Tuesday, June 02, 2009

The Demise of the US Auto Industry on FoxNews.com Strategy Room

FoxNews.com Strategy Room is an eclectic marketplace of ideas, especially when Eric Bolling is at the helm. Bolling’s academic background of economics and business, accompanied by a career that has included being a professional baseball player, one of the world's largest commodity traders, and years as a business news journalists (first with CNBC and now with Fox News and Fox Business) makes him something of an adrenaline addict and one of the most enjoyable TV hosts to watch.

Bolling is intelligent, eloquent, and passionate about his convictions, although they are not easy to label. He describes himself as one who is "center/right and believes in free markets." As a man who has made a significant part of his living as a commodities broker, his passions are both pragmatic and well founded.

When I was on the Strategy Room this week (Bolling hosts 3 PM EST hour) the show covered a plethora of issues early on, but slowly began to focus on the fact that the United States automobile industry is dying and seems to be doing so quickly. This is one of the most dominant topics in business news today.

Invariably these discussions lead to "what should the government do to solve this?" My answer to that is that government has been the primary reason the industry is in such a dire situation. You can go back decades to when Michigan became a close union shop state, making labor the primary customer rather the people who buy cars. This has led to Detroit paying over $70 an hour per employee compared to Japan's $40 an hour for employees in Southern states. Addressing the auto industry situation should include:

  • Ending the controversial UAW "Job Bank" program . This program has paid tens of thousands to be idle at 90 percent of salary.

  • Bring auto worker wages back to the real world. According to the Heritage Foundation, when it comes to salary and benefits, the average wage of all private sector employees is $25.36 and for American based Japanese auto plants (Honda, Nissan, Toyota) is $42.95 to $47.60 on average. The big three pays $70.51 (Ford), $73.26(GM), and $75.86 (Chrysler) per hour, per employee. These six digit wages for blue collar work demand a reality check.

  • End the "30 and out" practice. The Detroit auto companies allow employees to retire with very lucrative packages at the young age after 30 years. If you start working at a plant at 20, you can retire at fifty. You can see where that can be costly. 60 or 65 should have to be the standard retirement age, which is what the market clearly demands.

  • Seven week vacations need to be history. Detroit auto workers receive almost two months off a year. This is another pounding cost, on a very weak industry, that needs to change.

  • Finally, they should require the companies to relocate to a right to work state. This would empower these companies to lower wages and make it easier to implement the other reforms listed above. Twentytwo states are Right to Work, 28 are not. It is more than a coincidence that all but one of the ten richest states are Right to Work, while the ten poorest are closed union shops according to the American Legislative Exchange Council. The threat alone could make the Michigan government come to its senses.

So how do I think the problems of the auto industry should be solved? This can only be done through markets, less government, more freedom, and plain old business sense. These are the kind of ideas that once made the automobile industry the envy of the world.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

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