Mitt's Detroit diagnosis

Published Nov 19 2008, 01:46 PM by Adam Reilly

In an op-ed in today's Times, Mitt Romney makes a pretty good case against bailing out the domestic auto industry. But he seems to lay an inordinate amount of blame for Detroit's woes on the extra costs that current labor agreements impose on American manufacturers in comparison with foreign competitors. Here's the section in question:

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable. [emph. added]

The implication, obviously, is that if Ford could put $2000 bucks more into the Taurus, it would be just as appealing as the Avalon.

This seems like a real reach. I recently heard a talk-radio caller explain that he won't buy domestic because American-built cars start breaking down at 120,000 miles, while Japanese imports routinely make it to 200,000 miles with minimal repairs. That sounds about right; it definitely fits my own experience.

So here's the question: if Ford had an extra $2000 per car to play with, would this difference magically disappear? I don't know cars like Mitt does, but I'm skeptical.

P.S.--If nother $2000 bucks per car would make all the difference, than Ford should spend it, pass the bill on to the consumer, and let the market take its course. After all, the Taurus's bottom MSRP is currently $24,125; the Avalon's is $27,845.

Filed Under: Mitt Romney, New York Times, automobiles, republicans 2012, economic woes

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4 Comments

Tony Schinella said:

It isn't even that some of these cars are imports. The 2007 Honda Civic I drive is 80 percent made in America. The 2006 CRV we have is 70 percent. The large imported parts of the car are the engine and mechanics with the rest produced domestically. They are both low-end, high quality cars, with better gas mileage than their "American" competitors which are often made in Canada, Mexico, or even Korea at this point. Why again would I buy a Big 3? Smart people haven't ...

November 19, 2008 5:20 PM
jeffery mcnary said:

mitt? this guy again? gosh, after what he personally squandered in a failed electoral bid? after pretending to be a governor? advice? that baffoon couldn't point out an outhouse to a lost hunter with diarrhea. this is his way of saying, "see me...here...over here"...i'm here"..lol!!!

November 20, 2008 12:23 PM
Jason said:

For those GM employees concerned about their retirements don’t fret the Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of nearly 44 million American workers including those at GM.

The only problem is that the taxpayer is the Pension Benefit Guaranty Corporation. Keep GM and its employees working or pay for their retirements.

http://nomedals.blogspot.com

November 20, 2008 3:13 PM

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Mitt's Detroit diagnosis

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