GM Implodes
The Shrinking of the Auto Industry
By Daniel Muniz

It wasn’t a huge shock when America’s largest carmaker, General Motors announced massive job cuts. Delphi, America’s largest auto parts maker had also been wrangling with bankruptcy. But overall, Big Business of the old economy, especially manufacturing, has been declining for decades. They were part of a generation that enjoyed a relatively protected non-competitive economy with a limited monopoly and they maintained nefarious alliances with Big Government and Big Labor.

Times have changed. Our once protected economy now has competition and consumers have more choices and lower prices than ever.

Today, Big Business can no longer rely on Big Government to protect itself from competition although they will angle for federal bailouts because of their failures. Big Labor still wants to be paid its handsome wages and oversized benefits for productivity that is nowhere close to what the competition offers. The unions can complain all they want about jobs being shipped overseas but they simply cannot explain how Japanese manufacturers and their suppliers have created 60,000 good paying jobs on American soil.

Granted, these new jobs pay nowhere near the same stratospheric level of wages that the union workers are accustomed to but that is the beauty of this development. Steve Miller, the architect of the plan to restructure Delphi famously commented:

The enormous burdens that unions have placed on Big Business of the old economy is abruptly coming to an end as more of their employers either file for bankruptcy protection or go under for good. But that doesn’t stop the unions and their Democratic allies from denying reality.

But the facts are simple and impossible to ignore.

Foreign manufacturers continue to embarrass their unionized counterparts by establishing more factories on American soil that are able to generate higher productivity at a much lower cost. And these foreign manufacturers are in no way exploiting Americans.

Here in my hometown of San Antonio Texas, Toyota has opened up a new factory to build trucks. And so far, it has been deluged with job applications from all over the country. Toyota is offering a good wage and few in this city would argue that this is not good pay. In fact, you would almost be laughed out of town if you tried to make the claim that Toyota pays its workers too little.

But yes, the wages from these foreign factories on American soil are substantially lower than what Ford and GM workers make even when they are working. Ah yes, that is another dirty secret that the unions want to keep under the rug. Union restrictions for many businesses severely limit productivity by creating so many obstacles in the workplace, including periods of time for mandated non-work. Less productivity per employee means that more workers are needed to accomplish the same workload.

Steve Miller of Delphi also commented about these non-working union hours:

This formula doesn’t work in places where obtuse union rules do not apply such as in San Antonio Texas and other similar cities. That is also why the environment in the South is suitable to Toyota’s liking since they can actually tell their employees to work and they do it.

Texas also has a much lower cost of living and no state income tax. In fact taxes are much lower here than in the industrial areas where Ford and GM have their plants. And this state is friendly to businesses without unions, which is probably a powerful message to states with a heavy union influence.

But what can the government do to stop the hemorrhaging of the big auto makers?

Perhaps the easiest answer is nothing. Market forces are slowly reshaping GM and everyone else from the old economy. GM and others have to face competition, which benefits everyone because of better products and lower prices. And the companies that don’t want to change will join the ranks of Eastern Airlines, Braniff, etc.

Suppose GM and other manufacturers do not adapt fast enough? Can America stand to lose certain industries?

On the surface it looks like a tough question because certain needs, especially in Defense, should be able to be met at any time in this country. Would foreign manufacturers undermine that need?

Of course there is always a possibility of an impact but real world situations are already a stark reality. For instance, much of Europe vehemently loathed the second Gulf War and enjoyed the opportunity to criticize America. However, nobody loathed the American dollar. There are a number of contractors and sub-contractors in Europe that continue to produce vital materials to the United States military. Nothing changed and almost nothing was disrupted. And if significant disruptions do arise, then there are plenty of other places that are willing to accept the American dollar. That is the free market at work.

But overall, the change is good for America and really for the rest of the world. Market economics is lowering prices and improving quality in this country and so far, consumers don’t really seem to mind.

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