Why are the Detroit 3 Auto Makers in trouble? The following is excerpted from the Wall Street Journal (dated 10-22-08) and it shows some of the problems they face.
Over the years they (Detroit 3) have accrued an almost incalculable amount of baggage of government intervention.
Why don’t the automakers limit themselves to paying competitive wages in line with what workers could earn elsewhere? Because, in the 1930s, Congress passed the Wagner Act with the nearly explicit purpose of imposing a labor monopoly on Detroit to keep wages at higher than competitive levels.
Why doesn’t Detroit rationalize its musty brand of lineups and dealer networks? Because, in the 1950s, legislatures across the country imposed franchising laws, including the Federal “dealer day-in-court clause,” to make such rationalization prohibitively expensive.
Why don’t the auto giants do as Whirlpool and other manufacturers have done, move their production to cheaper offshore locales? Because, in the 1970s, Congress enacted fuel economy rules to penalize homegrown automakers if they don’t build the lion’s share of their cars in high-wage, UAW-staffed domestic factories.
They are also faced with stringent requirements for Safety Standards and Emission Standards as well as Fuel Economy. No, Detroit’s troubles don’t arise because its executives are morons. The automakers have been around for a long time and they are bogged down with too much regulation.
The only thing wrong with corporate longevity are the legal encrustations that accumulate along the way.
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