Mopar Malaise

Everybody talks about legacy heath care costs and their effect on the competitiveness of GM, Ford and Chrysler. James Surowecki has an article in the New Yorker (complete with cartoon!) where "The Wisdom of Crowds" author explains that Cerberus faces more problems than health care:

A 2006 report by the Harbour-Felax Group, a well-respected automotive-industry analyst, concluded that in 2005 Chrysler’s health-care costs were about eleven hundred dollars more per vehicle than Toyota’s. But even if that gap were closed Chrysler and other U.S. automakers would be far less profitable and would be growing more slowly than their foreign competitors. Ultimately, American manufacturers sell too few cars for too little money, and have to offer too many incentives—thousands in cash back or low-interest financing—on the vehicles they do manage to sell. That same Harbour-Felax report found that, on average, Japanese automakers’ profits for 2005 were twenty-nine hundred dollars more per vehicle sold in the U.S. than those of American automakers. And most of that profit comes not from lower production costs but from the Japanese automakers’ being able to charge more, because their cars are better designed and more reliable, and because their mix of products is smarter. Honda’s revenue per vehicle, for instance, was twenty-six hundred dollars more than Chrysler’s.

So they pay more in health care, more in wages, get less productivity from workers and produce lower profit automobiles. We have a few Mopar fiends around here, but where does this stop? I think the UAW needs to be chased out or defanged. You can trace about all of these problems to union demands and concomitant lack of flexibility.

Read it all. It's short, good, and you get a cartoon. Hat-tip: Everyday Economist

Posted by John Kranz at May 29, 2007 11:06 AM