Car talk

When the right points out that Detroit's union contracts are making it difficult to return to profitability, the left generally responds that the problem lies not with our unions, but with our stars . . . why cannot they be more like Toyota?

Toyota seems to be asking that question of itself: its profits are sharply down. You'd think that oil spikes would be a license to print money, but the US is one of its biggest markets, and the dollar decline is hurting them badly.

This is obviously not Detroit bad--but it's very odd to see Ford's earnings rising while Toyota's fall. Toyota's US plants are also getting older, and with them, their workforce--the same problem that has dogged Detroit. Toyota doesn't operate under the same labor constraints as the Big Three, but my understanding is that it has a different constraint: laying off older workers would trigger a hell of a backlash against their product.

Comments

Even though Toyota sells a lot of Priuses and other small cars (and their fleet sold is certainly tilted more towards small cars than trucks and SUVs compared to Detroit), their trucks and SUVs have a greater profit margin, so the move to small cars isn't helping them as much as some might expect.

Posted by John Thacker | May 8, 2008 2:26 PM

Even though their profits may be temporarily moving in different directions, Ford posted a quarterly profit of $100Mln, while Toyota's quarterly profit was $3Bln, 30X Ford's.

Posted by winstongator | May 8, 2008 2:50 PM

I think that just a bit misleading- Toyota still expects to earn $11 billion in the coming year, which is roughly equal to the market capitalization of Ford.

Even the best run companies run into falling revenue/profits from time to time. The difference between Ford and Toyota is that one knows Toyota will still be standing at the end of a recession.

Posted by Yancey Ward | May 8, 2008 2:56 PM

Toyota's US operations do not have the huge pension and retiree health care obligations that so burden the American carmarkers.

Posted by Peter | May 8, 2008 3:04 PM

Yes, when Land Cruiser sales drop, and Corolla sales climb, profits will drop. The difference, however, is that Toyota still makes money when they sell a Corolla, whereas that is not the case when Ford sells a Focus.

Posted by Will Allen | May 8, 2008 3:11 PM

How many plants does Toyota have in Michigan?

Posted by DDP | May 8, 2008 3:15 PM

That first sentence, shouldn't "stars" be "cars." Stars doesn't make sense to me, unless it's one of your jokes that I never am able to get anyway. Pls advise.

Posted by Lady Lucy | May 8, 2008 3:27 PM

Lucy - please see Shakespeare, William

Posted by holdfast | May 8, 2008 3:31 PM

You'd think that oil spikes would be a license to print money

Not when overall industry sales are declining sharply during an economic downturn. And not when the weak dollar is hurting them on the models and parts they still import to the U.S.

How many plants does Toyota have in Michigan?

None at all -- any such plant would probably be organized by the UAW, but Toyota does have a significant presence in Michigan anyway:

http://www.mlive.com/business/index.ssf/2008/04/engineering_talent_in_area_rem.html
http://www.mlive.com/naias/index.ssf/2008/01/toyota_venza_engineered_in_ann.html

Michigan may not remain the center of U.S. auto manufacturing, but it is quite likely to remain the center of auto R&D in the U.S.

Posted by Slocum | May 8, 2008 3:37 PM

I would point out that the German and Scandinavian automakers are both among the most profitable and highly-rated in the world, and also have much more powerful unions than their American counterparts. I would add also that if Toyota had to pay for its employees healthcare, rather than operating in a country which (like the vast majority of first world nations) provides universal health care to all of its citizens, you could reasonably expect their profit margins to suffer. I might even be so bold as to point out that the threat of their American factory workers unionizing compels Toyota to offer better wages and benefits to their American employees than the might otherwise. And I even would probably make a moral argument and say that it's a good thing that factory workers in American car companies can have health insurance for themselves and their families, and make a wage which enables them to raise a family and have a reasonable expectation of sending their kids to college; and I'd wonder why the same people who think that there is no amount of money whatsoever which is too much to pay to investment bankers and corporate lawyers have such a visceral distaste for people without college degrees earning a good wage.

But then, the "American automakers' problems are the faults of the unions, and no one but the unions, and if they weren't unionized they'd suddenly have a license to print money, and if you disagree you're a dirty goddam communist" meme is just about holy writ around here.

Posted by Freddie | May 8, 2008 3:44 PM

Freddie,

Google has 10,000 employees and made 1.31 Billion last quarter. That equals a profit per employee of $131,000.

Goldman Saks has 22,425 employees and a profit in Q1 of 2008 of 1.51 Billion. That equals a profit per employee of $67,335.

Ford has 245,000 employees and a profit of 100 Million. That equals a profit per employee of $408.

Google 131,000
Goldman 67,335
Ford 408

If you have 100 employees and you want to pay them $100,000 a year each, you need to have at least $10,000,000 left over after you deduct overhead, cost of goods sold, etc. etc.

The 245,000 Ford employees just aren't adding enough value to the equation to warrant being paid as much as they are.

Posted by jmo | May 8, 2008 4:08 PM

jmo:

Profit per employee is not a measure of worker "added value," particularly where the reason profits are so low is debts owed to third parties.

In the case of Ford, the debt obligation takes the form of pension and health obligations to retirees, but the analysis wouldn't change if the debt obligation was owed to holders of Ford coprorate bonds.

Posted by alkali | May 8, 2008 4:19 PM

Freddie

"I would point out that the German and Scandinavian automakers are both among the most profitable and highly-rated in the world, and also have much more powerful unions than their American counterparts."

GM bought a controlling stake in Saab in the early nineties, and bought out the remaining minority shareholders around 2000, from memory. As far as I know, the unions are still there.

Volvo, meanwhile, is owned by Ford, although there are continual rumours that they are trying to unload it as it doesn't, ahem, make enough money.

Any other highly profitable 'Scandanavian' automakers you care to discuss?

Given that the Big Three and Toyota all make cars in the same country with the same health care system, yet only one party turns a reasonable profit, I am unconvinced that amending the US health care system would restore Detroit to its former glory.

Posted by 40 degrees south | May 8, 2008 4:23 PM

Mercedes unloaded Chrysler cause it was such a bomb...

It is incorrect to blame the unions for GM's downfall.

They didn't help, certainly, but the reason American car manufacturers are in trouble is because, despite having 30+ years to adapt, they have been pushing out the same mediocre, badge-engineered, nickel & dimed vehicles, and have shredded their reputation with a lot of the country. The SUV craze generated enough profits to cover it up, but now that suv sales have cratered and the American companies are struggling to get some decent small cars to market the decades of mismanagement are coming home to roost.

