Detroit and the Democrats

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

The Three Kings of Detroit made their long-awaited pilgrimage to Washington yesterday, and the good news is that President Bush seems to have been mostly unconvinced. By all accounts, he listened politely as the chief executives of Ford, General Motors, and Chrysler made a pitch for a combination of currency manipulation and health care reforms that were variously described as vague to vaguely troubling. Then he politely sent them on their way. If only they were getting a similar response on a newly Democratic Capitol Hill.

The Big Three would have been better off staying in Detroit and meeting with their unions. American automakers face two fundamental problems. Fewer people are interested in buying their cars than in purchasing those of their competitors, and the automakers pay their employees more to manufacture those cars than Japanese or Korean companies pay their workers. While some government policies contribute to their woes — continuing tariffs on certain types of steel, to name one — for the most part the wounds are self-inflicted.

Detroit has been slow to develop fuel-efficient small cars. That failure, more than any temporary currency fluctuation, explains why Toyota and Honda are building market share. Detroit has no one but itself to blame for labor contracts that have left the automakers with more retirees than current workers and spiraling health care costs. It’s certainly a problem for GM that the company is expected to be spending $7 billion a year by 2009 on health care for employees and retirees. But why is that to be laid on taxpayers in Maine, say, or Utah? Automakers can try harder to negotiate changes to their contracts, or they could file for bankruptcy.

The danger is the pending accession of the Democrats. Prominent Democrats were certainly quick to jump on the bandwagon yesterday in the wake of the meeting. Feature Senator Clinton, who sent a letter to Mr. Bush asking him to sponsor a full-blown auto industry conference to address the industry’s “enormous competitiveness challenges such as the legacy costs of health care and pensions, energy efficiency and an intensely competitive global marketplace.” Never mind that these problems are, by and large, within Detroit’s power to solve without help from the government.

More broadly, what constitutes the “American auto industry” these days? The presence of Thomas LaSorda of DaimlerChrysler at yesterday’s meeting is a little mysterious considering that it’s been a German-owned corporation since 1998. Honda now directly employs 25,000 Americans and buys parts from 600 American suppliers, according to its Web site. Toyota employs 38,340 in its North American operations and is listed on the New York Stock Exchange. Both Japanese companies are expanding their American operations — and hiring more Americans in the process. They can afford to because they’ve run their businesses well. That’s a lesson Detroit is not going to learn in Washington.


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