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Oh Yes They Did

Posted By Conn Carroll On December 2, 2008 @ 10:57 am In Economics | Comments Disabled

Big labor apologist EJ Dionne Jr. asserts in the Washington Pos [1]t today:

The failure of the Big Three is regularly attributed to the high wages and benefits earned by members of the United Auto Workers union, and it’s true that the Detroit-based auto companies operate under heavy “legacy costs” for retirees’ pensions and health coverage negotiated during the industry’s fat times.

But the blame-the-workers-first cant ignores the fact that if the Big Three had designed better cars, they would not have lost as much market share to Toyota, Nissan and other competitors. The unions did not prevent management from producing a better product — and I say that as someone who has enjoyed driving Saturns for the past 15 years.

Oh but the union most certainly did restrict the type of cars the Big Three were able to produce. Megan McArdle explains [2]:

Management has made a lot of mistakes. But making big cars wasn’t one of them. That’s because they couldn’t profitably make small cars in the United States. And the reason they couldn’t is that their labor costs were too high. All in, Detroit was paying about $30 more an hour than other companies to make cars. At that kind of differential, you have to concentrate on large cars with big profit margins, not economy cars where consumers fight to save $15 on the headlight bezels.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/12/02/oh-yes-they-did/

URLs in this post:

[1] Washington Pos: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/01/AR2008120102404.html

[2] explains: http://meganmcardle.theatlantic.com/archives/2008/11/labors_love_lost.php

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