The trouble with this comforting liberal argument is labor costs. When Kuttner says "Japanese total labor costs are comparable, even with Detroit's higher health insurance costs," he is--as is so often the case--talking through his hat. Look at this chart. GM pays $31.35 an hour. Toyota pays $27 an hour. Not such a big difference. But--thanks in part to union work rules that prevent the thousands of little changes that boost productivity--it takes GM, on average, 34.3 hours to build a car, while it takes Toyota only 27.9 hours. ** Multiply those two numbers together and it comes out that GM spends 43% more on labor per car. And that's before health care costs (where GM has a $1,300/vehicle disadvantage).
If you're GM or Ford, how do you make up for a 43% disadvantage? Well, you concentrate on vehicle types where you don't have competition from Toyota--e.g. big SUVs in the 1980s and 1990s. Or you build cars that strike an iconic, patriotic chord--like pickup trucks, or the Mustang and Camaro. Or--and this is the most common technique--you skimp on the quality and expense of materials. Indeed, you have special teams that go over a design to "sweat" out the cost. Unfortunately, these cost-cutting measures (needed to make up for the UAW disadvantage) are all too apparent to buyers. Cost-cutting can even affect handling--does GM spend the extra money for this or that steel support to stabilize the steering, etc. As Robert Cumberford of Automobile magazine has noted, Detroit designers design great cars--but those aren't what gets built, after the cost-cutters are through with them.
Look at the big Ford Five Hundred--a beautiful car on the outside, based on the equally attractive Volvo S80. But thanks to Ford's cost-cutters it debuted with a tinny, depressing interior that would lose a comparison with a subcompact Toyota Scion. Ford wants $30,000 for the Five Hundred. Forget it!
Is it really an accident that all the UAW-organized auto companies are in deep trouble while all the non-union Japanese "transplants" building cars in America are doing fine? Detroit's designs are inferior for a reason, even when they're well built. And that reason probably as more to do with the impediments to productivity imposed by the UAW--or, rather, by legalistic, Wagner-Act unionism--than with slick and unhip Detroit corporate "culture."
P.S.: If Detroit can only be competititive when the UAW makes grudging concessions, isn't it likely the UAW will only concede enough to make GM and Ford survive, but never enough to let them actually beat the Japanese manufactures? I try to make this point here.
Update: But UAW President Ron Gettelfinger is right about Ford's botch of the Taurus. ...
**--Non-union Toyota's productivity, in terms of hours per car, has actually been growing faster than GM's, according to the Harbour report cited by NPR. So--thanks in part to Toyota's lack of work-rule bottlenecks?--GM is not catching up. It's falling further behind. 1:57 P.M. link
Wednesday, January 10, 2007
Who's Surge Is It, Anyway? In this video from AEI, Frederick Kagan and Gen. Jack Keane, originators of the "surge" strategy, make it as clear as can be that they do not intend for surging U.S. or Iraqi troops to go after on Moqtada al-Sadr's Shiite Mahdi Army or to attempt to enter and clear out the vast Shiite neighborhood of Sadr City.** Yet in his speech tonight, President Bush said (without mentioning Sadr's name) that Iraqi prime minister al-Maliki had given U.S. forces the "green light" to do just that--and news accounts played up the anti-Sadr angle. ... Either Bush's surge is some other kind of surge from the Kagan/Keane surge, or there's some Kabuki goin' on (e.g., al-Maliki doesn't really mean it, and perhaps the Bush administration knows al-Maliki doesn't really mean it, but wants a) Iraqi Sunnis, b) Americans, c) Sadr or d) himself to think he means it). ...
P.S.: Kagan and Keane also wrote:
It is difficult to imagine a responsible plan for getting the violence in and around Baghdad under control that could succeed with fewer than 30,000 combat troops beyond the forces already in Iraq.