There’s a lot riding on GM and Ford
AS FORD AND General Motors implode, should ordinary Americans care?
The news is obviously traumatic for the 65,000 or so autoworkers whose jobs have been slated for elimination, and it is equally devastating for their communities. But what about the rest of us?
The answer is simple. These layoffs should be at the top of everyone’s agenda. The fates of Ford and GM could tell the future of U.S. firms in the global economy and of the bedrock middle-class jobs that manufacturing has historically provided.
Well, you might say, employment in the auto industry has stayed even at roughly 1 million workers since 1990, despite a loss of several hundred thousand jobs at Ford, General Motors and Chrysler -- Detroit’s Big Three. True enough, but the workers getting hammered today tend to be in their 50s earning close to $30 an hour, while the new hires tend to be in their 20s earning half that, with few benefits, at low-wage suppliers.
Clearly, the companies bear a large part of the responsibility for their competitive skid. How many times do managers have to put all their eggs in the basket of the latest gas-guzzling cash cow, such as SUVs, before they realize that they can’t compete with more efficient, cleaner cars such as Toyota’s and Honda’s pioneering hybrids?
That said, the problem is not simply myopic managers. Legacy costs -- skyrocketing healthcare and pensions -- have drained the bottom lines of the Big Three. Their international competitors, even those with U.S. plants, bear a far lighter burden.
Take healthcare costs. U.S. automakers on average spend more than $1,200 a vehicle on them -- more than is spent on steel. Their competitors average about $450 a car made in their U.S. plants. The difference reflects a much younger workforce. If Ford had Honda’s healthcare costs, it would have turned a profit in the U.S. last year, rather than losing $1.6 billion. Outside the U.S., automakers can rely on national health insurance, not collective bargaining, to cover their share of employee health benefits, dampening costs considerably.
On pensions, the story is similar. The former Big Three support 800,000 retirees; their international competitors underwrite fewer than 1,000 from their U.S. operations.
Some observers add another “benefit” -- the job bank -- to the list of Big Three ills. The United Auto Workers jettisoned work rules and, in some cases, compensation in exchange for the creation of the bank, which pays idled workers full wages until new jobs open up. Critics of these programs should remember that lifetime job security, the job bank’s inspiration, is one of the things credited for Japanese automakers’ competitive success. Job banks are costly, but they are hardly the torpedo that’s sinking the U.S. automakers.
The good news is that the automakers and the UAW -- deeply aware of the industry’s crisis -- are making changes. For example, the new Ford Fusion and Chevy Cobalt are promising models that have the potential to compete in price, quality and longevity with some of the Japanese best-sellers. And Ford’s hybrid Escape at least begins to tap that growing market.
The UAW should get credit for cooperating with Ford to make its Wixom plant, near Detroit, the third best for quality in North America, outshining most Japanese-owned plants. (Ironically, Wixon is one of the plants targeted to be shut down.) Moreover, the union is calling for U.S. firms to take a technological lead. UAW President Ron Gettilfinger gave an eloquent endorsement of hybrids and alternative fuels at the recent Automotive News World Congress in Detroit.
If the car industry has at least begun to do what it must, President Bush and Congress have not stepped up to the plate. Their inaction is a staggering failure of public policy. The recently announced layoffs at Ford and GM are comparable to the threatened shutdown at Chrysler in 1979, which prompted a major national debate and congressional action. The situation today is far more perilous.
That’s because the Ford and GM layoffs add to the 3 million manufacturing jobs shed by the U.S. economy since 2000. On top of that, as companies seek an edge by slashing wages and gutting benefits, more and more workers and their families end up under the highway to the middle class rather than on it.
What should the president and Congress do? Recognize that national health insurance is a competitive necessity for the nation and that there must be improved federal protection for pensions as well. In addition, the Bush administration must establish a trade policy that encourages decent wages for workers worldwide so that U.S. companies can compete without resorting to poverty wages and anemic benefits.
Next quarter or next year, a company can improve the bottom line by squeezing its workers harder. Long-term success, however, is based on worker-employer commitment being a two-way street -- and on national policies that support this rather than hinder it.