Also, most Toyotas sold here are made here. By workers w/o universal health care.

Posted by toxic | May 8, 2008 4:30 PM

alkali,

Ford's revenue for Q1 2008 was 17.1 Billion. That equals revenue per employee of $69,387.

The REVENUE per employee at Ford barely equals the PROFIT per employee at Goldman or Google.

That is why traders at Goldman and software engineers at Google do make, and should make, more than auto workers.

Posted by Jmo | May 8, 2008 4:31 PM

Mercedes unloaded Chrysler cause it was such a bomb...

Actually, Chrysler was making popular cars and money with the added benefit of Mercedes engineering technology in the suspensions and a number of miscellaneous parts in some of their newest vehicles (e.g. the Crossfire).

Mercedes, however, was badly dropping the ball back home and decided they couldn't manage the two brands at once, so they dropped Chrysler into the hands of Cerebrus as part of their reorganization strategy.

Posted by aMouseforallSeasons | May 8, 2008 4:38 PM

I would point out that the German and Scandinavian automakers are both among the most profitable and highly-rated in the world, and also have much more powerful unions than their American counterparts.

And American automakers might have continued to be highly profitable with their unionized workforces if the UAW had been able to organize the transplant factories in the south. But all of those organizing efforts failed, and the UAW was not able to impose the same 'pattern bargaining' on Toyota, Honda, and Nissan as it did on GM, Ford, and Chrysler.

And, of course, the auto-workers in the south knew what they were doing in rejecting the UAW -- in exchange for slightly lower wages and relaxed work rules, they got the genuine long-term job security that comes from working for profitable, growing companies. The UAW workers got the phony, illusory contract-based job security which shrinking companies can't provide regardless of what they agree to. Which is why UAW employment has shrunk by 2/3.

With respect to European automakers, two comments. First, the supposedly union-friendly European manufactures also set up their plants in the non-union south (BMW is in South Carolina, Mercedes is in Alabama). Also, the same dynamics of shifting production to low wage countries are affecting Europe as well:

http://www.businessweek.com/globalbiz/content/jan2007/gb20070110_446656.htm

I would add also that if Toyota had to pay for its employees healthcare, rather than operating in a country which (like the vast majority of first world nations) provides universal health care to all of its citizens, you could reasonably expect their profit margins to suffer.

I don't follow that logic -- Toyota does pay for the health-care of all of the workers in their American factories (as have Honda, Nissan, BMW, et al) and their profit-making capacities have not suffered.

I'd wonder why the same people who think that there is no amount of money whatsoever which is too much to pay to investment bankers and corporate lawyers have such a visceral distaste for people without college degrees earning a good wage.

You will find that a lot of people in the American working-classes have a visceral dislike for the UAW. Why? Because *they* themselves never earned anything close to UAW wages, but they all had to pay the inflated prices for mediocre cars that were produced by the high-priced, low-skilled UAW labor with absurdly restrictive work-rules.

Posted by Slocum | May 8, 2008 4:50 PM

Lol Mouse.

Yeah, Mercedes sold a profitable company at bargain basement prices to a strip and flip company for the sake of simplicity...

Got some waterfront property for sale too.

Posted by Toxic | May 8, 2008 4:52 PM

Freddie wrote: I would point out that the German and Scandinavian automakers are both among the most profitable and highly-rated in the world, and also have much more powerful unions than their American counterparts.

They also operate in a social and legal environment that is substantially different from that in the US. To equate them as you have, on the sole premise that they are both autoworkers' unions, is no more sensible than trying to equate a BMW and a Cadillac merely because they are both luxury cars.

I would add also that if Toyota had to pay for its employees healthcare, rather than operating in a country which (like the vast majority of first world nations) provides universal health care to all of its citizens, you could reasonably expect their profit margins to suffer.

What, they don't pay their corporate taxes to the Japanese government?

Also, "the vast majority of first-world nations" is a sloppy metric. It's like trying to examine the specific legal policies of North Dakota and California and expecting broad parity because they're both "states".

I might even be so bold as to point out that the threat of their American factory workers unionizing compels Toyota to offer better wages and benefits to their American employees than the might otherwise.

Evidence, please. On the basis of bald assertions only, it is equally possible that Toyota pays wages that it believes will attract workers capable of sustaining Toyota's reputation for quality and reliability.

And I even would probably make a moral argument and say that it's a good thing that factory workers in American car companies can have health insurance for themselves and their families, and make a wage which enables them to raise a family and have a reasonable expectation of sending their kids to college; and I'd wonder why the same people who think that there is no amount of money whatsoever which is too much to pay to investment bankers and corporate lawyers have such a visceral distaste for people without college degrees earning a good wage.

There's these little things called "nuance" and "context", and neither one is something that is smoked or injected. On a related note, I think it would be great if someone came along and retired my student loan debt without any obligations to me whatsoever, just because I exist, but it's not necessarily going to happen.

But then, the "American automakers' problems are the faults of the unions, and no one but the unions, and if they weren't unionized they'd suddenly have a license to print money, and if you disagree you're a dirty goddam communist" meme is just about holy writ around here.

Spoken like a pope. Apparently the problem of building arguments from holy writs is even more endemic than you first suspected.

Posted by aMouseforallSeasons | May 8, 2008 4:53 PM

and I'd wonder why the same people who think that there is no amount of money whatsoever which is too much to pay to investment bankers and corporate lawyers have such a visceral distaste for people without college degrees earning a good wage.

You would wonder that, but you're usually too mature to engage in pointless straw men. Well, usually. Judging by your last paragraph, you seem to be in a bad mood today.

Certainly you've been hanging around us libertarian folk long enough to know it's not about who should be making how much. It's about choice. We allow Goldman Sachs to pay their CEO however much they choose, and we respond badly when others force GM to pay their workers various benefits.

Most of my co-workers (I'm in computer network support and engineering) are not college grads and they make a fine living. I have no visceral opposition to this, quite the contrary. They come to the employer and say "I think I can provide you a lot of value with my skills", and the employer agrees. It's disingenuous and beneath you to think that we hate the auto-workers 'cause them's gots no bachelors.

Posted by Geoff | May 8, 2008 4:58 PM

Lol Mouse. Yeah, Mercedes sold a profitable company at bargain basement prices to a strip and flip company for the sake of simplicity... Got some waterfront property for sale too.

Chrysler was losing money overall, but that doesn't invalidate what I said. Chrysler had and has a number of popular vehicles. The greater problem was that Daimler couldn't manage both companies simultaneously (since they never really became one company in spite of the "merger"), and was rapidly losing control of both companies as a result. Dumping Chrysler fast in order to refocus Mercedes was at the top of the priorities list, hence the firesale to Cerebrus.

