Why are U.S.-Owned Auto Companies in the Crapper?


As Chrysler plans to idle its plants for a month or more, it's worth puzzling over the various forces that have brought Detroit (Rock City!) to its knees. Over at U.S. News & World Report, Michael Barone has a thoughtful post which engages Slate's Mickey Kaus argument that the fault stems from the passage of the Wagner Act back during the Depression:

Mickey Kaus, pretty much alone among the commentators I've been reading, indicts "Wagner Act unionism" for the decline and fall of the U.S. auto industry. The problem, he argues, is not just the high level of benefits that the United Auto Workers has secured for its members but the work rules—some 5,000 pages of them—it has imposed on the automakers. As Kaus points out, unionism as established by the Wagner Act is inherently adversarial. The union once certified as bargaining agent has a duty not only to negotiate wages and fringe benefits but also to negotiate work rules and to represent workers in constant disputes about work procedures.

The plight of the Detroit Three auto companies raises the question of why people ever thought this was a good idea. The answer, I think, is that unionism was seen as the necessary antidote to Taylorism. That's not a familiar term today, but it was when the Wagner Act was passed in 1935. Frederick Winslow Taylor was a Philadelphia businessman who pioneered time and motion studies. As Robert Kanigal sets out in The One Best Way, his biography of Taylor, he believed that there was "one best way" to do every job. Industrial workers, he believed, should be required to do their job in this one best way, over and over again. He believed workers should be treated like dumb animals and should be allowed no initiative whatever, lest they perform with less than perfect efficiency.

The whole post, well worth reading, is online here. I think the UAW is a deadening organzation, but it has never been the problem in making cars. But to talk about the Wagner Act without discussing Taft-Hartley, which leveled the playing field substantially between management and labor, is dodging an obvious rejoinder to Kaus's claims. In any case, the UAW last year signed a contract that brings compensation for new hires into line with the amounts paid by foreign carmakers in the U.S. I can understand why the UAW isn't backing down right now—they know some sort of bailout, whether under Bush or Obama and despite public sentiment to the contrary, is coming.

The simple truth of the matter is that management signed every idiotic contract and that they never felt they really needed to confront anything because they thought they had a monopoly on car sales. Especially after World War II, when the Big 2.5 had long passed through their entrepreneurial days, they became classic lard-ass corporations who figured they would just raise prices whenever necessary. As Barone notes, they stuck to this plan even when Asian and European carmakers started to give them a run for the money in the 1970s. And they were never shy about using government to keep competition out (various tariffs on trucks and SUVs, etc. are one reason why domestic companies still dominate those markets). You can't blame unions for the slow death of U.S. carmakers any more than you can blame them for the Pontiac Aztek or the Ford Edsel. They may not be helping matters now, but unions are an add-on to a much bigger and systemic problem.

Reason Contributing Editor Mike McMenamin on the end of organized labor. And here's Contributing Editor Brink Lindsey on how the specter of Taylorism haunted American business.