George Harris K.C. Star Reader Advisory Panel 2008

Whether American car companies deserve to get federal financial assistance is a different question than whether they should get such assistance. Regardless of the question, the debate shouldn't rely on false information.

Company CEO's, union leaders and many economists say the failure of the companies would create havoc in the economy and should be helped to avoid the calamity. Maybe true, maybe not.

But opponents of assistance to the companies are also using arguments and information to oppose the aid that are inaccurate or misleading. Here are just a few examples:

Myth: American auto workers earn $75 per hour

Some media outlets (Fox Business News) have reported that American auto workers make $50 to $75 per hour and blame these wages for the manufacturers’ woes.

But these figures are inaccurate or, at best, misleading. U.A.W. officials say incoming workers start around $14 per hour and the average wage is around $27 per hour. I have seen estimates that place hourly wages for union workers at American companies at an average of $2 to $4 per hour higher than at foreign company plants in the U.S., but I have not been able to find what I trust to be accurate and complete summaries of labor costs. I’ll keep looking. But current auto workers do not earn $75 per hour.

American car makers do have labor costs accumulated over decades of labor agreements, including health care and pension costs often termed generous. These legacy costs do increase total “labor” costs for American companies.

Unions have made a number of concessions to reduce the auto makers costs and arguably should have to concede additional benefits if the government agrees to participate in a financial rescue.

A national health care system would also do much to reduce the burden of health care from all American employers, including car companies, and would enhance American competitiveness.

Myth: Nobody wants American cars

General Motors Corp., Ford and Chrysler sold 8.5 million vehicles in the United States last year and millions more around the world. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Myth: American cars are unreliable

Consumer Reports rated Ford reliability as on par with Japanese cars. The J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

Myth: American cars are all gas guzzlers

Chevy builds the highly rated Malibu with 2 mpg better than a comparable Honda Accord. The Ford Focus has the same fuel rating as the Toyota Corolla. The Chevy Cobalt rates on par for mpg with the Honda Civic (though the Civic is generally considered a better car.) The Chevy Aveo is rated by Edmunds.com as the least expensive subcompact to buy and operate, but the Aveo is made in Korea and isn’t a very good car.

General Motors tried to build small cars through its Saturn division, albeit not very successfully. The Astra (a rebadged Opel), however, is a highly rated car with good gas mileage.

It’s also true that Toyota and to some extent Honda have done their share of building gas guzzling SUV’s and trucks. All companies are now building some trucks with hybrid equipment. The fact is, Americans have liked SUV’s and trucks. The top rated Chevy Silverado and the Ford F 150 are still two of the top five selling vehicles in the country and get better gas mileage than their Japanese counterparts.

Myth: American car executives are the ones who have mismanaged their companies into poor financial conditions.

Chrysler CEO Bob Nardelli and Ford CEO Alan Mulally are relatively new to the auto industry. GM’s Wagoner wasn't in charge in the 1980s and 1990s. The business model of American companies arguably needs reform, but much of what exists is the result of decades of labor/management negotiations that are difficult to unravel.

Myth: The financial downturn in the economy isn’t the reason for American car companies’ problems.

There are, no doubt, many factors in the companies' problems. But the fact is that all foreign and domestic car companies have suffered sales losses ranging from 30% to 40% from last year. It is also true that other nations are providing loans and assistance to their country’s car companies during the economic downturn that is affecting everyone.

There is no such thing as a “free” marketplace in the world. Foreign car companies have received multi-million dollars in tax credits to build plants in mostly non-union states in the U.S. and receive other assistance from their governments.

The playing field ideally should be level for all companies, but it is not, and America cannot ignore this reality and allow its manufacturers to fail. The government should require companies and unions to make concessions and to reform but should save American jobs for millions of middle class citizens.

Some of the information in this post was found in other articles. Please see links below.

http://www.mlive.com/saginawnews/opinion/index.ssf/2008/11/believe_it_or_not_there_are_my.html

http://www.usnews.com/blogs/flowchart/2008/11/20/6-myths-about-gm-ford-and-chrysler.html