Union Rules vs. Employer Survival

Friday, January 12, 2007

Over my Christmas break, I rented a Ford Taurus, which I was rather pleased with overall. At some point during the Florida leg of my holiday visits, I was surprised to learn from my father-in-law that Ford was discontinuing the Taurus. I replied something to the effect of, "I like this car, although I probably wouldn't buy one for myself." I am a Honda man, after all.

And then I added, "Hmmm. I guess that's the problem." We got a good chuckle out of that.

I am not the only one, and customer preference itself has causes. Why, after all, do so many Americans prefer foreign cars now?

Blame the unions

When [Pontiac G-6 road tester R.] Kuttner says "Japanese total labor costs are comparable, even with Detroit's higher health insurance costs," he is -- as is so often the case -- talking through his hat. Look at this chart. GM pays $31.35 an hour. Toyota pays $27 an hour. Not such a big difference. But--thanks in part to union work rules that prevent the thousands of little changes that boost productivity--it takes GM, on average, 34.3 hours to build a car, while it takes Toyota only 27.9 hours. ** Multiply those two numbers together and it comes out that GM spends 43% more on labor per car. And that's before health care costs (where GM has a $1,300/vehicle disadvantage).

If you're GM or Ford, how do you make up for a 43% disadvantage? Well, you concentrate on vehicle types where you don't have competition from Toyota -- e.g. big SUVs in the 1980s and 1990s. Or you build cars that strike an iconic, patriotic chord -- like pickup trucks, or the Mustang and Camaro. Or -- and this is the most common technique -- you skimp on the quality and expense of materials.
Mickey Kaus goes on to note that this very problem is plainly evident in the new Ford Five Hundred, which is one of the three models slated to replace the Taurus.

That's too bad.

-- CAV


Today: A reader notes the following off-topic -- but very important and very bad -- news.
Oil major Exxon Mobil Corp. is engaging in industry talks on possible U.S. greenhouse gas emissions regulations and has stopped funding groups skeptical of global warming claims -- moves that some say could indicate a change in stance from the long-time foe of limits on heat-trapping gases.
A "change in stance"? From fighting one's enemies for survival to helping them kill you, although perhaps more slowly?

I guess some companies don't even need union thugs to bring them down. Threatening mail from Congress and the whining of hippies will be enough to make Exxon fold like a cheap lawn chair.


Anonymous said...

Sorry off thread. Exxon caved: http://www.msnbc.msn.com/id/16593606

Gus Van Horn said...

No need to apologize. Bad news, but important nonetheless.

Anonymous said...

Electric utilities have also become big anti-greenhouse gas advocates. The CEO of one of the largest electric utilities, Duke Energy, has been outspoken for several years in calling for curbs on greenhouse gas emissions. He is joined by the CEO of one of the largest electric generating companies, NRG Energy, who calls reducing greenhouse gases a "moral imperative". The full quote and link is below.

It turns out that NRG wants government subsidies to build two large "integrated gasification combined cycle" coal-burning power plants in New York and Texas. The technology is too expensive for the market, but anything is possible with enough subsidies.

These CEOs, especially the CEO of Duke who is a smooth political operator in the electric utility industry, believe that it is better to "bugger everyone" than be the only industry getting buggered.

They operate on the mistaken view that they if they advocate controls, they can shape how they are applied, and therefore suffer less. Of course, by advocating controls at all, they become their own destroyers. (It is kind of like trying to manufacture a comfortable noose to go around your neck!)

Quote of David Crane, CEO of NRG Energy: "Taking steps to reduce carbon dioxide concentrations in the earth's atmosphere is a moral imperative."

Gus Van Horn said...

[For reader convenience, you can avoid typing in the last link by clicking here.]

And if the utilities won't bugger themselves across a pack of lawyers is working to make just that happens in Texas -- where coal-burning plants make up for blue-state deficits in electricity-generating capacity....

Inspector said...


Re: Unions and GM

I forget; have you read this yet?

Re: Exxon

“An appeaser is one who feeds a crocodile, hoping it will eat him last!” - Winston Churchill

Gus Van Horn said...

Thanks for pointing to that article, Inspector.

Anonymous said...

I like the Winston Churchill quote.

I hear the crocodiles usually go for the spine first. That may explain why there are so many spine-less businessmen walking around!