American Cars, part II: Laying blame

Earlier this week I talked about American cars ("American cars: What's wrong?") People had some interesting comments, not only talking about their own vehicles, but also what they think is wrong with the way American cars are created. Phil noted this aspect of American car buyers:

" ... A large segment of the car-buying public make their choice based on a non-economic critera. Ford, GM, and Chrysler never had to have better quality control because people didn't use quality as the main decision-making criterion. This creates an inefficient car economy, the result being lower-quality American cars."

He also pointed out the use of advanced automated technology in Japan.

These views would suggest that American car makers and consumers are to blame. I certainly don't dispute that people make buying decisions for the wrong reasons -- status, advertising cues, self-perception -- and American carmakers are shirking on quality, but there's some other factors at work, too:

1) GM, Ford and Chrysler are getting hammered on health care costs. Countries with national health care and healthier populations have a competitive advantage, and it forces the American companies to save money in other areas -- getting cheaper parts, or processes to make the cars.

2) The Big Three automakers and the unions have made some ridiculous pacts that waste billions of dollars and lead to lowered productivity.

Case in point: GM and Ford's programs which pay employees not to work. GM's version is called "Jobs Bank", and if the company doesn't need it's workers, it is forced to pay them to do something else -- many volunteer or take classes on GM's dime, but thousands of others sit in rooms reading magazines all day, and they've been doing it for years. GM now has 7500 employees in the program, which will cost it up to $900 million this year, based on current wage levels, according to the Wall Street Journal story, "Detroit's Symbol of Dysfunction: Paying Employees Not to Work," by Jeffrey McCracken, page A1 (sorry, don't have the date, but it's within the past few weeks).

How can American car makers be competitive in an environment like this?


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