NCPA - National Center for Policy Analysis


June 4, 2008

U.S. automakers are closing plants and slashing jobs in Michigan, Ohio and other U.S. union havens, in favor of non-union, foreign places, like Mexico and China.  Past deals with the United Auto Workers (UAW) union have saddled U.S. companies with such high costs that they can no longer make cars here and compete on a global market, says Investor's Business Daily (IBD).

For example:

  • U.S. carmakers pay their workers an average of about $73 an hour in wages and benefits -- way more than others.
  • According to the Center for Automotive Research, there's a $16.15 per hour gap between what Detroit's Big 3 pay workers and what Toyota pays workers in the United States.
  • Add to that a $5 billion a year difference in health care and other retirement costs, totaling thousands of dollars in extra costs on every car sold, and U.S. automakers operate at about a $12 billion a year disadvantage.
  • From 1999 to 2007 alone, the United States lost 281,500 auto-related jobs, or 25 percent of the total.

Though little noted, last year was a watershed for U.S. carmakers:

  • For the first time, foreign producers in the United States made more cars -- 54 percent of the total -- than the former Big Three.
  • As recently as the 1980s, Ford, Chrysler and GM made 73 percent of all cars here.

Ford's recent investment of $3 billion in two auto plants near Mexico City is the largest foreign company investment ever in Mexico.  Ford's move to Mexico should be a warning to the UAW, which has seen its membership shrink from 1.5 million in 1979 to about 500,000 today.  The decline of Ford, GM or Chrysler is bad news for the United States -- but it may be a death-knell for the UAW, says IBD.

Source: Editorial, "Movin' To Mexico," Investor's Business Daily, June 3, 2008.


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