstein, if you are competing against a country that actually has universal health care, while you’re forced to add $1,200 to $1,500 to the cost to every unit you manufacture to cover your employees’ health care, you’re not going to be competitive.

If your country doesn’t rebate the value added tax when you export your product while your competitor’s country does, not only will you be priced out of their market, your foreign competitor’s government subsidy will put them at a tremendous price advantage on your home turf."

Detroit Free Press December 14, 2008

http://freep.com/article/20081214/BLOG24/81213081

 
At 12/14/2008 4:15 PM, Anonymous rg said...

@Walt G.

says

"If they have the guts to throw old people out in the cold, maybe we will do likewise."

and says

"If the Japanese do not support these guys in 30 or 40 years, U.S. society will."

Isn't that also true for all the other millions of American workers who are NOT working in the auto industry?

Should we really mix these two problems?

rg

 
At 12/14/2008 4:45 PM, Anonymous Anonymous said...

give the big three the kind of government
'subsidies" that will not harm anyone. nor cost a cent.

make Detroit the new Hong Kong.... deem it a Tax Free city.

and step aside as it become the next boomtown.

 
At 12/14/2008 5:23 PM, Blogger David said...

What would happen to the hourly wage rate at the transplants (Toyota, Nisssan, etc) if it were increased to include the effects of the taxpayer subsidies that many of these plants have gotten?...allocated over a reasonable amount of time, of course.

I don't know whether this would represent a material change in the numbers, but somebody (Mark?) ought to take a crack at it?

 
At 12/14/2008 6:01 PM, Blogger Walt G. said...

rg,

It's going to be tricky for workers to save for their own retirements: Anywhere. With defined contribution plans proliferating over defined benefit plans, Social Security benefits may need to be increased in the future. The ratio of the numbers of people contributing to SS as compared to the number of people withdrawing from SS will make that an impossibility.

You can joke about how easy auto assembly work is; however, that is not a reality. Those Toyota workers will be used up and thrown out between the ages of 50 and 60. Their OSHA recordables are some of the highest in the industry. Kentucky, Tennessee, and Mississippi have a near-future problem on their hands.

 
At 12/14/2008 6:46 PM, Blogger Marcus said...

S.S. and other defined benefit plans are every bit as dependent upon a vibrant, growing economy as defined contribution plans.

This idea that they are somehow safer is a myth which needs to be busted.

 
At 12/14/2008 7:50 PM, Anonymous PotatoChef said...

This whole argument is being made to complex. It doesn't need to be.

The long and the short of it is: If Detroit (The Big 3) made affordable, reliable, and fuel efficent automobiles, they would be prospering and teetering on bankruptcy.

 
At 12/14/2008 8:27 PM, Blogger Walt G. said...

It's a myth that GM does not build fuel-efficient cars:

"High-quality, Fuel-efficient Passenger Cars And Crossovers Lead General Motors’ 2009 Lineup

18 models with 30 mpg or better EPA highway – more than any other automaker

Fuel efficiency leaders in subcompact and midsize

Eight hybrid models

18 flex-fuel models that operate on E85 ethanol,

19 with fuel-saving Active Fuel Management technology"

 
At 12/14/2008 8:53 PM, Blogger Plamen said...

Walt G., while I do think that GM's vehicles get a worse rap than they deserve, "more than any other automaker" is not a good argument - GM has so many brands and models it's sad.

GM, Ford, and Chrysler were never able to
(1) shake off the stigma of the horrible vehicles they hastily built back in the 70's, and
(2) appreciate that a huge new group of buyers became important in the US marketplace - women, who happen to care much less about torque, horsepower, and styling, but do appreciate a vehicle that does not leave them stranded, and also take much more advice from "experts" like Consumer Reports (goes back to failure (1))

Those are marketing failures I happily attribute to inept management. When your vehicles are solid, and you get bad ratings because "the car just does not handle well", you have a marketing problem. When you let that problem fester for so long, that it becomes a permanent feature of resale values, do not ask for whom the bell tolls.

 
At 12/14/2008 8:55 PM, Blogger @sethstorm said...

Plamen:
That doesn't mean you force people to buy against affordable muscle.

 
At 12/14/2008 8:58 PM, Blogger @sethstorm said...


Those are marketing failures I happily attribute to inept management. When your vehicles are solid, and you get bad ratings because "the car just does not handle well", you have a marketing problem.

If you're a transplant, that definitely applies.

A car with flashy rims and shoddy-cheap gadgets won't fix it. Try again, and start looking back at putting performance back in.

See the Honda "Trabant" Fit and the Scion series for such errors in design.

 
At 12/15/2008 4:23 AM, Blogger 1 said...

"Christopher Hayes of The Nation magazine was interviewed on MSNBC’s Countdown with Keith Olbermann"...

LOL!

Are you talking about the man who doesn't know what socialism is but thinks Barry is a pragmastist instead of a socialist was being interviewed by the likes of this clueless clown?

ROFLMAO!

 
At 12/15/2008 8:17 AM, Blogger Marcus said...

"I don’t care what you’re manufacturing or if your CEO is Albert Einstein, if you are competing against a country that actually has universal health care, while you’re forced to add $1,200 to $1,500 to the cost to every unit you manufacture to cover your employees’ health care, you’re not going to be competitive."
-- Kazimer

Here's another myth which needs to be busted. Universal health care does not take the cost of health care off the backs of manufacturers. It just changes how they pay for it. Taxes instead of premiums.

The Japanese transplants pay for health care benefits for their employees too.

 
At 12/15/2008 9:57 AM, Anonymous rg said...

@Walt G.

Maybe you did not understand my comment/question when I said

"Isn't that also true for all the other millions of American workers who are NOT working in the auto industry?"

The last time I checked most Americans did NOT work for the "big 3" and therefore do have the same issues relating to retirement as the workers of foreign auto companies. So why treat autoworkers special?

Until recently the USA highlighted the fact that there is no real government retirement plan and no real government medical insurance, as a competitive advantage. Recently however, it has become more convenient to argue that the more socialistic countries in the world have a competitive advantage.

American, please make up your mind!

rg

 
At 12/15/2008 10:58 AM, Blogger Walt G. said...

rg,

I consider a lot of people underpaid, too. I don't think the solution is to reduce other workers' pay. The same goes for retirement and health benefits.

 

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