Auto industry war: does anyone in government care?

Author:Modic, Stan
Position:Straight talk

More evidence is surfacing that the United States continues to lose its manufacturing prowess. The latest is Ford's losing its No. 2 status in Detroit's Big Three to the Japanese auto giant, Toyota. Toyota has outsold Ford for the first eight months of this year and is expected to best Ford for the entire year.

Goodbye, Big Three!

The fate of the auto industry is reflected, in part, to the United States' giant trade deficit. Last year, the trade deficit in manufactured goods and cars reached $547 billion, up from $538.3 billion in 2005. Of that deficit, motor vehicle products accounted for $144.7 billion. That number increased 5.5 percent from 2005.

"Even when they assemble automobiles in the United States, Asian automakers import more parts than Ford or GM," points out Peter Morici, business school professor at the University of Maryland. He points out that since December 2001, although the deficit on vehicles has decreased slightly, the deficit for automotive parts increased $1.1 billion, or 82 percent.

Costly imports

Although petroleum plays a big part in our trade deficit numbers ($271 billion in 2006), "the American appetite for inexpensive imported consumer goods and cars was a huge factor driving the trade deficit higher," Prof. Morici writes. That appetite takes its toll on our economy in the loss of well-paying manufacturing jobs. The ripple effect is that manufacturing jobs produce more high-value exports and generate more taxes. In addition to imports, plants abandoning U.S. workers in favor of cheap foreign labor and productivity-enhancing technological advancements all play a part in job disappearance.

In many instances, it is either reduce cost or die as manufacturers fight an uphill battle in the global war for markets. The National Association of Manufacturers (NAM) says it has documented that "the external costs imposed on U.S. manufacturers for energy, excess litigation, regulation, taxes, and health care add 31.7 percent to the cost of production," compared to the foreign competition they face. Much of that advantage even spills over to the foreign carmakers assembling cars in the United States.

It has cost the nation more than three million manufacturing jobs in the last decade--but the impact of job loss closer to home is more telling.

Cleveland's The Plain Dealer reported in 1995 that GM and Ford employed 87,200 workers in Ohio. In 2006 the two automakers, including Delphi that GM spun off, employed only 46,000--that...

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