I’m doing a little catching up this weekend and trying to read all the two dozen or so articles I bookmarked over the past couple of weeks.
One of the items I bookmarked was Holman W. Jenkins Jr. December 31st Op Ed piece in the Wall Street Journal “Let Detroit Build Profitable Cars”
In the continuing battle over Detroit, UAW chief Ron Gettelfinger doesn’t seem to get the picture. Let’s help him.
With shareholders virtually wiped out and debt holders taking a massive haircut, labor is the only stakeholder with anything left to lose. Even a friendly Obama administration will have to acknowledge this. But there is an alternative that would at least take some of the pressure off wages and benefits — and that’s freeing auto makers to build cars for a profit rather than to meet regulatory mandates.
Like all regulatory schemes, Congress’s hallowed Corporate Average Fuel Economy rules froze in place a conception of the auto industry as it appeared to the simple minds of Congress in the early 1970s, when three manufacturers dominated the U.S. market, making full lines of vehicles. Today, more than 25 companies sell vehicles here, and the corollary of such diversity, normally, is specialization.
The Big Three, left to their own devices, would surely specialize in those vehicles on which they make money — i.e., those with hefty price tags and markups relative to their man-hour content. Even at the peak of gas prices, half the vehicles sold in the U.S. were light trucks. In November, amid a collapsed home construction industry and with $4 gasoline fresh in mind, what were the two top sellers? Pickups by Ford and Chevy — and the Dodge Ram was No. 7.
While I agree with Jenkins in principle on repealing CAFE standards it’s only one piece of what needs to be done to bring the big three back to profitability… It’ll help but that won’t solve the problem.
On a related note: Chrysler seems to be winning new friends… I don’t who the marketing genius was that dreamed up the idea publishing a thank you ad but if the comments on their blog are any indication it didn’t go over well.