Survival is Job One
A Register-Guard Editorial
Published: Wednesday, January 25, 2006
Just six years ago, one out of every four cars sold in the United States was made by the Ford Motor Co. Now it's one in six. That explains why Ford will lay off 30,000 workers and close 14 factories over the next six years. The problems confronting Ford and other U.S. automakers are reflexively blamed on foreign competition - but the real problem lies closer to home, in the shortsightedness of executives and policy-makers.
Foreign companies now claim 40 percent of the U.S. market for cars and trucks, but many vehicles with Japanese or German nameplates are actually made in the United States. While Ford is cutting 30,000 jobs and General Motors announced two months ago that it would cut a similar number, Toyota is opening a new truck plant in Texas and Nissan may expand a plant in Mississippi. Foreign automakers employ 60,000 workers in North America, and their numbers are going up.
Foreign automakers' ability to profitably manufacture vehicles in the United States is good news, and not just for the workers employed making them - it also undercuts the notion that U.S. manufacturing plants are at an inherent disadvantage. The companies that are gaining ground against Ford and GM are proving that the relatively high cost of American labor and the burden of employer-provided health insurance do not necessarily spell the end for the U.S. auto industry.
American car companies do have a labor cost structure that puts them at a disadvantage. The foreign companies pay less, hire younger workers who are cheaper to insure, and locate their plants in states with weak protections for organized labor. Ford will continue paying many laid-off workers under contracts negotiated in a period when large-scale downsizing was not anticipated. Its foreign competitors don't carry burdens of that sort.
But American automakers have tried to gain similar advantages. GM's Saturn plant in Tennessee was envisioned as a Japanese-style manufacturing enterprise, with a work force trained in teamwork and a location away from the auto industry's heartland in the upper Midwest. Yet GM starved its Saturn division while the company poured resources into making and marketing sport utility vehicles. The SUVs were profitable - but when buyers went looking for more fuel efficient sedans, GM wasn't ready for them.
Ford hinted that it might launch a Saturn-style project in the next few years, attempting to build low-cost, high-mileage cars at a new location in the United States. Ford has gone further than GM in the development of gas-electric hybrid engines for some of its vehicles, but it, too, allowed foreign competitors to dominate what appears to be an emerging market.
The blame can't be laid entirely at automakers' door. Over the past decade, Ford and GM have responded to the demands of the U.S. market - demands that were shaped by low gasoline prices and lax mileage standards.
It's as though the United States set out to craft policies that would ensure the short-term profitability and long-term failure of a primary industry. Ford lost $1.55 billion in North America last year, but earned a profit worldwide through the sale of smaller, more economical vehicles in Europe and Asia.
The U.S. auto industry will not survive by attempting to catch up with the Japanese, the Koreans and, soon, the Chinese. It must leapfrog ahead of them. Automakers must design and build vehicles for the 21st century, and they must not be impeded by 20th century tax, energy and transportation policies. If companies from other countries can make a profit on cars built in the United States, the American auto industry should be able to do the same.
http://www.registerguard.com/news/2006/ ... on=opinion
