Auto Union Chief Presses for Trade Reform

United Auto Workers president Ron Gettelfinger has taken aim recently at free trade policies as a factor in the problems that beset the American automobile industry.

“We must take action to fix our broken trading system,” he said in remarks prepared for an automotive conference.  “We can no longer afford to have the most open market in the world, while other countries use currency manipulation and non-tariff barriers to keep out US-made products.”  Gettlefinger tempered his message by saying that “the UAW is not opposed to fair trade, but it’s time to recognize that so-called ‘free trade’ is a fiction.”Gettelfinger noted further that the deficit in automotive trade alone is expected to hit 109 billion dollars and the US has an automotive trade imbalance with every one of its major trading partners, including Britain, which has a small automotive industry.

I am not quite sure that Gettlefinger is placing appropriate emphasis on the issues here.  If we have a automotive trade deficit with every single one of our automotive trade partners, does this imply that every single one of them – including the British – are manipulating their currencies to create a competitive disadvantage for U.S. companies?

Toyotas and other non-American cars are assembled in the U.S. (mostly in the southeast) and use the North American supply chain for most of their parts, like the Detroit Three.  How does currency manipulation of the yen or the euro figure into the competitive strength of non-U.S. players in the U.S. auto market?

Certainly, currency issues are a central factor in trade balance.  However, Mr. Gettlefinger’s calculus is a bit oversimplified.  For a more nuanced example of the factors at play, take a look at the recent Business Week article, The 65 mpg Ford the U.S. Can’t Have, to see some of the confounding reasons why we can’t seem to get a car made here that is double the typical available average new car gas mileage.  By attacking trade policy, Mr. Gettlefinger draws attention away from labor components of new car costs.

Gettelfinger did say, though, that his UAW is willing to consider concessions like those spelled out in the terms of the federal bridge loans for GM and Chrysler. However, before the UAW agrees to any kind of wage concessions, he wants to be able to examine the books of Japanese companies such as Toyota, Honda and Nissan to how they calculate labor costs. 

I can’t argue with a desire for an apples-to-apples comparison, especially if the government sets competitive benchmarks for the Detroit Three against Japanese producers.  It has been well established, however, that the initial quality ratings and assembly times of Japanese versus U.S. automobiles have roughly reached parity in recent years, so the need for Uncle Sam and Gettlefinger to get into Toyota’s books are largely unnecessary, in my mind.  The real issues are company overhead, development expense, and employee benefits.

Read Mr. Gettlefinger’s extended comments here.

What are your thoughts on the plight of the U.S. auto industry, the UAW, or trade policy?

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