Wednesday, the CEOs of GM, Ford and Chrysler meekly descended on Washington to present their plans to Congress in hopes of mooching a piece of the bailout pie. How did it come to this?
Throughout the endless debating of the reasons for America’s automotive misery, one constant question has been bandied about: How have the Japanese auto manufacturers been so far ahead of the curve when it comes to building smaller, more fuel-efficient cars, all the while maintaining fiscal responsibility? While it’s easy (and partly justified) to blame poor management policy on the part of “The Big Three” for their seeming lack of business acumen, there’s a little more to it than that.
For one, there wasn’t exactly a market for smaller, fuel-efficient cars in the US because, well, Americans wanted bigger ones. Just a few years ago, gas was around a buck and a quarter, we wanted safer, more practical SUVs, and we could afford them.. And the Big Three obliged us. Who can argue that the American auto consumer wasn’t infatuated with owning a big, beautiful SUV or a hardy 8-cylinder pick-up?
We were all shocked when, seemingly overnight, a gallon of gas went from the price of a pack of gum to that of a pack of cigarettes. As this happened, the strength of the American auto industry vanished. Rows of shiny gas-guzzlers sat idle in their showrooms, inventory backed up, and cash flow broke to a dead stop.
For Japanese car makers, however, this was not a new template to which they needed to adapt. America is not their only market. For the better part of their existence, Japanese manufacturers have been building smaller cars with better gas mileage due to the price of gas in socialist Europe and Japan, where a gallon has been anywhere from $4.00-$6.00 (or more) for years due to stifling taxation and draconian environmental standards.
Not to mention labor..
For every car manufactured by our American companies, it is estimated that $1,400 of each car, whether sold or not, gets put towards the benefits package of a single autoworker. The cost per hour of work for a typical UAW member in the US, benefits included, is between $70 and $76 dollars per hour. The average cost in Japan is $48 per hour. That means a US company pays a US worker roughly $52,160 more per year per employee..
While it is true that Japanese automakers do not have to pay for extortion-type union benefits, they do operate under the highest corporate tax in the world (the U.S. is second). As we all have heard, corporations don’t actually pay for these taxes. They are passed directly to the consumer. Combine that with the suffocating income tax the Japanese population has to pay the government, and you can see why operating under the Japanese flag isn’t as helpful as one would think.
American automakers need to restructure their business models. That is beyond dispute. But it’s going to take some sacrifice from the workers, as well.
Or we may be saying sayonara to the auto industry.
By Shawn Mallow