Suprise: The American automobile industry is alive and well, although shrunken from where it was 20 years ago. The problem is the American operated automobile industry. The biggest weight sinking Detroit manufacturers is retirement and health benefits it negotiated with its unions. Similar companies, such as Bethlehem Steel have simply reneged on pensions, and have relied on a Federal government program to bail them out. Toyota, Honda, Nissan, Mercedes, all have opened up factories in the South, because these states have "right to work rules" which weaken the power of the unions to negotiate. Wages are below the UAW wges, but relatively are pretty good for manufacturing jobs. Now manufacturing centers are either abroad or in the South.
Read this tale of two cities, and make sure to watch the video, and tell me what you think.
6 comments:
This is a good example of the process of creative destructionism at work. With the company Toyota out-competing companies such as Ford and GM there was bound to be a shift in the size of each companies work force. For companies like Ford unprodustive plants were either shut down completly or relocated to areas where labor is cheaper. Toyota started to expand due to its recent success. Toyota most likely set up a factory in southern United States to one have easier access to the large American market. Secondly the fact that autoworker laborfoce is not unionized makes labor cheaper than in the north.
It interesting how places that rely on the factories such as the ones in this article can go from prosperous to poor and vice versa. I guess that this is just a natural affect. Things change over time. Whether it’s a changing of a dominate species or one company putting another one out of business. Things change with time whether its nature or in the economy this is the one and only constant
I think that it’s pretty obvious what the cause of all this is: unions. And I’d have to say, they got what they deserved, and in a way, what they asked for. By demanding to work less and make more, to be less productive and to keep the older methods of production in order to safeguard their own jobs, union workers created their own downfall. It is ironic that by trying to safeguard their jobs, they effectively destroyed them. Instead of making more, they may be out of their jobs now, and making nothing, but they certainly got half of their wish because they are definitely working less. This came about because of foreign competition. There is a foreign sector that is willing to do what it takes to succeed. Their workers are not lazy and obsessive over benefits, and the workers and the companies are willing to do what it takes, including constant modernization, in order to succeed. America certainly has the potential to keep up, and in my opinion outpace, foreign competition in many sectors of the economy. What we need to do, however, is get over the idea that we “deserve” certain privileges. In order to be competitive in the global and domestic markets, American firms and individuals need to be ruthless capitalists as we have been in the past, and look to constant modernization and progress as we did through out the past two hundred years. We cannot hope to expect so much more benefits for the same work that foreigners will do for less, and still be successful and make a profit. It just won’t happen. What we need to do, as I always say, is take advantage of our abilities and specialties, and using the principle of comparative advantage, put the skills of one of the most intelligent, educated, and entrepreneurial workforces to work. If we can do that, we will continue to prosper as we have in the past.
Boy, this is fun.
This trend in auto factories in america is a microcosm of what is happening in the world. Car companies are "outsourcing" to the south where labor market conditions are more favorable due to the lack of unions. Other companies, such as wal-mart suppliers, are doing the same thing by building factories in foriegn countries. Both are examples of firms locating themselves where they will be most productive; in this case, where labor is the cheapest.
This is alarming to me that the American automobile industry has decreased so little. I thought that we had an enormous drop off. The fact that other countries automobile companies are manufacturing their cars in the united states is a little strange considering the fact that they could probably produce the cars for cheaper in other countries. Atleast the companies are trying to dodge labor unions as the foriegn autos are pushing the industry out of detroit and into the south. Overal i am dissapointed that the companies that are running the automobile industry in America are becoming predominately foriegn but if they still keep the amount of jobs in the auto industry relativly high for american workers then I am a little more enthusiastic about the idea.
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