Car trouble

First gear: I own a 2001 Toyota Avalon, designed in California, built in Kentucky. Over 100,000 miles and runs like new. Is it an American car? Darned if I know—define your terms!

Second gear: A good comment at Megan McArdle's place:

GM and Ford (at least) do make cars that are cutting edge in their categories and that the public wants to buy. There called trucks and SUVs. If GM and Ford were allowed to make what they want and are good at--these, and anything else the believe they can profitably make--everything would be fine. Problem is, they can't just make what they want and are good at. CAFE standards require that they make so many small cars every year. And the truth is, neither GM nor Ford (nor Chyrsler, for that matter) can profitably make small cars in UAW factories.

Every failure falls from this. The bad reputation for quality and poor resale value, for example, result from the fact that the small cars are sold almost entirely on price. The number of small cars GM and Ford they must sell is driven by the number of big cars they can sell and their required corporate average fuel efficiency, which is what CAFE stands for. Thus, the companies lower the price through price cuts, rebates and low interest rates until the requisite number sells. Quality is sacrificed because it doesn't much matter to price-only buyers and reduces the loss on each car sold. For the same reason, the companies push fleet sales, even though those kill their cars resale value.

A couple years ago, all the government needed to do to save Ford and GM was eliminate CAFE. Now more immediate measures need to be taken. But these won't work as long as GM and Ford are required to build small cars in UAW factories.

Third gear: Do you remember when New York City had ten daily newspapers? Let me list them: Wall Street Journal, Daily News, Times, Post, Herald-Tribune, Journal-American, World-Telegram and Sun, Mirror, Star-Journal, and Long Island Press. And the Brooklyn Eagle, from time to time, would make eleven. What happened? Labor trouble. The Mirror went down in '63, after a strike; in '66, the Herald-Tribune, Journal-American, and World-Telegram and Sun tried to merge following a strike, becoming the World-Journal-Tribune, which did not last. "The Star Journal closed its doors in 1968 due to a strike by its workers who demanded higher wages and other benefits. In 1977, the Long Island Press was closed down due to the sad fact that while it became more expensive to put out the paper, less money was coming in, as well as labor troubles."

What's the common element in the newspaper stories? Labor trouble. Union leadership would rather kill the companies that employed their members than back down on their demands.

We are seeing this kind of short-sightedness again from the UAW leadership. Chapter 11 is the way for GM to go, if they can. Ford does not need help. [Inline update: In spite of union workers who are barely working (via).] Chrysler is owned by an investment firm that can redirect money into the auto company, but would not mind getting something from the government, if there is something to be got.

Mickey Kaus has been all over this lately.

To sum it up, too briefly and glibly: Our auto makers have been trying to please three masters, the union, the government, and their customers, in about that order. That's too many masters. It's no wonder they are in trouble.

Update: More on unions that kill their industries, at Chicago Boyz: Killing Cities: Indiana versus Texas. Steel, this time.