Wednesday, October 19, 2005

Delphi's Failure - Who's at Fault? China or America? Or Neither?

Robert J. Samuelson gives his usual coherent opinion today in the Washington Post.

The topic is Delphi's recent bankruptcy and subsequent announcement of potential cuts in benefits and wages. Especially controversial has been the suggestion that retirees over the age of 65 simply move to Medicare and receive no additional supplementary benefits.

Samuelson hits the nail on the head when he points out that the "legacy" US auto industry has turned into a welfare state. How else would you describe an industry in which " laid-off UAW workers essentially get full salary and benefits indefinitely"? Where benefits total $1,600 per car?

With all due respect and sympathy to those individuals and families impacted by the wrenching changes to come, this is simply a market correction that is necessary and overdue.

And the blame for it lies not at the feet of politicians - it belongs to the union and industry leaders who fought for and agreed to contracts and infrastructure that rendered it uncompetitive. How many union leaders ever looked out across a GM showroom and wondered, "Hmmm. My benefits total $1600 per car out there. Wonder how that stacks up against the Toyota showroom across the street? And why the hell has our market share plunged in the last two decades?"

I doubt it. That would be looking in the mirror.

It's not that the legacy US automakers haven't done a ton to improve their products and processes. GM, for example, currently boasts 4 of the 5 most efficient auto assembly plants in North America. But those rich contracts have saddled them like an anchor.

My only quibble with Samuelson's column is his closing shot at China. Yes, there are uncompetitive advantages in its currency. But China Inc has had minimal impact on the US auto industry. I have some experience with China (see my comments at A Stitch in Haste - a great blog, if you haven't checked it out yet).

The bottom line is that, for all the gnashing of teeth over all our manufacturing moving to Asia, US manufacturing output continue to increase, year after year after year. Yes - manufacturing employment has dropped. But that's because we've gotten smarter, more productive, and more competitive.

In the big picture, and in the long run, that's a good thing.


Blogger Mason said... are sooooo on the money, especially that this is much needed, long overdue market correction. Regrettably, to the disadvantage of the workers, both short and long term. But, again you are right, it is the fault of the union and industry leaders.


1:32 PM  

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