Posted by aMouseforallSeasons | May 8, 2008 5:06 PM

MM: my understanding is that it has a different constraint: laying off older workers would trigger a hell of a backlash against their product

Where does that understanding come from? Why would Toyota suffer more than other companies from doing so? Wouldn't the more relevant restraint be federal non-discrimination law?

Mouse: the firesale to Cerebrus

"Sale", fire or otherwise, is a misnomer. Daimler paid Cerberus to take Chrysler off their hands.

Posted by zaleriana | May 8, 2008 5:11 PM

And having a few popular cars is nice, but it doesn't make a company worth a damn.

Posted by toxic | May 8, 2008 5:25 PM

Mouse,

None of Chrysler's "popular cars" you write about are popular any more. If you bothered to read up before you posted you would have found out for yourself. But I don't mind correcting your silly errors.

No one wants to buy Chrysler's stupid gas guzzlers. They haven't been popular in years. Your conception of Chrysler is at least 5 years out of date. I wonder what king of piece of junk car you drive.

Posted by Blake | May 8, 2008 5:57 PM

Freddie,

Mouse, Geoff and Slocum all make valid points to which, seemingly, you haven't grasped all these years. I'll let you in on it...not all unions benefit society and the UAW falls squarely into that category.

I can easily tell that you neither live in Michigan or work in the auto industry because you would otherwise be singing a different tune.

The union did not provide fair wages to employees. They bargained for ridiculously inflated wages for jobs which a monkey could be trained to do. There are plenty of line workers that make more than degreed engineers.

One then must ask themselves a question: What sane person would then spend their time going to school and getting a degree and advancing themselves when they can pop out of high school and get a job making $30/hr, $60/hr overtime, and $90/hr holiday time? If there was no work for you? No problem, they'll pay you to sit at home.

Should we now be surprised that we have so many unemployed workers in Detroit when none of them had any incentive to develop skills that they could use to market themselves elsewhere? They had, after all, the cushiest, best payng jobs. I mean, instead of buying that new SUV or that $250,000 home, they could have gone through some job training or education. But without any incentive, why would they?

To add to that, there was very little in competition for these jobs because the UAW is a highly corrupt and nepotistic organization. It is a "racket" in every sense of the word. They are far less concerned for the safety of their employees than with making sure that any kind of efficient work is eliminated so as to not jeopardize a unioners job. Skills mean nothing compared to whom one knows.

Nobody should be surprised that a collective group voting themselves wages asked for far more than their labor was worth. Nobody should be surprised that a group of people voted themselves benefits amounting to values that no company could sustain. Nobody should be surprised that those, without any incentive to do so, decided not to better themselves and that productivity became a secondary concern.

But yet, here we are, having to explain to people the consequences of such actions when all they have to do is look at the city of Detroit and one can see it firsthand.

And, just for the record, the UAW (in it's hayday) was far more powerful than German labor unions.

Posted by DDP | May 8, 2008 6:14 PM

I've been thinking about the meme that US industry is at a competitive disadvantage because they have to pay employee health care and in other countries the government pays employee health care.

First, in countries with a single payer system, normally there is a substantial employer contribution.

Second and more important, taxes pay the rest.

Suppose we changed to a single payer system. True, GM would get a short term benefit perhaps as some of the taxes would fall on the workers instead of the company [although a liberal legislature that enacted single payer would probably have substantial payroll taxes], but consider the next labor negotiation. A simple model is that the company has to offer more and more money until they are offering enough so that fewer than half of the workers will vote for a strike, and that an individual worker is likely to vote for a strike until hir living standard, not hir nominal salary, rises to a certain level and then they will no longer vote for a strike.

Because of the newly increased taxes, the worker needs a higher nominal salary to be satisfied.

It's unreasonable to suppose that the average employee will pay substantially less in incremental taxes to support the single payer plan than the employer used to pay for health insurance. This is especially true in the UAW case because auto workers are rather well paid and this country has a moderately progressive tax system. Even a linear tax would get a disproportionate share from auto workers because the percentage of the nation's income earned by one auto worker exceeds the percentage of the nation's medical care they consume, and with a progressive tax this effect is even stronger. Therefore, the auto worker will feel deprived enough to support a strike until the company is willing to pay hir and hir payroll account as much or more money than they have to pay under the current health care system.

-dk

Posted by Dick King | May 8, 2008 7:12 PM

A lot of this union-bashing sounds like jealousy to me. The complaint is always because you went to college and got a degree only to get a white collar job that paid you less than the "monkeys" on the line were making, it is not "fair". For some reason rather than sticking their necks out and organizing themselves to enjoy the vacation, benefits, and pay of which they are so jealous, the white collar workers and college educated folks instead always take the anti union stance and try to drag down unionized workers.

Who are you to say that these people are nothing more than "monkeys" and that what they do is worthless? Someone above contrasts the profit per head from line workers versus investment bankers at Goldmans. At least the line workers are putting in honest work actually building something valuable rather than generating a bunch of phony profits through fraud and manipulation. What was the profit per head at Bear Stearns or Enron?

And a "collective group voting themselves wages asking far more than their labor was worth"? I find it interesting to see that it is so horrid for the working class to do this, but when it happens in the board room or the halls of Congress it is just these highly valuable people who sell out our economy and run our government into the ground being justly compensated for their high education and invaluable work. Right. What is worth? How much value do innumerable degreed paper shufflers and bit twiddlers really generate?

I live in Michigan and have a ton of family in the auto industry, all engineers - ArvinMeritor, Visteon, Chrysler, Saturn, Delphi, and so forth. I went to engineering school myself. I've heard the complaints about slovenly union folk and how they supposedly retard efficiency but I think so much of that is just classist, or perhaps more kindly just a case of misplaced priorities. I myself respect the working class and believe that it is important to have these sorts of good manufacturing jobs around. You can see the effect of the loss of these jobs in manufacturing all across the state in hollowed out cities like Detroit and Flint. The same sort of good jobs that undoubtedly enabled many families of modest achievements to live a nice middle class life. Maybe send a kid or two to college to join the ranks of the "educated". Getting rid of these jobs is like kicking a leg out from under society.

Posted by STC | May 8, 2008 7:27 PM

Nobody should be surprised that a collective group voting themselves wages asked for far more than their labor was worth.

Best description of auto company top management and their boards of directors that I've read in years.

Posted by gene | May 8, 2008 7:38 PM

I myself respect the working class and believe that it is important to have these sorts of good manufacturing jobs around. You can see the effect of the loss of these jobs in manufacturing all across the state in hollowed out cities like Detroit and Flint.

