“Two or more companies can develop a product that they believe is marketable to consumers and they compete against one another. The company with the best plan and implementation of that plan will succeed, leaving the others to fall to the wayside, either to regroup or to collapse completely.””
Two or more companies can develop a product that they believe is marketable to consumers and they compete against one another. The company with the best plan and implementation of that plan will succeed, leaving the others to fall to the wayside, either to regroup or to collapse completely. This model is easily applied to the automotive industry, where American carmakers have declined due to poor planning and management. No one would expect a rematch of Cleveland and Buffalo because of fairness, just as no one should expect our tax dollars to be given to private companies that have mismanaged their products and have turned away millions of American consumers.
There are several factors that play into the failure of the American car companies, and it spawns from the ’60s and ’70s. GM, Ford and Chrysler started their stranglehold on American consumers following World War II, when business was booming and a recession seemed far off the horizon.
There were no worries, except in finding land for expansion in Detroit. The autoworkers’ unions demanded higher wages and better benefits and the Big 3 were obliged to sign the check, because demand, in their minds, could only escalate. Workers were happy and management’s pockets continued to get fatter. The reality is the Big 3 were completely blind to the fact that they were actually hurting their interests.
Following the 1970s, Japanese automakers started their rise to the top. Honda, Toyota and Datsun (now Nissan) started importing their vehicles into the U.S. market. Though they did not come to immediate stardom among Americans, what they accomplished was to prove that though their cars were reliable and attained exceptional gas mileage; these attributes that weren’t on the minds of the Big 3. These attributes would be the cornerstones on which foreign automakers would build an empire.
Coming into the ’90s, more and more Americans were realizing that the foreign automakers were making a much better product than their American competitors. Millions of consumers were lost, and the Big 3 finally realized that the grip they held on the American market was quickly slipping away. The foreign companies were innovating, trying to come up with the best technology possible in order to win over more consumers. American consumers were still concerned with huge cars and appearances instead of cars that were economical and relatively easy to maintain.
Now, into the 2000s we can see what innovation has done for the foreign car companies. The hybrid Toyota Prius is selling off the lots and currently has the highest customer satisfaction rate according to Consumer Reports. Listening to the demands of consumers concerned with gas prices, Honda released the first hydrogen-powered vehicle into the market.
What is remarkable about these advances is that they weren’t funded by government grants; they were generated through good old-fashioned competition. The foreign companies were able to remain competitive because of ingenuity and because they kept their costs low. Specifically, they were able to keep labor costs low; something the Americans had signed away to the unions decades earlier.
These union contracts have forced GM, Ford and Chrysler to pay exorbitant wages to workers that are doing nothing more than putting on lug-nuts on an assembly line. The contracts prevent the automakers from laying-off workers without paying an outrageous penalty fee. The companies have needed downsizing so badly that they have actually paid workers to stay home.
And for those of you who cry, equal pay for equal work, you should be outraged at American carmakers. On average, workers within the Big 3 make $71 per hour, while the rest of the service sector makes $30 per hour. That’s quite a salary for putting on nuts and bolts.
While liberal congressmen call for a bailout of the auto industry, remember the decisions these carmakers have made over the previous 40 years that have led to their collapse.
Why should the American public be held responsible for these private companies’ shortfalls? Why reward a company that can’t properly manage their money by giving them more money?