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What's Bad for General Motors and Ford is Bad for America
Our Buy American Mention of the Week!
by Roger Simmermaker
January 7, 2006

At last December's local union meeting, which I address every month as our local Machinists Union's Communicator, I passed out literature from the Union Label & Service Trades Department of the AFL-CIO listing all the union-made and American-made vehicles. I reminded everyone that supporting domestic manufacturing was one of the best ways to help erase America's trade deficit. After all, how are we to export as much as or more than we import if we allow our own manufacturers to die off? But after the meeting, the all too predictable happened. Someone pulled me aside and asked me just how we were going to help ease America's expanding trade deficit by buying American-made autos when he had heard that foreign cars were of much higher quality than American cars.

Such misconceptions are depressing when they serve to undermine the very automobile companies that are largely responsible for building the middle class in this country. I reminded the gentleman that General Motors, for instance, has recently won more automotive quality awards than you could shake a stick at. And Toyota recently announced the biggest recall on record for a Japanese automaker. This recall involved 1.27 million vehicles.

How sad it is that people run around with virtual tape recorders in their heads, recording what they hear and spitting it out as fact when the time seems appropriate. And it's unfortunate that time isn't something that either GM or Ford have much of to turn things around in the realm of public opinion.

Despite the efforts of many to publicize the true facts, whether it's articles like these or the CEO of Ford Motor Company addressing the National Press Club in Washington, DC, it's anybody's guess whether the remaining two American automakers can survive retaliation of American consumers who are hell-bent on making them pay for perceived sins of the past.

I'm not claiming that GM and Ford haven't made their share of mistakes over the years. All companies make strategic blunders, but I would argue that no company in U.S. history has ever been the recipient of such pure hatred among American consumers as has GM or Ford. And the venom that has been spewed at them is largely undeserved and unwarranted. It's not that I don't think that for every one person who won't buy an American car under any circumstance, there is at least one person who won't buy a foreign one under any circumstance. It's just that there's too many who won't buy the American car. But I'm willing to bet that there is even a larger group of people that know better than to buy foreign but are being swayed by inaccurate information or outright lies.

Bill Ford, addressing the National Press Club on November 22, 2005, noted that GM, Ford, and DaimlerChrysler combined invest more than $16 billion on research and development each year, which eclipses any other industry in the U.S. From that research and development came, among many other things, America's first hybrid SUV, which was engineered, designed, and built in the U.S. by Ford. The Japanese, of course, have their own hybrids, but the Ford Escape stands alone as the only hybrid vehicle that was built from the ground up. All Japanese hybrid vehicles started as non-hybrids and were converted, a much less innovative task.

Bill Ford went on to point out that U.S. automakers pay more than $11 billion in pensions each year to no less than 800,000 retirees and their spouses. Any American who thinks they aren't affected by the recent struggles of Ford and GM since they don't work for either automaker had better think again. Why? Because you can't take literally billions of dollars out of the U.S. economy without it affecting everyone in the country.

Many Americans recall the days when there was only American competition in the auto industry and in doing so reason that they should buy foreign cars to somehow prevent that situation from occurring again. But if Toyota buys GM and Honda buys Ford, these same people may soon realize that foreign competition absent American competition is much worse. Ultimately, the American economy is large enough to provide enough competition by itself without much foreign competition, as long as there is proper government oversight and regulation to prevent collusion between companies in similar industries. It's hard to believe that a nation as big and diverse as ours can't host enough domestic competition to be considered a healthy and competitive economy.

Retiree benefits are being cut in many industries well beyond the auto industry. If the health care coverage for many Americans doesn't disappear completely, costs may increase to the point that premiums will be unaffordable, resulting in millions more dollars being taken out of the U.S. economy. Wal-Mart already has the deserved reputation for offering unaffordable health coverage, yet they are the apple of corporate America's eye. Unions representing workers at General Motors have voted to take on more of the financial burdens of health care that used to be paid by the company, resulting in over $15 billion more consumer dollars taken out of the U.S. economy. The importance of disposable income for American workers/consumers cannot be overstated since two-thirds of economic activity is dependent on consumer spending.

