Why The Auto Industry Keeps Failing The US Economy
To answer that we must also ask why the American Auto industry failed in the first place. In order to do that we have to go as far back as the early 1950's to the introduction of the Tucker Automobile. Here was a man who envisioned a car far ahead of it's time only to have the Oil and the major Auto industry purposely set out to undermine and eventually destroy this automobile before it was capable of mass production. This was a car that was able to get more than 50 miles per gallon of gasoline with safety features unheard of then. The Tucker was made without union help which infuriated the rest of the Auto Industry and the United Auto Workers Union.
Back in the 1950's the major auto and oil companies were the dominate industries in the United States. They controlled the economies of not only the United States but pretty much the rest of the world. Along with our strong manufacturing base more citizens were able to purchase cars without worrying about the price of gas, unlike today. This laissez-faire attitude among the auto industry and the general public created an illusion that the American Auto Industry was like the Titanic, unsinkable.
The United Auto Workers Union realizing the volume of cars sold began to seek higher wages. But as wages increased the auto industry started cutting corners in using lesser quality materials in the designing and manufacturing of the American auto. This was to make up for the United Auto Workers pay demands. Consequently the American made automobile ceased to be of the quality and affordability that it once was. The lessening of tariffs allowed countries like the Japanese to begin flooding the American market with lower priced better quality cars.
In 1974 the United States experienced it's first real disruption in oil and gasoline. The cost of fuel began to rise like never before causing major economic suffering for all. Countries like Brazil realized that oil from the Mid-East couldn't be reliable anymore and set out to be almost energy independent. They succeeded. The United States policies didn't alter and the population was left with no recourse but to suffer and pay at the pump. There was the first surge for alternative fuel sources like wind or solar but with cost constraints the vast majority of the population wasn't able to afford the new energy and was left with no choice. The American Auto industry continued to manufacture non-fuel efficient automobiles and along with the major oil companies they continued to ignore the warning signs that the American public was beginning to purchase those foreign cars that were now of a better quality more fuel efficient and more affordable.
Had the American Auto Industry designed American Autos to meet the fluctuating gasoline prices and the United Auto Workers Union put wage caps on wages just enough to be considered a living wage the American Auto Industry like General Motors today would be producing the type of Automobile that meets today challenges; more affordable, longer lasting, more fuel efficient and safety ensured American made cars.
The real problem with the past 2008 auto industry bailout is that it really didn't take hold of the US economy in ways that made the majority of Americas better off. The billions of dollars infused into failing financial institutions and the auto industry really was really a bailout for the guys running these corporations and United Auto Workers and their pensioners. A solid pro-Obama constituency, the unions, were given a colossal gift courtesy of the American taxpayer. Our auto industry that kept making terrible products for decades still kept paying its workers too much got to live another day sort of speaking just because Obama knew he needed to win the northern Midwest in 2012. A political expediency in which the American taxpayer continues to suffer the fall out form the bailouts that have only favored big business.
While the fat cats got even fatter at the expense of the American taxpayer the American Auto industry has been quietly shifting operations overseas. These most benevolent beneficiaries of the Present Administration have made the case that it really doesn't make their profit margins bigger to keep manufacturing automobiles here in the United States at least not in the way that Ford, GM and Chrysler have for years continued to do. One might mention that Subaru which has a major plant in Indiana is probably the best auto manufacturing plant in the country but is not unionized.
What really is happening under the noses of Americans is that the guys running the show at GM factories are secure in their pensions while the GM pensioners who also need GM to be more profitable to secure their own pensions have realized that to do so means moving operations to China. GM is nearly doubling its export production capacity in China. It really doesn't take a financial or economic genius to figure out exactly what is transpiring with out public knowledge is that GM cannot make its domestic production target and still turn a profit. It seems that more profit the more their pensions are secured. All the while the American public continues to suffer the economic fallout when American companies keep shedding American jobs.