Gaffe of the Year--so far ...

A mostly political Weblog.
Feb. 12 2007 7:14 AM

Gaffe of the Year

Plus--Radar's blind spot.

(Continued from Page 24)

The shift lever falls readily to hand for one R. Kuttner, who road tests the Pontiac G6. He doesn't like the door-lock releases. Or the steering. Kuttner concludes the problem wiith GM isn't its workers--or unions--it's GM's incompetent designers and executives:

You might blame GM's woes on poor American workmanship or the cost of American labor. But Japanese total labor costs are comparable, even with Detroit's higher health insurance costs. Increasingly, Japanese cars are being assembled in the USA, and the quality holds up just fine.

So what's wrong with GM? The cars. GM is famous for being run by bean counters and ad men. Toyota is run by engineers.'

This is a common viewpoint, I've found, among my Democratic friends--Jon Alter, this means you!***--who would never actually buy a Detroit product but who want to believe the UAW can't be blamed. The argument seems to be roughtly this: a) American cars are now reliable enough, having closed the gap with the Japanese brands, so b) the workers are doing their job; therefore c) if Detroit cars like the G6 are still obviously inferior--tacky and cheap, with mediocre handling--it must be because they're designed badly by white collar professionals, not because they're built badly by blue collar union members.

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.

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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.

***--Update:Alter denies the charge that he'd never buy a Detroit product. He says he "had a Taurus a few years ago." And he doesn't remember the conversation--about the relative culpability of the UAW vs. Detroit design--that I remember. ... 1:57 P.M. link

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