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Argument: US autos have failed to control labor cost

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Mitt Romney. "Let Detroit Go Bankrupt". New York Times. 18 Nov 2008 - "I have several prescriptions for Detroit’s automakers. First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable."


Bill Steigerwald. "Don't Bail Out the Big Three". Town Hall. 17 Nov. 2008 - The other big problem they have is they agreed to these ridiculous work rules. At GM, you can't really lay off a worker and therefore reduce costs commensurately. Laying off a worker at GM requires that you pay 90 to 95 percent of their salary for the period of the contract. You've heard of these job banks where people are paid not to work. So if you're in an industry and you're facing contracting demand and you want to slow down your output, you can't really get the benefits of slowing output if labor is a fixed cost. You need to be able to cut your costs. The foreign nameplates can do that, but GM, Ford and Chrysler have been sort of crippled in that capacity.

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