Yes you can -- and those jobs might still be here if the UAW had showed any more sense or the Big 3 more guts. Caterpillar also employs a UAW work force, but Caterpillar has been highly profitable and has been dominating its industry against Japanese competition. But Caterpillar's management was willing to take on the union, accept a long strike, send managers and engineers to the lines, hire replacement workers and do what it took to achieve wage levels and work rules that made them competitive. The unskilled Caterpillar UAW jobs do not pay what they once did, but they are not disappearing (unlike those of the Big 3). The UAW in the auto-industry has destroyed itself by crippling the companies that write the paychecks.

The same sort of good jobs that undoubtedly enabled many families of modest achievements to live a nice middle class life. Maybe send a kid or two to college to join the ranks of the "educated". Getting rid of these jobs is like kicking a leg out from under society.

But those nice middle class lives for uneducated, unskilled workers came at the expense of all the Big 3's customers, who spent more of their lower incomes on crummier cars than they would have had the UAW not been living large working for 'Generous Motors'. And it goes without saying that cars are not and never have been a trivial expense for most families. Millions of other Americans subsidized the salaries and gold-plated benefits enjoyed by the UAW.

Those high salaries for low skill work were possible because of the defacto shared monopoly the Big 3 had on auto sales in the U.S. and the monopoly the UAW had in providing labor to those companies. It was a classic case of monopoly rent-seeking.

Getting rid of that system is not 'kicking a leg out of society' it is supplying long-deserved relief to those forced to pay Big 3/UAW monopoly prices.

Posted by Slocum | May 8, 2008 7:57 PM

I will concede that the UAW maybe went a little bit too far but that doesn't justify union-busting and it doesn't serve to condemn the idea of organized labor in general. Why is it justifiable to cut the pay of blue collar workers in the name of becoming more competitive, but never that of white collar workers? Especially considering that the white collar workers are the ones who design the products and set the overall strategic direction of the company. And competitive in what light? A country that has given away its technological lead to foreign competitors with a government that sets policies which at worst basically encourage the exploitation of the working class and at best are oblivious to them?

To lay the blame for the troubles of the Big 3 solely at the feet of the UAW is ridiculous. There was a lot of mismanagement over the years. The big health care crisis of today originated back in the middle of the twentieth century when management decided to take profits by offering such benefits as a deferred benefit to workers in lieu of greater increases in pay. Designers created products that people didn't want to buy. Management squandered billions of dollars on failed initiatives or failed to bring the results of research and development to market. Take GM and the EV-1, for example.

The guys on the line just build what they're given.

I don't think historically that the customers of the Big 3 got products that were on the average any better or worse than what was produced by foreign manufacturers. I think people look back with a jaundiced eye assuming that the labor was so slipshod not always considering that even twenty or thirty years ago design, materials, and manufacturing were much less sophisticated than they are today. Cars were a lot more crude and needed more maintenance in general. Then, as is the case today, many people were sometimes negligent in performing it. Sure the Big 3 made some duds, but they also produced some durable and iconic makes. This is no different for any auto manufacturer.

It is a real stretch to justify social darwinism to say that salaries paid to union labor (and not just the UAW; recall that at one time almost thirty percent of the labor force was organized in the US) represented some kind of hardship forced upon consumers. Do you really think that paying labor less would have resulted in lower prices? I doubt it. Rather, prices would have been about the same but executives would just be pocketing vastly larger proportions of the profit. Just like how it is today. Besides, these wages were spent on services in local communities, or on goods produced by other unionized workers (hows that for trickle down economics!)

Busting unions and lowering the standard of living for the working class is indeed kicking a leg out from under society. You know that there just aren't enough skilled positions for everyone. Even if there were, not everyone has the particular aptitude. How can you say that people don't deserve to have a decent middle class existence just because they prefer to work with their hands instead of their heads, or weren't lucky enough to be born with an aptitude in the current skill of the hour? Going down the path of income inequality and stratification will lead to social unrest. Look back to the gilded age and the early twentieth century. Why do you think communism and socialism came about in the first place? The circus of easy credit took the edge off for a lot of people for the last fifteen years or so but now that the blinders are off, I have to wonder what the future will bring.

Posted by STC | May 8, 2008 9:30 PM

Thank you, Will Allen.

The WSJ article Megan cites begins:

------

Toyota Net Drops 28%
As U.S. Truck Sales Falter
By JOHN F. MURPHY and NEAL E. BOUDETTE
May 9, 2008

An ill-timed bet on the U.S. truck and SUV market contributed to a 28% decline in Toyota Motor Corp.'s net profit for the fiscal first quarter.

The Japanese auto giant expanded its truck manufacturing capacity in the U.S. just before a dramatic shift in American tastes away from trucks and sports-utility vehicles to small cars.

-----

In other words, the basic story here isn't about union contracts or even Toyota vs. Ford or GM. The basic story remains trucks and SUVs vs. compact cars. If Detroit can successfully reorient itself to produce compact cars economically, bully for them!

....In other words

Posted by brooksfoe | May 8, 2008 10:36 PM

Best description of auto company top management and their boards of directors that I've read in years.

Also absolutely right.

But since I think the UAW sucks then I must be a right-wing nutjob who also believes that corporate executives deserve to pay themselves multi-millions for their "talent".

It's just not comprehensible to some that a person could lay the blame at both of their doorsteps, is it?

Posted by DDP | May 8, 2008 10:44 PM

"I would point out that the German and Scandinavian automakers are both among the most profitable and highly-rated in the world"

The Germans I'll give you, as long as you exclude VW. As for the Scans, Volvo is solidly in the middle of the pack quality wise. Saabs have always been garbage, though their success in marketing a crappy, unreliable car as an upscale product is one of the miracles of modern PR. The GMC SUV they're selling now probably helps their dependability rating. As far as profitability, neither seems to be doing the parent company much good, though Volvo's commercial vehicle division is doing well. On the other hand their top selling vehicle in the US market (the XC90) has the same EPA fuel econ numbers as a...Chevy Suburban. Oh, I mean it's the same as a Suburban if the Volvo has the V6 that prevents it from getting it out of it's own way. With the V8, the XC90 fuel econ is pushing Hummer territory. $4 gas might put a dent in it's popularity.

You're on the money with the threat of unionization - the productivity losses imposed by a contract are way more expensive than higher wages. Toyota does have on UAW plant, in Fremont, CA.

