While most of the discussion today is about whether the Obama administration made the right or wrong choice by ousting GM's Rick Wagoner and demanding a more comprehensive makeover than GM or Chrysler had provided as part of their deal to get taxpayer assistance, Robert Scott over at the Economic Policy Institute had some things to say about how the Big Three should be investing in America.
While GM, Ford, and Chrysler production in Mexico increased in 2008, it fell in the United States and Canada. GM has invested $3.6 billion in Mexico in the past three years and is increasing its commitment to Mexican production by having its new Aveo subcompact built there instead of in the United States (Black 2008). And the Big Three plan even greater future investments outside of the United States: GM announced plans to invest $1 billion in Brazil (Ortolani 2008), and Chrysler is investing $570 million in a new engine factory near Saltillo in the Mexican state of Coahuila. At the same time, GM and Chrysler are seeking nearly $22 billion in additional restructuring aid from the Obama administration.


This, writes Scott, indicates a clear need for the government to make future taxpaid funding for GM and Chrysler dependent on a restructuring that includes an investment here at home instead of sending those production jobs out of the country.
The problem is that administration's Path to Viability for GM and Chrysler that requires aggressive restructuring also may contribute to further pushing the companies to reduce their U.S. manufacturing footprint and increase their outsourcing off-shoring. That would add more losses to the 369,000 jobs already lost in the auto industry and auto parts makers since December 2007. And when recovery does happen, more U.S. auto jobs would be outside the country than ever before.
As Scott says, "This would conflict with the President’s announced 'commitment to support an auto industry that can help revive modern manufacturing.'"
He recommends:
• Stabilize Domestic Content: Require that the domestic content of cars and trucks sold in the United States, on average, equals or exceeds the 2008 domestic content shares. This will limit offshoring of parts and vehicle production by GM and Chyrsler.
• Cap Imports: A standstill agreement on the number of cars and trucks imported from Mexico, as a share of actual sales; Mexico could share in the benefits of recovery, but not at the direct expense of autoworkers in the United States or Canada.
• Reform labor rights in Mexican auto assembly plants: Anti-democratic labor laws and lax enforcement policies have systematically kept wages low in Mexico and encouraged companies like GM and Chrysler to outsource production there. Weak labor rights are endemic to Mexico, and reform of labor rights in auto plants could help pave the way for improvements throughout Mexico’s labor market.
With Chrysler part of Fiat, and Mexican labor law outside the scope of what even the most aggressive U.S. administration can tackle, achieving such reforms will be difficult, at best. But, since the "tough" part of the "tough love" approach to the auto industry has been made quite clear, it would be good to see the "love" portion including requirements that the U.S. auto industry stop shipping so many jobs out of the country.