Americans can only be as affluent as spenders as they are wage earners. And since those employed in the auto industry are among the most well paid, some Americans who don't enjoy similar wages or benefits seem to advocate the industry's demise out of jealousy. But all Americans would be wise to support American autoworkers and their American companies to put upward pressure on wages that will cause ripple effects through other industries.

How does the ripple effect from prominent American industries influence other seemingly unrelated industries? Well-paid American automakers may decide to make improvements on their houses in an increasingly attractive housing market, for example. To do this, they support the banking industry where they get a home-improvement loan. They also support the lumber, construction, and possibly furniture industries as well, whose employees in turn spend their money at restaurants, retail stores, or maybe even on college tuition for their kids.

But instead these same automotive workers are having previously unthinkable reality discussions with their kids, with many telling them that they can no longer afford to send them to college. Major companies such as Delphi, which provide a significant number of parts for GM vehicles, are proposing wage cuts of up to 66 percent saying auto parts workers are too well paid. With China now graduating more engineers than America these days, this is a reality concession our nation cannot afford. But still, the anti-American auto industry crowd cheers these developments on thinking that someone is finally going to pay for the perceived auto-management sins of the past. Little do they realize that we will all pay since we're all Americans, and we are not individually immune regardless of the industry of our employment.

If some American consumers can't see the benefits of buying American through the "Made in USA" argument, maybe they can be persuaded to focus on supporting companies that would prevent American taxpayers from picking up the tab for retirees' pensions and health care if these prominent U.S. companies fail. Such a strategy would not include supporting companies like Toyota, which did not build their first U.S. plant until 1987. In other words, an employee hired by Toyota the first day the plant opened would still have less than 20 years with the company and would not yet be eligible for retirement benefits.

Benefit costs like these are at the forefront of several reasons why GM and Ford have a huge cost disadvantage compared to foreign automakers. But instead of being exalted for their contribution to the U.S. economy, they are accused of being bloated, inefficient, and uncompetitive. American consumers should think twice before passing off the demise of the American auto industry as just another acceptance of global reality and instead long for an economy that at least has some of the traits of the 1970s.

In the 1970s, during which General Motors produced the best running car I've ever owned (my 1976 Buick Riviera accumulated over 250,000 miles before I sold the engine, which still powers a Florida airboat to this day), American consumers managed to save an average of 10 percent of their income each year. And they didn't have to borrow against the equity in their houses and risk their future on speculative bubbles to do it. How amazing it is that the American savings rate has recently turned negative while China's savings rate is around 50 percent. I guess they have to do something with all the American dollars we send them if they aren't trying to buy major American oil companies or appliance makers. My made-in-Michigan 1996 Lincoln Town Car may threaten to take my old '76 Riviera's crown someday since it just passed 160,000 miles with no signs of letting up. There are few things that can counter the lies of the anti-American auto industry crowd than personal experience with American vehicles.

As the old adage says, "As GM goes, so goes the nation." Fortunately, GM will soon begin touting the Chevy Tahoe as the most fuel efficient vehicle in its class. The Chevy Tahoe was also the winner of one those quality awards mentioned at the beginning of this article. If GM is guilty of anything, it's for not communicating well enough or fast enough about how valuable they really are to American prosperity. The American people will eventually find out. It may be the hard way, not through television ads or other media attempts, but they will learn. The only good thing that will emerge from the ashes of the demise of the American auto industry, if it happens, is that Americans will finally learn how to vote with their dollars according to the values upon which a prosperous U.S. economy depends. And not just in the auto industry but in all American industries that are vital to the prosperity of the American nation.

If GM and Ford fail, the American tragedy will be that we'll have to take several steps backward in several areas of our lives before we learn how to start taking steps forward again. But as we begin to take those steps forward, we'll also become more aware of how to avoid going backwards like before. Buying American will become more popular than ever before, and I hope an American presence in the auto industry will emerge and benefit from better and smarter buying habits. I'm not predicting failure for Ford or GM, and I'm hopeful that things can still turn around. But if these two American companies are forced to exit the auto industry, literally millions of Americans will be forced to exit the middle class.


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