"The big health care crisis of today originated back in the middle of the twentieth century when management decided to take profits by offering such benefits as a deferred benefit to workers in lieu of greater increases in pay"

I believe that came about during WWII when pay increases were barred by law - it had nothing to do with "profit taking". And is there a crisis today?

"Why do you think communism and socialism came about in the first place?"

A lawyer thought he understood economics, and wrote a book about it (well, in the case of communism anyway).

Posted by j | May 8, 2008 11:35 PM

Lawyers write a lot of books. Few of them lead to worldwide movements embraced by hundreds of millions of people that drive the global historical narrative for over a century. Generally that would seem to indicate the lawyer's book effectively voiced the grievances, interests and aspirations of a very large constituency of people that perhaps weren't being well served by other political forces.

Posted by brooksfoe | May 9, 2008 2:08 AM

The Germans I'll give you, as long as you exclude VW.

Sure, but BMW and Mercedes specialize in high-performance and luxury cars, which have a higher profit margin. If GM were only Corvettes (and Cadillacs), they would make fairly highly rated cars and have a lot less concern about profitability. BMW and Mercedes also tend to just bite the bullet and pay fines rather than meet CAFE standards in the US, due to not selling enough small cars.

Oh, and it's part of GM, but Opel is also German... though I don't think you're quite willing to give that one as making great and profitable cars.

You can see the effect of the loss of these jobs in manufacturing all across the state in hollowed out cities like Detroit and Flint. The same sort of good jobs that undoubtedly enabled many families of modest achievements to live a nice middle class life.

Yeah, it's pretty bad in Michigan, particularly because so much of the Michigan economy is tied up in the one industry. Of course, back in the heyday this made Michigan one of the richest states in the Union. But how much do those hard luck stories mean to people from Alabama or South Carolina that now have good jobs from foreign auto manufacturers that they never got from the Big Three? They spent many years being much poorer than Michigan, and I'm not sure that they saw a whole lot of sympathy from the Michiganders enjoying those good UAW jobs that didn't exist down South. If the Michigan economy can't adopt (and surely it's the fault of Michigan's business leaders and executives as well), then Michiganders may have to move-- Southerners had to do it for years.

Posted by John Thacker | May 9, 2008 4:15 AM

You know that there just aren't enough skilled positions for everyone. Even if there were, not everyone has the particular aptitude. How can you say that people don't deserve to have a decent middle class existence just because they prefer to work with their hands instead of their heads, or weren't lucky enough to be born with an aptitude in the current skill of the hour?

Well, first of all the hands vs head is a false opposition. Plumbers make an excellent living with their hands--though, of course, they use their heads as well. Caterpillar's position is that it won't and can't afford to pay high wages for unskilled labor, but they also don't think any of their production workers should make a career of unskilled work. Instead, those workers should earn more by learning a skilled trade (for which Caterpillar provides training opportunities). That strikes me as an eminently sensible, sustainable, and humane position.

Why is it justifiable to cut the pay of blue collar workers in the name of becoming more competitive, but never that of white collar workers?

The Big 3 have cut their white-collar work-forces by many thousands of positions also. But if they've not cut the salaries for engineers and executives, it's because they were never inflated far above market rates. Pay below market rates to your engineers, and you'll get only the worst engineers. The best ones will jump ship and grab a job in another industry (or with a competitor -- with Toyota or Hyundai who've set up R&D facilities in SE Michigan).

I don't think historically that the customers of the Big 3 got products that were on the average any better or worse than what was produced by foreign manufacturers.

Well American car buyers must have been all shopping under the influence of a massive delusion then in their belief that Toyota and Honda made more reliable vehicles that lasted longer and had higher resale values. And those Consumer Reports reliability ratings must be a massive conspiracy.

Posted by Slocum | May 9, 2008 7:32 AM

A 96 camry still sells for 3-4 thousand. A 96 Grandam ... not so much.

Maybe straight off the lot you can't tell the difference. I've never had a new car, so I dunno. I can tell you that the Ford and Chevy I had went into a free fall collapse when they got old. The foreign cars kept on chugging.

Posted by Toxic` | May 9, 2008 10:11 AM

The Big 3 have cut their white-collar work-forces by many thousands of positions also. But if they've not cut the salaries for engineers and executives, it's because they were never inflated far above market rates. Pay below market rates to your engineers, and you'll get only the worst engineers. The best ones will jump ship and grab a job in another industry (or with a competitor -- with Toyota or Hyundai who've set up R&D facilities in SE Michigan).

This strikes me as unfalsifiable. What test or observation could you make that would falsify this?

I don't think historically that the customers of the Big 3 got products that were on the average any better or worse than what was produced by foreign manufacturers.

Well American car buyers must have been all shopping under the influence of a massive delusion then in their belief that Toyota and Honda made more reliable vehicles that lasted longer and had higher resale values. And those Consumer Reports reliability ratings must be a massive conspiracy.

Posted by Slocum

Yes. Isn't it possible - and this is standard free-market writ - that Toyota just plain makes a better car? Ironic, that the libertarians are paying such lip service to 'competition'; rather than say that Ford has generally made some bad decisions, and has a bad corporate culture, in short, has been uncompetitive, they would prefer to blame the unions.

But the fact of the matter is, I would pay $15K for a Toyota before I would pay $12K for Ford or GM. I suspect most people feel the same way, these days.

Posted by ScentOfViolets | May 9, 2008 12:23 PM

Megan: Detroit's union contracts are making it difficult to return to profitability

Certainly true...in the form of increased costs. You can argue all day about things like "living wages" or "the standard of living for the working class" or whether the UAW is net good or bad, but that doesn't change the accounting numbers.

STC: To lay the blame for the troubles of the Big 3 solely at the feet of the UAW is ridiculous [....] The guys on the line just build what they're given.

True...a well-built Pinto is still a Pinto.

SOV: rather than say that Ford has generally made some bad decisions, and has a bad corporate culture, in short, has been uncompetitive, they would prefer to blame the unions

Well I would say that Ford has generally made some bad decisions, including acquiescence to the UAW which is a big obstacle to being competitive. I look at it like that really bad purchase that you maxed out your credit card for but later regret. Yes, it was a bad decision on your behalf, but now there's no easy way out and it just keeps hurting you. Of course the seller will keep going on about how valuable their product is, but you know better.

But the fact of the matter is, I would pay $15K for a Toyota before I would pay $12K for Ford or GM. I suspect most people feel the same way, these days.

Well I agree, but there are a lot of people on the road who apparently don't. Why, I don't know.

Posted by TakeFlight | May 9, 2008 1:21 PM

Back in the day...when the Big Three designed and manufactured cars in line with our interests they sold those same cars. It was the autoworkers job to manufacture those cars, not choose the designs.

