Not particularly. Wages are operating costs, just as they would be anywhere else.

What you are missing is that auto making is a capital intensive business where labor is a small piece of the overall cost picture. Cutting the cost of a minor category does little to the total. That’s just arithmetic, and is true in this case because of the nature of what an automobile is (a complex device consisting of thousands of parts and assemblies.)

There is a reason why car makers have opened plants in the US, while other industries have been shutting then down and offshoring them. The cost structure in automaking is different, and the ways in which profits are generated are different. It is possible to make a car in the US and turn a profit, whereas that can be quite tough with cheaper commodities.

If you do the math on GM, as I have on other threads here, you can see that GM loses money largely because it has no brand equity or pricing power, so it sells cars for less than it would cost anybody to make them. It’s a revenue problem, not a cost problem.

If GM is to have a future, it lies not in fixating on cost reductions for the sake of them, but in making cars that Americans want to buy at a price above the normal cost of production. It’s quite possible that unit costs would have to increase in order for that to happen; the focus needs to be placed on making better vehicles, which may require more investment, higher parts prices and wage stability.

Why has no Republican been able to make the obvious case that Joe Taxpayer is shelling out tens of billions to provide $3200/month pensions and silver (formerly gold) plated benefits to 50 yr old UAW retirees?

The same reason said group won’t make the obvious case that Joe Taxpayer is shelling out tens of billions to provide golden parachutes to 50+ yr old Wall Street and Banking executives from firms who TOOK THE GOVERNMENT BAILOUT MONEY….

And the decimation of the middle class is a real thing. Not that I think the UAW comes out angels, unions had their purpose and their time and they seemed to have outlived it. But Japan and Germany have car industries that are practically infested with government and seem to do okay. And German unions are not pushovers (although they are more reasonable in some ways, because there is a huge social safety net that isn’t present here).

So essentially, so some people could save a few bucks and drive a marginally superior import we fucked the overall quality of life for an entire industry! Awesome! Wait screw this, we’ll pay the Auto workers minimum wage with as few benefits as possible! Then we’ll have tons more R&D (and we’ll quit paying the white collars what they’re worth too) to build the best cars possible! The consumer wins, every one else involved LOSES! I loved unfettered capitalism and crushing those who would stand in its way!

Accounting of labor costs must be missing some key element or cost within union shops. Are retiree health benefits included? Because something is missing from this accounting picture.

I’ve familiar with both union and non-union environments. Although I’ve never been in a UAW plant, I’m very familiar with their perks, benefits and numerous job classifications – all of which I could see easily increasing labor costs by 50+ percent (if implemented in the medical parts field).

Is my 50+ percent enough to make GM compromise in other areas so that they make Cobalts instead of Civics?

+1

@indi500fan: they have, the media is so distracted by Michael Jackson that they have not reported the issue.

That line of logic always bothered me because it amounts to “Be thankful for what you have, because you could have it worse.”. It’s a favourite of people who support dubious causes because it makes them look clean by comparison.

Why not ask why things are getting worse, rather than stomp down on people who are trying to hold the line or make it better? I’m not saying the Union is faultless (or even, in some matters, smart), but I think it would be worth asking why the American education or heath-, child- and elder-care systems are middling at best, rather than saying “Well, at least you don’t live in Eritrea!”

Yes.

Long answer: it costs serious money to start up production, especially from the ground up. That said, it also costs serious money to import a high-volume model from offshore, especially if it’s a low-cost product.

So, it depends.

Maybe it was socialism that forced Chrysler, GM and Ford to make bad cars? Of course! Genius!

Fascinating listen.

Psarhjinian ain’t gonna like it, but I do.

I don’t think it’s so much a Union/Management thing as it is a problem for the producers of high-cost, high-sale-price discretionary products.

Semiconductors and biotechnology are relatively easy (in cost terms) compared to, say, heavy manufacturing: once the R&D is done, the cost to produce is far, far lower and much more transportable to low-cost regions. Internet-based businesses and consulting can, effectively, have next to no physical overhead outside of labour.

What is hurting—in addition to manufacturing— is discretionary retail and (especially) housing. Neither is particularly union-heavy. I don’t think it’s the adversarial nature as much as it is being stuck holding debt or inventory when the market collapsed. If you’re a consulting firm or a drug maker or a chip fab you can cope with that a lot more easily than the likes of General Motors.

I don’t think the point is what form of political economy you subscribe to, it’s how capable and willing you are to execute. Capitalists are just as willing and able to make crap.

For years, the Germans and Japanese made better cars than the American marques did, despite being more socialized. Heck, out of the American plants, their highest-quality products often rolled off Canadian assembly lines (Ford:Oakville, GM:Oshawa), again despite Canada being more socialist.

I’ve also heard variations on Sowell’s points. I’ll say that I disagree, offer up Walter Benn Michael’s podcast as an alternative (if not directly related) counterpoint and spare the rest of TTAC a completely off-tangent debate on the topic.

Industries that are not stuck in the legacy of Union vs. Management in the USA are not just doing well, they thump on everyone else. Semiconductors are a good example. The internet is another good example. Biotech isn’t even a comparison in so much as USA vs. Rest of Planet – everyone else loses, badly.

In-so-much as their social dynamic, the Detroit companies remind me of an industrial analog to Colonial Williamsburg or Mt. Vernon: a protected little bubble of unreality where you can see how people did things in the old days, before we figured something better.

The crystallization of power-structures in both the union and the boardroom of the Detroit outfits is what killed them. The ultimate failure of the domestics viewed politically or ideologically can only be characterized as a very, ahem, “bi-partisan” effort here. There are no good guys, just a den of thieves.

I think that would be news to the people of ’socialist’ countries like Germany, Sweden, Italy, Australia, Canada, etc.

Socialists make bad cars. Truth bro.

As far as median income goes, give this a listen to:
http://www.econtalk.org/archives/_featuring/thomas_sowell/

The demand was lacking because the cars were not appealing or particularly good.

What should have been bread-and-butter vehicles such as the Sebring never sold in the same numbers that the popular competitors did, even after dumping most of them into rental. Companies tend to lose money when they make stuff that people don’t want. They didn’t produce too many cars, they produced too many lousy ones.

Labor is not a major cost component of automaking; the main source of expense is parts. Companies that make losing cars are doomed to lose money; lower wages would have only reduced the losses, not produced profits.

+1.

If it was your money would you invest in a UAW industry in the USA? I sure wouldn’t with my money and I have no yearning to provide UAW members the lifestyle they are accustomed to.

The investment money is fleeing the USA by the billions. And the flood is going to become a torrent.

The US government has sent the signal that they will coddle the unions at the expense of the investors.

And then with the House passing the global warming bill more money will flee the insanity. They have just made it much more expensive for the auto industry in the USA. The result will be that the socialists will not have any more other peoples money to spend. Take a look at California to get the idea.