The Wall Street Journal’s Business World by Holman W. Jenkins Jr. exemplifies the dangers of always looking at the course through the same binoculars. His “Uncle Sam Goes Car Crazy” (WJS Oct. 22, 2008) rant is an attempt to view Detroit’s troubles through Government is Bad glasses, filtering out all other reasons for the slide. He’s wrong, and in a dangerous way.
We can start where we agree: The American automotive industry is cart wheeling into the stands, parts are flying off and people are scared. Jenkins and I part ways mid-tumble. He believes Detroit has “accrued an almost incalculable baggage of government intervention, which explains why more intervention is needed today.” A traditional free-market loyalist, when there’s trouble, Jenkins’ finger points to big government first, automatically and without much input from rest of the body, it would seem.
First, Jenkins blames GM, Chrysler and Ford’s labor inflexibility on the Prohibition-era Wagner Act, claiming the Government makes automakers dole-out higher compensation than the market dictates. I’ll crack open a 70-year-old bottle of rye and toast laws that never change. Salut.
Labor contracts over the last few years have actually added second and third tier employees, mitigating the effect of Wagner. Not that it should have mattered. The labor laws in Germany are even more stringent and their Big 3 seem to be surviving. (Not that any car maker is raking it in a the moment, but Porsche/Volkswagen, BMW and Mercedes are nowhere near putting their respective bellies up.)
Second, Jenkins bemoans the 50s franchising laws, which certainly add to Detroit’s problems, but wouldn’t if they were moving vehicles, which they’re not. Ironically, if The Big 2.8 had not fended off the government’s attempts to raise fuel efficiency standards for a generation, dealers might have more competitive products to push right now. They’d all be selling more cars and trucks. The number of outlets matters, but to a lesser extent.
Next up, off-shoring vehicle construction, as in Detroit doesn’t do enough. I’m not entirely sure whose job Jenkins is trying to save with this argument; it’s not Joe the Tool and Die guy. Jenkins believes that saving American car manufactures means making cars someplace else. I just assume buy an American made truck, despite the Toyota badge on the tail, but that implies the tack is valid in the first place. Anyway, The Big 2.8 build plenty of cars in other countries. Fuel and safety dictates haven’t hampered that effort in the slightest. In fact, due to a limpid dollar, building in good ‘ole US of A hasn’t been this attractive in years.
Lastly, Jenkins states that American companies build better cars overseas and can’t bring them here, again because of an ignorant, intrusive federal government. I’m gathering he’s never been to a Saturn lot. Maybe he’s still confused by the fact that his Ford Focus doesn’t corner like the one he rented in Glasgow. A choice Ford made all on it’s own.
Yes, there are differences in standards from nation to nation. The differences, themselves, do not prevent a world car. The European Ford Focus is built on the Mazda 3 – Volvo 30, 40, 50 platform, that runs nicely on American highways. Its one of the many things Allan Mullaly noticed when he took charge of Ford. He’s been trying to slim and unify ever since. AND he’s not breaking any laws in the process.
Strangely enough, Jenkins misses the Big Kahuna: mandatory health care. GM, Chrysler and Ford have to offer it to their workers, and It costs them a fortune, adding thousands of dollars to the cost of every Trailblazer, Explorer and Durango rusting on the lot. And, you know, helping people survive cancer, heart disease and other ailments along the way.
A national, single-payer health care system would alleviate these costs and level the field Americans play on against Japan, Germany and Korea, as the Chinese stretch out on the side lines. “Socialized Medicine” is beyond Jenkins’ scope, though, regardless of how good it looks as applied to this industry. Government is never the answer in Business World.
“The only thing wrong with corporate longevity,’ Jenkins writes, “are the legal encrustations that accumulate.” To which I say: build better cars and customers will buy them.
There are times when you’ve got to put the binoculars down and take in the full course. Even when you may not like what you see. Laissez faire is a fine ideology; it should never be confining. There are times when other strategies need apply, like… now (for example). One of the world’s foremost authorities on business issues got it wrong four out of four. I expect better of the Journal. With industry leaders getting this kind of advice through their headsets, it’s no wonder the American automotive industry’s spinning off the track.