Friday, November 14, 2008

Leveling the Playing Field for the American Auto Industry

The failure of the American auto industry has lots of root causes, but the difference in cost structures and buying incentives between US and foreign auto makers surely has a lot to do with the industry’s lack of competitiveness.

Lack of universal health care here means that every car manufactured in this country is saddled with $2100 of health costs that aren’t included in European or Japanese cars.

Comparatively low gas prices mean that American consumers have not had the same fuel efficiency incentives buyers in every other country have had. Sure, Toyota was clever about designing and building the Prius. And fully 35% of Prius sales to date have been in Japan alone, a dramatically smaller market than the US. So just how prescient was Toyota? They were designing and building cars that suited their own domestic market.

Human rights and labor requirements are held to much higher (and more costly) standards by US car manufacturers than by their foreign counterparts, so I’ve been told.

As Congress contemplates a bailout for the auto industry, we should consider correcting the underlying causes. Addressing these would mean the industry has a much higher likelihood for competitive success in the long-term. If we really want a thriving car industry in the country, we need to reduce the burden of health care costs for this industry (and all industries), require the same human rights and labor standards for all cars being sold in this country, and raise the cost of gas in this country so that it more closely mirrors those experienced by European and Japanese consumers, and is more aligned toward our goals of energy independence and CO2 reduction.

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