Dave said the Big 3 were paying above market wages for labour. The Big 3 are (well were, if there even is a market anymore
) the market.
The majority rule applies here. If you want to make an arguement that the rest of the manufacturers we paying "below" market go ahead. Even that is in question, as workers at Toyota and Honda make almost the same wages as the Big 3. (I've sited this in previous posts here)
The term "sector" was being used kind of loosely here. I think it was being used to include all the automotive manufacturing related industry, not just the Big 3. This includes suppliers and distribution etc.
In any event, the whole thing goes back to GM and Ford in NA. We're not talking about what Indonesian workers make or what Mercedes did in the 1880's.
When I said market wage, I meant the general wage for a semi-skilled worker and didn't mean to limit it to the automobile sector.
You have touched on the situation that led to the problems that Detroit and the automobile manufacturers find themselves in. For a moment in time the big three automobile makers and their unions thought that they had a quasi monopoly on automobile production. The unions could threaten one manufacturer with destruction if they didn't cooperate. Of course it was a kind of mutual destruction threat so there were limits on how far the union could go. But once an agreement was in place with one manufacturer it was fairly simple for the union to move on and pressure the remaining manufacturers to comply or die. This paradigm drove automobile sector wages well above market wages and left tens of thousand unemployed in its wake.
But the paradigm worked well enough for awhile for both the manufacturers and the unions. Manufacturers didn't have competition from lower labor cost manufacturers and so only needed to worry about the reduction in size of the market that the higher automobile prices caused by the higher union wages created.
But this paradigm and the failure to recognize that the Detroit automakers monopoly was an illusion would eventually lead to the near collapse of the Detroit automakers. First all that happened was Detroit lost some opportunities for overseas sales. Then the Detroit automakers began to outsource and automate more to defend against the union demands, But that wasn't enough and foreign automakers began to gain market share in the US. Still the union and the automakers didn't adjust their strategy even as the strategy provided a fertile nursery for the competition that would eventually overwhelm them.
Finally, thanks largely to management and union leaders who chose to ignore all evidence to the contrary the Detroit manufacturers and the union continued with the old paradigm, thus enabling foreign competitors to build factories all over the US and out compete the Detroit automakers first on price and then on quality and features.
Along the way other paradigms were modified that also went unheeded. Automobiles became more reliable and lasted longer. So not only was Detroit losing market share to other competitors the whole pie of American automobile sales was declining on a per capita basis.
So now we are where we are. What to do about it? I doubt that the US market will ever return to a large enough volume to fully utilize the installed base of car manufacturing facilities. Should the US limit the foreign manufacturer's market share in the US to save the American car companies? Should the US enter into giant trade wars to save the American car companies? I think the consequences of either one of those paths would be completely disastrous to the US economy.
Some people think that throwing money at Detroit is going to fix the problem. I think Bush already tried that. Three times really, once with the disastrous and corruptly driven SUV/truck tax subsidies. Then again with a bunch of money to finance the transition to greener vehicles and then finally with the Bush bailout.
And the end result is that GM is back with its hand out.
It seems likely to me that there is enough of GM capital left that a viable company can rise again from the ashes. But the problem right now is that GM doesn't own or control that capital and if a stable, profitable company can rise again GM needs to get relief from its various encumbrances so that it can compete.
I think a wholesale change in top management is probably important also. The old airlines that competed with bribes and cronyism for air routes in the days of the CAB for the most part never successfully transitioned to successful companies after the end of the CAB protectionism. If GM is going to beat the odds new people with skills and drive to compete in a new paradigm are probably required.
