“The (fuel mileage) standards will provide certainty for manufacturers in planning their investments and creating jobs in the auto industry as they add more fuel-saving technology to their vehicles,” cheered United Auto Worker President Bob King this January as he embraced President Obama’s radical new, 54.5 MPG-by-2025 mandate for auto fuel economy.” We are excited about the new green technologies that are being developed in the United states and produced in UAW-represented facilities.”
Talk about wishful thinking.
As government forces consumers into smaller cars, reports the Wall Street Journal, automakers are moving jobs to low-cost Mexico at a furious pace. “Mexico is taking center-stage in the production of cars, where lower costs and skilled workers are reordering the global auto market,” the Journal observes. “Six years ago, Mexico was the world’s ninth largest exporter of cars. Today the country is ranked fourth. One in 10 cars sold last year in the U.S. was made in Mexico.”
Even as the Obama administration takes credit for saving the U.S. auto industry with its Detroit bailouts, its environmental policies are squeezing jobs and profits by dictating that U.S. manufacturers produce what they — and their UAW employees — do worst: small cars. EPA’s higher fuel standards force manufacturers to both make smaller cars and to develop more expensive, alternative-fuel technologies. Either way, profit margins get squeezed.
It leads the Detroit Three in profit margin per vehicle at 12 percent. The reasons run from Ford’s newer vehicle fleet to its owning its own finance company. But a big factor is that the Blue Oval is the industry leader in pickup sales — and gas-guzzling trucks command significantly higher margins than cars. Industry estimates peg truck margins (like the Ford F-150, the best-selling vehicle in America) at $5,000 per vehicle versus just $1,000 for a small subcompact like the Ford Fiesta.
As a result, the F-150 wears the “Made in America” label — and the new, MPG mandate–fighting Fiesta is made in Mexico. The higher Washington’s MPG mandate, the more automakers look to lower labor costs abroad.
“That’s bulls***,” hollers Michigan congressman John Dingell (D., Dearborn), who, like the UAW, supports Obama’s green agenda.
But industry experts say otherwise. Subcompact production will increase to meet the new rules. “The first place that pops up is Mexico, because of labor,” Guido Vildozo, an analyst at IHS Automotive, tells the Journal. Mexican wages run at $40 per day, while UAW wages and benefits are over $40 per hour. Honda, for example — which produces vehicles like the midsize Honda Accord in Ohio with non-union labor — will soon produce its subcompact, the Fit, in Mexico. That’s 3,200 new jobs south of the border.
“Mexico is extremely competitive,” says Carlos Ghosn, Nissan’s CEO. “You can run your plants with practically no limits if you want.” Translation: No union shops demanding inefficient work rules.
Nissan just won New York City’s contract — forced by Obama green ally Mayor Bloomberg — to build a new fleet of fuel-sipping, 4-cylinder taxi cabs. Every single one will be built in Mexico — replacing generations of UAW-made Ford Crown Victoria cabs.
Both Dingell and the UAW’s King were hypnotized by Obama’s promise of a new generation of battery-powered cars made in the U.S. But expensive electrics like the Chevy Volt and Fisker Karma have been disappointments — and their government-subsidized battery makers have laid off workers as markets failed to materialize.
Taxpayer-rescued Chrysler also faces the EPA whipsaw. The company has sprung back to life under Fiat management thanks to its popular Jeep truck brand — but to meet the feds’ MPG rules it is putting MPG-friendly, state-of-the-art, eight-speed transmissions in many of its vehicles. “Such expensive technology makes Chrysler’s products more competitive, but it also eats away at the company’s margins,” reports the Detroit News about Chrysler’s industry-trailing profit numbers.
In a historic irony only government could embrace, the Democratic Party saved the UAW — and are now proceeding to ship their jobs abroad to meet its expensive new MPG laws.