And when the Big Three sold cars, there was no complaining about the costs, health care or pension or hourly wages, from those autoworkers, the ones who did their job making the cars with the designs handed down to them.

Now the Big Three have car designs Americans don't want. SUVs and V-8s and cars with low-mileage are their forte. Fewer Americans are buying them. They're losing market share, money, jobs. And now, all of a sudden, the problem is the costs of health care and pensions from those making the cars. Those costs weren't a problem before.

No doubt these are high costs. But when the Big Three designed cars people wanted, no one complained about those costs.

And it's another 2 years before GM's Fleet average will exceed that of my now 10-year old Corolla. I wonder who GM will blame for that? Maybe it'll be their employee's break time?

Posted by Zane Safrit | May 9, 2008 1:36 PM

And now, all of a sudden, the problem is the costs of health care and pensions from those making the cars. Those costs weren't a problem before.

Specifically, the problem with the UAW isn't the high costs themselves, it's the rigidity that the unions introduce. GM can't cut its costs to deal with the lost market share, so it can't attempt a financial turnaround without blockbuster sales.

Although I generally agree with SoV on Big Three vs. "domestic," anecdotally, when I was first married and planning on buying my first house, I had to pick the cheapest car out there, and I wound up with a stick-shift power-nothing Ford escort. 8 years later, it still gets 35-37 highway mpg and has never had anything but ordinary scheduled maintenance and expected wear like brake pads. So while I'd probably pick a Honda over a Ford, my experience has been quite a bit more positive than the stereotype suggests.

Posted by Rob Lyman | May 9, 2008 1:51 PM

Anecdotally, between 1992-1995 on my 1985 Chrysler LeBaron GTS I replaced the transmission. Twice. The power steering rack. Twice. The head gasket. Twice. The driver's side power window regulator track. Twice.

Anyone see a pattern here?

I did.

I donated it to the American Cancer Society and bought a Kawasaki.

Posted by TakeFlight | May 9, 2008 2:09 PM

This strikes me as unfalsifiable. What test or observation could you make that would falsify this?

Compare the salaries of GM engineers to those employed by European and Japanese companies with engineering organizations in the U.S. Or compare GM engineers to those at Boeing or Caterpillar or John Deere -- have GM engineers been overpaid by these measures?

Isn't it possible - and this is standard free-market writ - that Toyota just plain makes a better car?

It's possible. But then you have to explain why Ford and GM have been successful in markets outside the U.S. (Look at Buick in China vs Buick in the U.S.) I think it is more likely that Ford and GM have tried to get away with selling long-in-the-tooth models with cheaper, older technology in the U.S. because their cost disadvantages relative to Toyota made it impossible to compete head-to-head.

If you look at GM's and Ford's technology, they do have all the more sophisticated engines and transmissions in their portfolios -- they just haven't been able to manufacture them inexpensively enough to put them into their lower-cost models. And because of the 'jobs bank' that forced them to pay workers regardless of whether they were working or not, they had to keep the volume up no matter what -- which meant large numbers of low-cost vehicles pumped out however they could (with lots of them become rental mules).

They took a calculated risk that the jobs banks wouldn't cost them anything because attrition and retirements would happen faster than loss of market-share. That gamble obviously did not pay off.

Posted by Slocum | May 9, 2008 2:31 PM

Now the Big Three have car designs Americans don't want. SUVs and V-8s and cars with low-mileage are their forte. Fewer Americans are buying them. They're losing market share, money, jobs. And now, all of a sudden, the problem is the costs of health care and pensions from those making the cars. Those costs weren't a problem before.

Those costs were absolutely a problem before. They've been a problem for 30 years (remember the 'voluntary import restrictions' in the 1980s? The Chrysler bailout?) The reason that the Big 3 focused on trucks and SUVs recently was that was the one place where they weren't competing head-to-head and could make money. It's only very recently that Toyota and Nissan have built true full-sized pickups (and Honda still doesn't have one). The Big 3 couldn't build a better midsize car than an Accord or Camry and sell it for an equivalent price. But they owned the big truck and SUV market and could make money there. So that's what they focused on.

But now high gas prices have decimated that niche and they're going to have to go head-to-head in the car market (or die trying).

Posted by Slocum | May 9, 2008 2:41 PM

I suspect devaluation of the dollar vs the yen caused the drop in profits. Profits are reported in yen. US sales are a major component (but not the only component) of Toyota's world wide sales.

Last year's US sales bought more yen than this year's. So even if the dollar value of sales increases, the yen value decreases.

Ford converts all non-US sales to dollars so it makes a profit on currency exchanges.

Posted by sol vason | May 9, 2008 4:36 PM

Gm and Ford do well in other markets... but thats not because they are shipping the same models over to China and Europe. Or vice versa.

Part of the reason there isn't much cross pollination is different regulatory regimes, different market tastes, and these days the fact that the US dollar is low and so importing them from Europe is pricey as hell.

I know a guy who has a Geo Metro with 180000 miles on it that runs just fine...

but then again my Ford F-150 would still stall in left turns during cold days for a few miles no matter how long I let the engine warm up; and my Malibu racked up 900 dollars in repairs in three months as each and every belt on the the thing snapped.

Posted by toxic | May 9, 2008 4:55 PM

I know a guy who has a Geo Metro with 180000 miles on it that runs just fine...

Yeah, well, designed and built by Suzuki in Japan...

Posted by Rob Lyman | May 9, 2008 5:05 PM

Specifically, the problem with the UAW isn't the high costs themselves, it's the rigidity that the unions introduce. GM can't cut its costs to deal with the lost market share, so it can't attempt a financial turnaround without blockbuster sales.

What do you mean it can't cut it's costs? Sure it can. I suspect very strongly - verging with certainty - that union contracts would be easier to renegotiate if the rank and file saw some genuine pain at the top. How about _management_ taking a 20% pay cut? Or 40%?

That hasn't happened. And it's not likely to happen. So what happens, as I've heard the tale told, is that a floor worker thinks that the line that he should have his compensation cut 'for the good of the company' is just so much malarkey.

I would happen to agree with this thought.

Posted by ScentOfViolets | May 9, 2008 7:59 PM

Well, I certainly won't dispute that the best way to lead is by example.

Posted by Rob Lyman | May 9, 2008 8:17 PM

This strikes me as unfalsifiable. What test or observation could you make that would falsify this?

Compare the salaries of GM engineers to those employed by European and Japanese companies with engineering organizations in the U.S. Or compare GM engineers to those at Boeing or Caterpillar or John Deere -- have GM engineers been overpaid by these measures?

