2009 May 16 Saturday
Jeff Macke Sees Dim Future For US Auto Industry

Jeff Macke doesn't see a bright future for the US auto industry.

Not that I’m saying the government and UAW won’t be able to restore the glory of the US auto industry. Wait. I’m saying exactly that. The Administration and unions stiffing the real owners (those “unpatriotic debt holders” who, in 60 days, will be asked to re-buy the Chrysler they just got hosed out of) and going halfsies on the auto industry is the worst merger since the axis powers were formed. I don’t think the answer to the American auto industry's problems is to make a bunch of golf carts that go 50 mph for an hour - before you have to plug them in for 8 hours. Keep in mind, these have to be subsidized, even if you sell them for $50,000. And the North American auto run-rate is now 8-9 million annually, versus 17 million 2 years ago - which is nothing short of terrifying.

My take: The UAW needs to take a much bigger hair cut. US auto companies need labor costs that are below the labor costs of their competitors. That's especially the case for Chrysler. Why? Because the Japanese companies especially have far better reputations for quality and value. The US companies need to be able to undersell the Japanese on price while closing the gap on quality.

Once the US companies close the quality gap (assuming they can survive long enough to do that) their reputations will take years to repair. Therefore the Japanese get to charge price premiums over US makers and therefore the US makers need to have lower costs for years while waiting for customer quality perceptions to catch up with reality. So there's the time period for closing the quality gaps and then there's the subsequent time period for closing the perception gaps. Chrysler has the longest time to go on the first step. Ford is farthest along on improving quality.

Of course the Obama Administration has decided to shaft the senior debt holders to the benefit of the UAW. The UAW concessions fall short of what is needed and far short of what the UAW gave up to Delphi during Delphi's bankruptcy. Those concessions came probably too late to save Delphi which has recently warned it may liquidate. Wow.

Share |      By Randall Parker at 2009 May 16 05:06 PM  Economics Transportation

AMS-åtgärder said at May 16, 2009 8:16 PM:

Too bad that that UAW don't get universal health care and other welfare benefits that the Swedes have. And the Swedes do have AMS-åtgärder for reducing unemployment. The welfare state is superior to private charity. Long live folkhemmet!!

Swedes also have unions such as the LO.

Wolf-Dog said at May 16, 2009 10:10 PM:

We need a Manhattan project for Electric Vehicles.

Keep Dreaming said at May 17, 2009 9:26 PM:

"We need a Manhattan project for Electric Vehicles."

And all these new electric vehicles will be powered by new nuclear power plants and windmills off Cape Cod!

Engineer-Poet said at May 18, 2009 12:07 PM:

Quoth Keep Dreaming:

And all these new electric vehicles will be powered by new nuclear power plants and windmills off Cape Cod!
Why not?  It wouldn't require anything like a Manhattan Project-level scale of effort to do that; we have all the tech on the shelf already.

Keep Dreaming said at May 18, 2009 1:44 PM:

"Why not? It wouldn't require anything like a Manhattan Project-level scale of effort to do that; we have all the tech on the shelf already."

Sorry, I wasn't clear. The technology exists, no doubt about that but the current regime is against any kind of sensible energy policy that would actually deliver energy. My comments about nuclear plants and Cape Cod were a commentary on the lack of nuclear power development (Apparently, nuclear power is bad. Strange though because Europe uses lots of nuclear power and everything Europe does is awesome, except for that, I guess)) and the fact that liberals have prevented windmills off Cape Cod because it would spoil Ted Kennedy's and their view.

Engineer-Poet said at May 19, 2009 10:37 AM:

IIRC, Comedy Central spoofed the Kennedy faction by showing just how unobtrusive the Cape Wind farm would be.  It would also be sited on a shoal that isn't safe to sail on, so that objection is absurd also.  The obstruction is pure NIMBY, and ought to be universally condemned.  I only hope the SOB dies or is forced to resign soon, and the project proceeds.

Europe as a whole is still mostly anti-nuke.  France is the big exception, but Germany is still talking about expanding coal use (Kyoto notwithstanding).

If we want a rapid rollout of new nuclear power, we need something like molten-salt reactors.  LWRs need too many heavy forgings and other safety-critical mechanical stuff to be built in a hurry, and we don't have the fissiles inventory to push sodium fast-breeders (12 t fissiles per GWe) or lead-cooled FBRs (20 tons/GWe) out fast enough either.  MSRs breeding thorium can be started on our existing inventory of e.g. Pu from spent PWR fuel, and are small enough to be built in factories and trucked to the site.  LeBlanc claims that MSRs can run on as little as 400 kg of fissiles per GWe.

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