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China the UAW and the U.S. Automotive Industry
2005 October 13
© 2005, Libertiny Financial LLC
Reduce your wages by 2/3rds and we'll probably be able to fund the pension plan. That's basically what Delphi Automotive CEO, Robert (Steve) Miller has shared with his employees and the world during the beginning of the company’s Chapter 11 bankruptcy this week.
What's at stake:
1) The pension, which helps to support retired Delphi employees
2) The future of the company
3) The future of the U.S. automotive industry
4) Manufacturing in the U.S.
The Past
Real global competition is once again hitting home in the U.S. The steel industry was the first to feel it with the lower production costs from Japan Inc. The results: We no longer make much steel in the U.S. The semiconductor industry felt it next with the lower production costs of certain types of electronics, computers, CD & DVD players, televisions and audio gear. The results: We no longer make a lot of basic electronic gear in the U.S.
China
So how do the automotive industry and its suppliers compete with China which has an educated and skilled workforce that's willing to work for a fraction of U.S. wages? Is a U.S. automotive worker really worth between 3 times and 6 times the cost of a Chinese worker?
WalMart
It's a real quandary, because in our "WalMart" era of inexpensive goods sourced from low-cost Asia, the very people supporting "WalMart's everyday low prices" are the people who are about to have their wages significantly cut or their jobs eliminated.
Ford
In the early part of the 1900's, Henry Ford set a very high wage for his workers under the experiment that by doing so, he would create his own consumers: It worked. But as first Germany found out and now the U.S. is finding out (again), not everyone in the world has that same philosophy.
Waiting
We could just sit back and wait it out. Eventually, China's wages will approach the level of the U.S. while the U.S. wages decline toward China's. When that happens, much of the competitive advantage that China presently has, will disappear.
Compromise
But by waiting, we'll not only loose the automotive industry, but much of the remainder of our manufacturing capabilities, which is the backbone of the U.S. Instead, we're going to be forced to compromise: Cut back on our wages. Cut back on pension payments. And keep managers feet to the fire in their promise to build quality cars that have great style and fulfill a niche market at a fair cost. It's a tall order, but that’s why management makes the big bucks.
Buy U.S.
It also would help all of us in the U.S. to buy goods that are made by our family, friends, and colleagues. After all, the next wage reduction or job lost could be yours. Support U.S. industry.
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