But that's not a way to falsify what you wrote:

But if they've not cut the salaries for engineers and executives, it's because they were never inflated far above market rates. Pay below market rates to your engineers, and you'll get only the worst engineers. The best ones will jump ship and grab a job in another industry (or with a competitor -- with Toyota or Hyundai who've set up R&D facilities in SE Michigan).

What you wrote goes to intent, and to an assumption about paying 'below market rates'. Notice, btw, that wages and benefits have been cut, repeatedly, for various airline employees to 'below market rates'. Also notice that management didn't particularly share in the pain.

Isn't it possible - and this is standard free-market writ - that Toyota just plain makes a better car?

It's possible. But then you have to explain why Ford and GM have been successful in markets outside the U.S. (Look at Buick in China vs Buick in the U.S.) I think it is more likely that Ford and GM have tried to get away with selling long-in-the-tooth models with cheaper, older technology in the U.S. because their cost disadvantages relative to Toyota made it impossible to compete head-to-head.

That doesn't make any sense. Or if it does, then it's true that Beta was superior to VHS. Iow, what makes 'a better car' varies from market to market. Standard business 10A.

If you look at GM's and Ford's technology, they do have all the more sophisticated engines and transmissions in their portfolios -- they just haven't been able to manufacture them inexpensively enough to put them into their lower-cost models. And because of the 'jobs bank' that forced them to pay workers regardless of whether they were working or not, they had to keep the volume up no matter what -- which meant large numbers of low-cost vehicles pumped out however they could (with lots of them become rental mules).

They took a calculated risk that the jobs banks wouldn't cost them anything because attrition and retirements would happen faster than loss of market-share. That gamble obviously did not pay off.

Posted by Slocum

Again, how do you know any of this? It seems that all you are doing is trying to put the blame for an under-performing company on the unions. Without any sourcing for your claims. "Yes, we've been trying for 30-odd years to introduce better cars, more fuel efficient cars, but those gol-darned unions thwarted us at every step."

I've mentioned this before, I think, but my dad in his youth worked in a Chevy plant in K.C.; in his old-age he's a fundy conservative, and he certainly does not have much good to say about the unions. But his real wrath (as opposed to the Daily Grumble) is reserved for the management of that fine company, who - according to him - wouldn't adopt the most obvious, blatant, easy, inexpensive changes on the line if those suggested changes came from the guys who, you know, actually knew a thing or two about the daily operations of the plant, and who knew it by actually having experience assembling the product.

A line worker telling Management what to do, and thinking they know better than the College Boys!?!?!? The poor fellow is obviously suffering from heat exhaustion.

That sort of over-class contempt for the work force isn't good, either for the day-to-day running of the company, or for overall company morale.

Posted by ScentOfViolets | May 9, 2008 8:37 PM

Well, I certainly won't dispute that the best way to lead is by example.

Posted by Rob Lyman

Exactly right. I've been in the houses of parents who pay lip service to 'the importance of education', houses with maybe ten books in them, if you count the bible - affluent people!. But the parents never monitor the homework, never ask what goes on in school, talk in front of their kids about what great party times they had at 'Ol Miss, etc. The message the kids carry away is that education is not so important.

I guess what I'm trying to say is that even kids know that actions speak louder than words.

Posted by ScentOfViolets | May 9, 2008 8:44 PM

Notice, btw, that wages and benefits have been cut, repeatedly, for various airline employees to 'below market rates'. Also notice that management didn't particularly share in the pain.

Which wages and benefits have been cut to below market rates? And if they have been, then why are those employees still there in those low-paying jobs rather than accepting the supposedly higher going market rates from other employers?

That doesn't make any sense. Or if it does, then it's true that Beta was superior to VHS. Iow, what makes 'a better car' varies from market to market. Standard business 10A.

Here are two theories -- Toyota makes better cars because it has better engineers or better engineering processes. Or in short, Toyota makes better cars because Toyota is 'smart' and GM makes worse cars because GM is 'stupid'. Another theory is that Toyota has a cost advantage which means that even though GM has the technology and knows how to make an equivalent for a given Toyota model, it has not been able to do so, because its costs are enough higher that it couldn't make a profit with this approach. Noting that GM (and Ford) compete quite successfully against other makers everywhere but North America lends credence to the 'cost disadvantage' theory rather than the 'just plain stupid' theory.

Which isn't to say there's no stupidity -- there's plenty of stupidity in any large organization. But systematic, decades-long stupidity that affected only the American operations of the Big 3 but not their foreign operations nor the (non-union) American operations of other makers? Quite a coincidence that would be. Is your theory that the UAW just happened to have the misfortune build cars for the only consistently stupid auto companies in the world (but who, oddly enough, were only stupid in the N.A. market)?

Again, how do you know any of this?

How do I know that GM has 5 and 6-speed automatic transmissions and sophisticated multivalve OHC V6s but hasn't put them in their entry level models? It's public information. And the effect of the jobs bank on both profits and the past tendency to try keep up the volume has been widely discussed (better to lose a smaller amount of money paying workers to build marginally unprofitable cars than a larger amount of money paying them to do nothing). That is also not a secret.

Posted by Slocum | May 9, 2008 10:53 PM

Re: I would add also that if Toyota had to pay for its employees healthcare, rather than operating in a country which (like the vast majority of first world nations) provides universal health care to all of its citizens, you could reasonably expect their profit margins to suffer.

In the US Toyota is stuck with paying for employee healthcare too. Since it hasn't been in the US all that long it doesn't have to deal with retiree heathcare to any significant extent. Those who are tempted to Michigan-bash ought to look up some facts: far from flying the hammer and sickle over the state house in Lansing, Michigan has had more GOP governors in my lifetime (about 40 years) than Democrats-- and the legislature has generally been controlled by the GOP too. Meanwhile across the border in Ontario the car industry is booming despite that province's well-known liking for socialism and pro-Union policies.

Re: Because of the newly increased taxes, the worker needs a higher nominal salary to be satisfied.

You're forgetting the fact that worker compensation formerly included the workers' healthcare premium paid by the employer, and since there would be no such premium, the worker could (quite legitimately, IMO) demand that that money as wages instead, and that in turn would defray the higher taxes. Indeed, probably more than defray them as experience in every country that has universal healthcare shows that per capita costs are lower than in the US.

Re: It's unreasonable to suppose that the average employee will pay substantially less in incremental taxes to support the single payer plan than the employer used to pay for health insurance.

