Wednesday, November 12, 2008

Let the Car Makers Fail...

The chart at right captures very nicely one of the major reasons that U.S. car makers are failing: the legacy labor agreements they're saddled with. The average employee at the Big 3 makes $73/hour (that's $146,000 per year!) – versus less than half that for Toyota's vastly more productive employees.

The right thing to do is to allow the U.S. auto makers to fail. They'll go into Chapter 11 bankruptcy and either shed all the baggage (like these labor agreements) that keep them from being successful, or their assets will be sold off to successful companies. Consumers will win in the long run.

Another reason U.S. car makers are failing is so obvious you'd think someone in government would figure it out: they are not building the cars that U.S. buyers want. Sales of cars built by U.S. makers have fallen dramatically more than sales of cars made by Toyota have fallen. Now legislators, surely you can imagine what the actual reason for that might be? Hint: consumers are willing to pay more for a Toyota Camry (made in the U.S., by the way) than they are for a similar car from a U.S. auto maker. Now why would that be? Could it be...that the Toyota is a better car?