Tags: automaker | bailout

Why Isn't Detroit South in Trouble, Too?

By Gene J. Koprowski   |   Monday, 01 Dec 2008 11:25 AM

As auto industry executives trek to Washington D.C., once again, this week, many free-market observers are wondering why America's "other" car makers — the foreign car makers with U.S. factories, like BMW and Toyota — aren't seeking salvation from the government.

There are 12 transplant automotive producers, located in the Midwest and in the South, that are actually gaining U.S. market share, and prospering amidst the overall sales slump that has battered Detroit. These companies include BMW, Toyota, and Kia, and, according to The Wall Street Journal, they collectively produce 54 percent of the cars that Americans buy.

The international automakers employ some 113,000 Americans, compared to 239,000 at U.S.-owned car makers, and several times that number indirectly, the paper reported.

The foreign car makers, to be sure, will be damaged if Detroit implodes completely, so they are not cheered by the financial problems of their rust belt rivals. They share many suppliers with GM and Chrysler and Ford.

There's also a potential backlash from protectionists — former U.S. Rep. David Bonior (D-Mich.) has Barack Obama's ear, and is part of his economic transition team, as is Michigan Gov. Jennifer Granhold (D) — who may seek to punish the Japanese and German and Korean companies for their success here.

On the other hand, observers are wondering why the federal government should intervene in the private sector in such a huge way.

A government lifeline for Detroit punishes these other companies and their American employees for making better business decisions, according to The Journal.

According to the Center for Automotive Research (CAR), the causes of the financial problems at the Big Three are quite well-known.

Take-home pay for automotive workers, in general, is $28.42 in the U.S. factories, about the same as the $26 per hour at Toyota. But healthcare benefits push the overall costs of doing business much higher, making hourly wages at Detroit cost $73.21, much more than the $44.20 hourly average for the foreign companies here.

Is it any wonder Detroit can only scratch out a living, making $1500 per car, with costs that high?

Some conservative voices argue that Detroit needs government financing not government ownership, at least for a while.

Columnist Patrick Buchanan decries the "free-trade fanaticism" that may lead to the "final internment" of the American auto industry. He cites a poll by Peter Hart that indicates that 55 percent of Americans favor federal loans to save the auto industry.

"If the GOP blocks these loans, and the industry dies, the party can forget about Ohio, Michigan and the industrial Midwest. For the Reagan Democrats will never come home again," writes Buchanan in his syndicated column.

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As auto industry executives trek to Washington D.C., once again, this week, many free-market observers are wondering why America's "other" car makers — the foreign car makers with U.S. factories, like BMW and Toyota — aren't seeking salvation from the government.There are...
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2008-25-01
 

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