No it's not. As I just said per capita costs under single payor are lower. There are no know exceptions. None. Moreover employer groups with significant healthcare costs (e.g., covering retirees whose age pushes premiums higher) would see those costs amortized over the entire population, hence the cost of insuring an auto worker (or investment banker for that matter) would be less.

Re: There are plenty of line workers that make more than degreed engineers.

Unless you are talking about certain high-skill workers (e.g., electricians) that's BS. I have a friend who just took the 30 years buy-out from Ford-- he made 45K a year after 30 years of working at Ford. That's decent money, solidly middle class, but it isn't stratospheric. And yes, it's might be more than a new engineering graduate could expect (at least in some markets), but it's well below what a 30-year experienced enigineer would make.
What's wrong with some of you folks anyway? This worker-bashing would embarass Marie Antoinette at her most frivolous! Not everyone is college material; not everyone should go to college-- it's a waste of time for many people who do. Why shouldn't there be decent, middle-class jobs for high school graduates? I do have a college degree, and it's stood me in a good stead-- but I don't forget whwere I came from, or begrudge my friend his 45K a year, and I don't think my degree means that those without one should live in destitution so I can feel better about myself. Envy, you know, is one of the seven deadly sins. Shame on you.

Re: At least the line workers are putting in honest work actually building something valuable rather than generating a bunch of phony profits through fraud and manipulation.

OK, let's not seesaw to the other extreme either. Banker-bashing is no more decent than lineman bashing. Both involve envy and both are shameful (I am talking about bashing a whole class of workers in either case. where there are lazy unproductive individual auto workers, or dishonest, cheating individual bank employees, bash away).

Posted by JonF | May 9, 2008 11:28 PM

ScentOfViolets - If you get BBC America you need to watch Top Gear. You will learn that Ford sells two fantastic cars in Europe. The euro spec Focus http://www.ford.co.uk/ie/focmca/-/-/-/-/-/- and the Mondeo http://www.ford.co.uk/ie/allnewmondeo/-/-/-/-/-/-

The reason they can't sell such popular, high quality, fuel efficient, safe cars in the US is that if they had the UAW build them they would be too expensive. So, they decontent the US market cars, instead of independent rear suspensions they use a beam axel, instead of OHC they us push rods, not 5 ot 6 speed automatics but 4 speeds, drum brakes rather than disks, etc. The money they save by using all this ancient technology is used to pay the inflated wages of the UAW.

Posted by jmo | May 9, 2008 11:52 PM

scentofviolets

Take a look at the review of the UK spec Focus:

http://driving.timesonline.co.uk/tol/life_and_style/driving/new_car_reviews/article2975392.ece

Ask yourself why they don't sell it in the US.

Posted by jmo | May 10, 2008 12:23 AM

Ah, nothing brings out the contradictions at the heart of libertarianism like a discussion about unions.

A bunch of people form a corporation to produce widgets, and they set the price for their widgets, and if you don't pay the price you don't get any? "Good for them!" says the libertarian.

A bunch of different people form a corporation to produce labor, and they set the price for their labor, and if you don't pay it, they don't work for you? "Destroying America!" complain the libertarians. Hilarious!

Posted by Chet | May 10, 2008 12:34 AM

Chet, as a strong labor supporter, I'd have to point out that's not an accurate model. In the labor union, the union also says nobody ELSE can produce "labor" for your factory.

Posted by brooksfoe | May 10, 2008 5:19 AM

Meanwhile across the border in Ontario the car industry is booming despite that province's well-known liking for socialism and pro-Union policies.

Well, it *was* booming when the Canadian currency was cheap. But now that the loonie is on par with the dollar -- not so much:

"Union officials said the casualties in the auto industry will continue to mount unless the federal government takes action to guarantee fair trade for Canada's exports.
The manufacturing sector, which includes the auto industry, has lost scores of companies and more than 300,000 jobs in the past four years, according to some estimates, because of a soaring dollar, pressure on prices, the decline of the Big Three domestic auto makers and tough international competition."

http://www.thestar.com/News/GTA/article/419374

And, BTW, despite the 'well-known liking for socialism and pro-Union policies', the transplant factories in Ontario are as non-union as the ones in Kentucky and Alabama (the CAW has failed in its organizing attempts).

Ah, nothing brings out the contradictions at the heart of libertarianism like a discussion about unions.

Libertarians don't like cartels and monopolies that engage in rent-seeking.

There have always been competing auto-companies in the U.S., but the UAW was a cartel that enforced its high, above market prices on all companies employing auto-workers (and all customers buying products of those companies). It protected that cartel by demanding protection from imports (aka, 'voluntary import restrictions'). The cartel was finally broken when the transplants came in and started manufacturing in places where the UAW couldn't extend its power, the rent-seeking was no longer possible, and customers have had better products and lower prices since.

Why shouldn't there be decent, middle-class jobs for high school graduates?

There should be, and there are -- the skilled trades being the most obvious example.

Posted by Slocum | May 10, 2008 7:28 AM

Re: the transplant factories in Ontario are as non-union as the ones in Kentucky and Alabama

Except that in Canada all sorts of worker benefits that unions have fight tooth and nail for in the US are either provided by the government (e.g., health insurance) or mandated by law (e.g., vacations). So there's less a need for unions. But it doesn't mean that Canadian labor is dirt cheap.

Posted by JonF | May 11, 2008 12:23 AM

Chet, as a strong labor supporter, I'd have to point out that's not an accurate model. In the labor union, the union also says nobody ELSE can produce "labor" for your factory.

Often, yes. In any other context, we'd call that a "monopoly", and again, it's instructive about the contradictions that underpin libertarianism that the only monopoly libertarians seem to truly object to is a monopoly on labor.

And anyway it's hardly much of a monopoly. The only things that prevent Ford from firing every union worker and hiring non-union are the contractual obligations they voluntarily signed, and the fact that they would be negatively viewed by the public for doing so. It's not as though you can't find non-union workers to build cars.

There have always been competing auto-companies in the U.S., but the UAW was a cartel that enforced its high, above market prices on all companies employing auto-workers (and all customers buying products of those companies). It protected that cartel by demanding protection from imports (aka, 'voluntary import restrictions'). The cartel was finally broken when the transplants came in and started manufacturing in places where the UAW couldn't extend its power, the rent-seeking was no longer possible, and customers have had better products and lower prices since.

My point exactly, Slocum - these are completely natural and expected behaviors for all corporations, but it's only when they're done by labor corporations - unions - that you seem to object to them. Corporations lobby the government, game the regulations, what have you; as long as they're not in the business of providing labor, that's perfectly cricket, according to libertarians.

Posted by Chet | May 11, 2008 1:05 PM