The American auto industry’s “Big Three”(Chrysler, General Motors and Ford) have asked Congress to help their failing companies with a $25 billion cash injection. The loan - unlike the other $25 billion offered, which they did not use - would be made on an emergency basis to help keep operations open. Essentially, automakers were being asked to revamp facilities on their own dime and then be paid back by the Department of Energy. Much of the Big Three’s financial problems stem from the irresponsible contracts its members have signed with the United Auto Workers (UAW).
As Washington Times reporter David M. Dickson recently reported: “Before contract negotiations between the UAW and General Motors commenced last year, UAW workers earned between $70 and $75 per hour in wages and benefits. International firms paid their nonunion workers about $45 per hour in wages and benefits. The hourly cost differential was between $25 and $30.”
That disparity will be reduced over time as the new contract is implemented- [with wages leveling off to] an average of $40-45 an hour at GM. Quite clearly, union autoworkers have enjoyed salaries that are far beyond what their companies can afford, especially as sales have slowed by 10 percent during the economic downturn this year. It is important to note that foreign automakers have fared better by placing their plants in right-to-work states, as opposed to states with compulsory unionism like Michigan.
U.S. automakers have certainly dragged their feet on research and development for energy-efficient cars in comparison to foreign automakers. Hyundai, Honda and Toyota have also been better at creating such vehicles, which sell better during times when energy costs are rising. Toyota has sold its hybrid technology to Ford, permitting that company to compete more successfully than Chrysler and GM. From October 2007 through last month, GM’s sales dropped 45 percent, Chrysler’s 35 percent and Ford’s 29 percent. Honda’s declined by 25 percent and Toyota’s by 23 percent.
Statistics compiled by environmental advocates often show that American firms lag substantially behind their foreign competitors in producing “green” vehicles. This becomes fodder for members of Congress and environmentalists pushing legislative solutions that could make it harder for the Big Three to keep up with foreign competitors. The Senate is considering the “Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007” which act would make fuel economy standards more stringent, driving up the cost of cars and make it harder to sell them.
U.S. automakers have already made some significant strides in closing the quality gap, according to figures compiled by J.D. Power. If the Big Three are to become competitive once again, Washington should stop overregulating them on the one hand while protecting them from foreign competition on the other.