Auto Bailout

December 13, 2008

A column in Tuesday’s New York Times raises an issue not raised by many who opine on the bailout of the auto industry – the relationship between health care financing and the bailout.  David Leonhardt  examines the much discussed wage disparity between the unionized autoworkers and their non-union counterparts employed by foreign manufactures in the US like Toyota and Nissan.

Ezra Klein in his blog picks up the same theme.  Apparently the Republicans in the US Senate missed their helpful analysis – as did most of the talking heads on the news shows.

1210-biz-webleonhardt1

They make two relevant points. Most of the disparity between the wages is in legacy cost, and secondly, wages are not the significant cost driver in the cost of an automobile.  They both agree that Detroit’s troubles are not related to costs, but to their inability to design and build cars that the American public wants.

Personally, I do not think the car makers deserve all of the criticism they received; a lot, just not all of it.  Until a couple of months ago, our family had two American made vehicles in our driveway.  Their combined mileage was almost 350,000.  Our high priced foreign car cost more per year to repair than the other two combined.

But I digress. This graphic reveals yet an another example of how the inequity in health care financing distorts the marketplace.   Read the rest of this entry »