Major Problem of Detroit Three

Auto manufacturing is very difficult issue in today's world. The emergence of new manufacturing systems which are mostly based on time and cost reduction led manufacturers to become leaner than ever. While  trying to compete in highly competitive environment, Detroit Three  has other problems that make the situation even worse.

The major problem of US auto makers is healthcare benefits of the employees. In 2008, the numbers of auto employees in US are; 355,000 auto workers and 1,000,000 retirees. The healthcare of retirees is a huge burden for Detroit Three and the additional healthcare expenses make them to lose their competitive advantage. Detroit Three's biggest rival, Toyota, also manufactures its cars in southern part of the US. These two sides of car manufacturers both are under the same legislation, which we can say wages, healthcare, pensions are relatively close to each other. The only difference at this point causes the biggest problem for the North. Toyota and other foreign companies have been operating in USA less than 30 years. Therefore, foreigners do not need to worry about pensions and healthcare of retirees yet. However, Detroit Three needs to deal with these extra cost of the retirees and this leads to a comparative disadvantage for now. To show the negative impact of the healthcare on the industry, GM vice president Bob Lutz claims that, "Sometimes it feels like we're a health-care company that tries to sell enough cars to pay the bills."

The situation does not seem bright for Detroit Three. The other manufacturers does not have these problems that the North has had. Sooner or later, foreign manufacturers will be experiencing the same problems and it is going to cause a chaos for auto manufacturing industry in USA.  So, what can be done to solve the problems of car manufacturers? The answer of the question consists nationalist elements in itself. A reform that will bring public healthcare system might solve the problems of American auto manufacturers. To show the possible improvement, health benefits in Canada cost $120 per car, in the US the number is $1,500 per car could be given as a good example. If the US can reach to these numbers by reforming its healthcare system, they might have the chance to save the auto industry. Otherwise, things does not seem bright for Detroit Three and other manufacturers in the US. Under this circumstances, it would be very optimistic to say that Detroit Three can compete with other car manufacturers which have national healthcare system.




Resources;

https://www.commondreams.org/view/2008/12/13-2

http://www.boldtypemag.com/auto-manufacturing-healthcare/

http://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2011/lacker_speech_20110613.cfm