Well, this is a bit of a half-baked response to Detroit deterioration:
> The Bush administration has a choice. It can preside over the dissolution
> of what remains of the U.S. auto industry or it can take the first
steps toward
> a national solution for the health care cost crisis that is
distorting labor markets,
> driving down disposable income, leaving millions of Americans without
health
> care and creating the largest competitive disadvantage that U.S.
companies now
> face
Ford is sitting on an inventory of 900,000 vehicles. Fewer people are
finding cash to buy. The cars being sold are gas hogs. And the author
only points out that Bush has "a" choice, referring to reducing health
care costs?
Somebody swat Mr. Tarpinian and put him back in his playpen.
Imports are taking over market share for one very simple reason - fuel
economy.
If Bush can't get off his ass and lend some assistance and enticement to
get Detroit to change what it keeps cranking out, he's going to be
presiding over a number of corporate funerals before his term is up.
(Didn't I say just the other day that it would take less than three
years? My how time flies....)
But I guess we should all be thankful, huh? Surely we're "much better
off now than we were five and one-half years ago, right?
Todd Swearingen
Keith Addison wrote:
http://www.tompaine.com/articles/20050811/the_auto_industrys_last_hope.php
The Auto Industry's Last Hope
Greg Tarpinian
August 11, 2005
Greg Tarpinian is the president and executive director, Labor Research
Association, a New York City-based non-profit research and advocacy
organization that provides research and educational services for trade
unions.
After pushing one of the largest companies in the world to the brink
of disaster, General Motors executives began their annual meeting with
UAW leaders on April 14 with plans to intensify their push for health
care benefit cuts.
GM announced on March 16 that it would report an $850 million loss for
the first quarter of 2005 and earn $1 to $2 per share for the year,
down from its earlier forecast of $4 to $5 per share. The company's
cash flow is a negative $2 billion. GM's bonds now are rated just
above junk, and it still owes billions to its underfunded pension and
retiree health plans.
Ford cut its profit forecast for the year by 14 percent on April 8 and
announced that it will not meet its 2006 goal of $7 billion in pretax
profit. Ratings agencies are now poised to downgrade Ford's credit too.
Both companies will cut production and accelerate layoffs for their
white-collar workers. GM's salaried workforce has already been hit
with substantial job cuts, wage freezes and higher benefit contributions.
There is no ready solution for the financial problems that may easily
overwhelm these companies. Ford is sitting on an inventory of almost
900,000 vehicles; GM faces substantial overcapacity. Although GM
executives continue to claim that they can regain market share,
industry analysts uniformly agree that GM and Ford have permanently
lost their positions as the leading car companies in the United States
U.S. market share for the American automakers fell from 65 percent in
1994 to 42 percent last year. Toyota displaced Ford as the
second-largest car seller in the country for reasons that have nothing
to do with Ford's higher benefit costs. The U.S. automakers have been
digging their own graves for years, but GM faces the highest costs
because of its misguided expansion two decades ago. The U.S.
automakers have squandered market share and mismanaged resources, but
would like to blame benefit costs for the financial crisis they have
been courting for two decades.
The financial crisis born of mismanagement leaves the companies facing
costs they cannot cover, including health care costs.
GM paid out $5.2 billion for health care benefits in 2004 and expects
to pay out $5.8 billion this year. These benefit costs are part of the
total compensation negotiated in union contracts that traded what
would have been higher wage increases for better benefit provisions.
Health benefits, including retiree benefits, are simply wages
delivered in a different form or, in the case of retirees, deferred
for payment later. The U.S. automakers are now pressing for the
equivalent of a wage cut for its union workers and take-backs from its
retirees.
The costs have been exacerbated by the unwillingness of the Bush
administration and Congress to address the catastrophic rise of health
care costs in the United States. GM's $73 billion liability for
retiree health benefits could be covered three times over by the
amount the United States squanders every year on administrative costs
for its private health care system.
China and India will begin exporting cars to the United States within
the next few years. Carmakers in both countries benefit from national
health care systems that pay for employee benefits with public funds.
The U.S. automakers are moving more production to Canada where a
national health care program provides coverage for workers and their
families for less than one-fifth of the cost of health benefits on the
U.S. side of the border.
Benefit costs account for 28.8 percent of compensation costs for
private sector production workers in the United States, compared with
17.0 percent in Japan, 16.6 percent in Canada and 17.6 percent in the
United Kingdom. Three-fourths of the difference in benefit costs stems
from the private health insurance system in the United States
The Bush administration has a choice. It can preside over the
dissolution of what remains of the U.S. auto industry or it can take
the first steps toward a national solution for the health care cost
crisis that is distorting labor markets, driving down disposable
income, leaving millions of Americans without health care and creating
the largest competitive disadvantage that U.S. companies now face.
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