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BAILING OUT DETROIT….David Leonhardt uses this graphic in the New York Times today to illustrate the labor costs of the Big Three auto makers vs. the Japanese companies who manufacture cars in nonunion plants. As he says, the $70+ per hour figure that gets tossed around so often is badly misleading: a big chunk of that figure comes from legacy retiree costs, and retiree costs are high not because retiree benefits are wildly stupendous, but simply because the Big Three are old companies and therefore have a lot of retirees. But even so:

[Defenders of the Big Three] are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year’s concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon.

He’s right. Even under the new contracts signed last year with the UAW, it will take years for Detroit’s costs to come down to Japanese levels. But worker paychecks aren’t Detroit’s primary problem anyway:

Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

….It’s a sad story, in many ways. But it can’t really be undone at this point. If we had wanted to preserve the Big Three, we would have bought more of their cars.

Obviously I have mixed feelings about all this. No one wants to see hundreds of thousands of auto workers collecting unemployment, especially now, but at the same time it just doesn’t make sense to keep GM and Chrysler alive as zombie companies for the next couple of years. And the idea of a “car czar” doesn’t appeal much either. It’s only systemic restructuring that’s going to make a difference here, and the deal we’ve struck so far doesn’t seem to really accomplish that. Like so many other things these days, there aren’t any good solutions here. Just bad and slightly less bad.

HERE ARE THE FACTS:

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ONE MORE QUICK THING:

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As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

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