Monday, November 24, 2008

The Problems Facing Big Three Belong to All of Us

Finally. A journalist with some common sense comes to the Big Three's defense. Thank you, Warren Brown.
According to the MOP [Mob of Pundits] crowd, American car companies have messed up -- making too many trucks and sport-utility vehicles, ignoring consumer and governmental demands for more fuel-efficient vehicles and, as Will stated in a column last week, entering "improvident labor contracts" with the UAW.

It's baloney.

Americans went truck crazy in the 1990s and in the early years of this century, making light trucks more than 50 percent of new vehicles annually sold in this country, for the same reason they are in danger of re-embracing that madness -- cheap gasoline. They were enabled by lawmakers who, with one hand, pushed car companies to increase technical fuel efficiency while using the other to give American consumers the least-expensive gasoline in the developed world.

Increased technical fuel efficiency plus low-cost gasoline fueled consumer demand for more driving and bigger and more powerful vehicles with which to do that driving. Gasoline consumption in the United States soared . . . until high fuel prices restored some sanity to the U.S. consumer automotive market.
As Brown reminds us, Honda, Nissan, Toyota and even Mercedes-Benz all had some kind of truck or SUV too because they were following "market demand." Nobody twisted our arms and forced us to buy the gas guzzlers.

What about the critics who say, "but look at that fuel-efficient, gas-electric Toyota Prius hybrid?"
Go ahead and look at it, preferably in Japan, where the Ministry of International Trade and Industry (MITI) has done a marvelous job of coordinating industrial and energy policy into a vehicle development and consumption strategy that makes sense. We have no such government-industry cooperation in the United States. We have no industrial policy, no energy policy, which largely is why we now have a core segment of our natively owned manufacturing infrastructure teetering on the brink of collapse.
Furthermore, Brown points out that European and Asian countries tax horsepower. The least-efficient motor fuels are taxed heavily, while favorable treatment is given to more efficient fuels, such as diesel.
That cost-sharing creates a kind of honesty. Car companies aren't inclined to design, develop and produce gas-guzzlers because European and Asian consumers are not inclined to buy them. It creates market predictability, contrary to what we have in the United States, where vehicle markets can flower or wither in an instant, depending on the price of fuel.
What did Brown have to say about the unions?
It is the rankest hypocrisy for well-paid journalists to decry the "high" pay of UAW-represented employees. I doubt that there is one UAW critic in the media, or on Capitol Hill, who would be willing to settle for a UAW paycheck. I'm almost certain there isn't one who would be willing to trade his or her relatively cushy employment for a year on an auto plant assembly line.

Criticism of "improvident labor contracts" thus smacks of class bias. It reeks of the notion that some work, such as that involving manual labor, inherently deserves less compensation than others, such as expressing one's opinion. It's more baloney.
Brown doesn't excuse the Big Three and he admits they've made mistakes, but he also points out they've done many things right - "contributing to the defense of this country; helping to create a viable middle class, especially in America's minority communities; and contributing to technological advancements in the global automobile industry."

The bottom line: "The potential failure confronting GM, Ford and Chrysler is not Detroit's alone. It belongs to all of us."

The solution to this problem belongs to all of us too - consumers, domestic automakers and the government. We have to keep pushing for meaningful energy policies regardless of the price of gas and we have to demand industrial policies that level the playing field for our domestic automakers and workers.


Kvatch said...

We have to keep pushing for meaningful energy policies regardless of the price of gas

One wonders if the recent drop in gas prices will cause people to just head right back to their guzzlin' ways.

Here in Babylon by the Bay, where we're seeing ridership on public transit soar (and associated revenues), the transit authorities seem determined to force the populace back into their cars by raising fares, sometimes by as much as 25%. Madness.

Lew Scannon said...

"The potential failure confronting GM, Ford and Chrysler is not Detroit's alone. It belongs to all of us."
At last, someone with common sense. I wonder along with Kvatch whether the drop in gas prices will cause the short term memory impaired back in to their gas sucking pigs of cars, or will they cling to more fuel efficient vehicles because you never know what might set big oil off on another profit driven oil gouging frenzy.

Anonymous said...

Well written. I couldn't agree more. We all have a horse in this race (3 horses) and we need to see that they continue running. Pointing to what they have done to help build our once thriving economy, should explain the need we all have for their presence and continued innovation to help carry us forward.

Kathy said...

Kvatch and Lew, if mid-Michigan is any indication, the drop in gas prices is having an effect on people's buying habits.

Dealerships are reporting sales of SUVs and trucks are on the increase because of price drops. When gas was high, small fuel-efficient models outsold the larger ones by 70% to 30%. That figure has now flipped and the gas-guzzlers are outselling the small models by 70% to 30%.

We are a nation of people with short-term memories. Let's hope the government doesn't allow the automakers to act so foolishly and lose sight of the big picture. Gas prices will climb again. It's just a matter of time.

Stephen, thanks for the kind words, but I have to give Warren Brown all the credit. I agree with you though that our domestic automakers deserve respect and consideration simply because of all they've done for our country in the past. They are true "American" companies. It's crazy that people are willing to turn their backs on them. What happened to "country first" or in this case "domestic manufacturers first?"