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Monday, December 22, 2008

Seven Big and Dangerous Myths About the Auto Industry

A friend just emailed me this article from the Knoxville News' on-line business section. It's a compilation of the seven biggest myths about the Big Three automakers. Here's their opening salvo.
The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists.
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1: Nobody buys their vehicles.

Reality: General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of nearly 700,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide - about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year. Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.
The article goes on to debunk other oft-repeated fables, such as the one that U.S. made cars are unreliable junk.
Reality: The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers."

The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high as or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

J.D. Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.
And this one, which will be an eye opener for my fellow environmentalists.
Myth No. 3: They build gas-guzzlers.

Reality: All of the Detroit Three build midsize sedans that the Environmental Protection Agency rates at 29-33 miles per gallon on the highway.

The most fuel-efficient Chevrolet Malibu gets 33 mpg on the highway, 2 mpg better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient nonhybrid Honda Civic.

A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.
And this one, also important to those of us concerned with climate change, renewable energy, and energy conservation.
Myth No. 5: GM, Ford and Chrysler are idiots for investing in pickups and SUVs.

Reality: The domestics' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry.

The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel-economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6: They don't build hybrids.

Reality: The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
And finally, for the union-busting anti-labor critics on the right, this should finally put to rest their favorite whipping boy.
Their union workers are lazy and overpaid.

Reality: Chrysler tied Toyota as the most productive automaker in North America this year, according to the Harbour Report on manufacturing, which measures the amount of work done per employee. Eight of the 10 most productive vehicle assembly plants in North America belong to Chrysler, Ford or GM.

The oft-cited $70-an-hour wage and benefit figure for UAW workers inaccurately adds benefits that millions of retirees get to the pay of current workers, but divides the total only by current employees. That's like assuming you get your parents' retirement and Social Security benefits in addition to your own income.

Hourly pay for assembly-line workers tops out around $28; benefits add about $14. New hires at the Detroit Three get $14 an hour. There's no pension or health care when they retire, but benefits raise their total hourly compensation to $29 while they're working. UAW wages are now comparable with Toyota workers, according to a Free Press analysis.
I actually find the union's capitulation to the two-tier system that leaves new workers not only earning half the amount of older GM workers, but also bereft of a pension when they retire, appalling. I understand why the union had to agree to this to be competitive. But it means that America, far down the road, is going to have a looming crisis for that generation of blue collar workers when they hit retirement age that will make the concern over the baby boomers pale.

Let's face it, most baby boomers still are in some kind of pension system, many in the old defined benefits type, and a majority in a defined contribution, 401K plan - but regardless of which type of plan we have, we have something in a nest egg. With no pension plan at all, it leaves blue collar workers, who are not at the upper end of the pay scale nor particularly investment savvy, to fend for themselves. Most of those workers are in the 20s right now. But what happens when they hit 65 or 70 and are too old for hard, physical labor, because we're not talking about desk jockeys here?

Just a thought.

Meanwhile, lots of people, even those who are intelligent and well informed, believe the myths just debunked. I had dinner the other night with somebody who is one of my smartest friends - she's an orthodontist who guest lectures at Vanderbilt University in Tennessee - and she was shocked when I told her that auto workers do not make $70 an hour. Before this, she said that, although she is usually a pro-labor Democrat who thinks we need to bring our manufacturing base back inside this country, she had little sympathy for the auto industry and their workers. She also was surprised to learn that labor costs were only 10 percent of the Big Three carmakers expenses.

If this was an eye opener to her, I would guess an awful lot of other people would be just as shocked to learn that much of what they hear on televsion, radio, and local newspapers may just be free trade, anti-union, right wing talking points with little relation to reality.

I guess we still have a lot of work cut out for us, deconstructing the seven big myths that still guide the public's perception. It would be nice if more of the media took the lead in correcting those myths rather than being the ones largely responsible for spreading the misperceptions. Kudos, however, to the Knoxville News for stepping up and doing what a newspaper should do, investigate and spread the truth!

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