The Real Problem With The Auto Industry

The other day I had a list of suggestions for the auto industry. To review, here they are:

1. Build better cars.
2. Build models people actually want to buy.
3. Pay less to build them. If you have to dump some union contracts and stop paying guys $50 an hour to bolt bumpers onto Buicks, so be it. A job with less pay and benefits might be better than no job at all. Especially in Michigan.
4. Charge less to sell them (see #3 above).
5. If none of those things work, get President Obama to ban the import of foreign cars. Problem solved. He can use some of that Obamessiah warm and fuzzy feelings to smooth it over with the Japanese, Germans, South Koreans, etc. After all, the world loves us again.

In reference to #3, Larry Kudlow gives some background on compensation packages:

Total compensation per hour for the big-three carmakers is $73.20. That’s a 52 percent differential from Toyota’s (Detroit South) $48 compensation (wages + health and retirement benefits). In fact, the oversized UAW-driven pay package for Detroit is 132 percent higher than that of the entire manufacturing sector of the U.S., which comes in at $31.59.

I don’t care how much money Congress throws at GM. With that kind of oversized comp-package they are not gonna be competitive. It’s throwin’ bad money after a bad cause. What a way to start the new Obama era.

I agree. Throwing money at GM, Ford and Chrysler will only delay the ultimate failure because they can't compete in the world auto market with compensation packages like that. Their autos will always have to be priced higher if they hope to make a profit.

I'm all for retaining a manufacturing base in the United States, but it doesn't make sense for taxpayers to prop up badly run businesses just to save jobs temporarily. There have to be fundamental changes in how those businesses are run.