Quote Of The Day: Bye-Bye Miss American Pie Edition

Edward Niedermeyer
by Edward Niedermeyer
quote of the day bye bye miss american pie edition

I understand the economic argument for the off-shoring of production, but I think the practice is reprehensible. U.S. automakers have benefitted greatly from federal largesse and should feel morally compelled to retain and create as many domestic jobs as possible.

As one of the strongest proponents of the Detroit Bailout, Rep John Dingell (D-MI) carries some weight when he makes statements like this. But how can Detroit rise again by ignoring the undeniably strong “economic argument” for outsourcing? In a Bloomberg BusinessWeek feature, Thomas Black shows why production numbers are on the rise in Mexico, and makes the case that the Detroit automakers will only increase their reliance on Mexican production when they are free from government ownership.

Why? The same reason illegal immigration is such a huge issue.

GM workers in Mexico earn wages and benefits of 340 pesos a day ($26.40) on average, or less than $4 an hour, said Tereso Medina, head of the union for GM’s 5,000 workers in Saltillo, a city that makes one in four Mexican autos.

GM’s average hourly worker salary in the US is $69,368. If a Mexican worker worked 365 work days a year at the cited rate, he would still make under $10,000. Average UAW concessions over the past decade range between $7k and $30k per year. It doesn’t exactly take a rocket-scientist to understand the “economic argument” at work here.

And the Mexican momentum is hard to ignore. Looking back at pre-crash production numbers, Black reports:

U.S. car and light truck production declined every year to 8.45 million in 2008 from 11.5 million in 2005, according to Ward’s Automotive Yearbook. In Mexico, output rose every year to 2.08 million in 2008 from 1.61 million in 2005, the data show…

Production fell in both countries last year, by 28 percent to 1.5 million units in Mexico and 34 percent to 5.56 million in the U.S., according to Ward’s.

This year, U.S. production in April rose 40 percent from a year earlier to an annualized rate of 7.05 million vehicles. Mexico’s output jumped 77 percent and is on pace to top 2008, according to the Mexican Automobile Industry Association.

Chrysler’s decision to build Fiat 500s in Toluca, GM’s new plant in St Luis Potosi and Ford’s re-opened Fiesta plant in Cuautitlan are all cited as evidence of a growing trend. And the analysts line up to be quoted as saying that politics alone are keeping Detroit from more aggressive Mexican investments.

Of course, the other way to look at it is that politics are the only reason GM and Chrysler still have the luxury of being torn between their bottom line and their moral obligation to Rep John Dingell the American people. Yet another perspective is that these weren’t truly “American” companies before the bailout anyway, and that rescuing multinationals and expecting loyalty in return is the height of naivete. In any case, it’s hard to imagine anything changing the fundamental imbalance between UAW/CAW and Mexican worker pay in the short term, so this is an issue we’re all stuck with for some time.

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2 of 18 comments
  • Arete Arete on Jun 11, 2010

    340-4: That's true. Mexico has a free trade agreement with Brazil (the largest market in SA).

  • DearS DearS on Jun 11, 2010

    I love coming up with my own opinions. One of them is that I refuse to force my believes on another. So I think its ok for Mexicans or anybody to make anything for anybody without guilt. Ok, now may the fittest and/or most open minded/hearted live.

  • Probert There's something wrong with that chart. The 9 month numbers for Tesla, in the chart, are closer to Tesla's Q3 numbers. They delivered 343,830 cars in q3 and YoY it is a 40% increase. They sold 363,830 but deliveries were slowed at the end of the quarter - no cars in inventory. For the past 9 months the total sold is 929,910 . So very good performance considering a major shutdown for about a month in China (Covid, factory revamp). Not sure if the chart is also inaccurate for other makers.
  • ToolGuy "...overall length grew only fractionally, from 187.6” in 1994 to 198.7” in 1995."Something very wrong with that sentence. I believe you just overstated the length by 11 inches.
  • ToolGuy There is no level of markup on the Jeep Wrangler which would not be justified or would make it any less desirable [perfectly inelastic demand, i.e., 'I want one']. Source: My 21-year-old daughter.
  • ToolGuy Strong performance from Fiat.
  • Inside Looking Out GM is like America, it does the right thing only after trying everything else.  As General Motors goes, so goes America.