A Car Wreck Made in Washington

11/26/08 - WSJ.com by Holman W. Jenkins, Jr.   --> Source

[edited] It was a fantastic moment in last week's congressional hearings. Rep. Stephen Lynch (D.MA) asked CEO Rick Wagoner whether General Motors was also asking China for a bailout.

He seemed to imply that GM can't afford to pay inflated UAW wages because it is squandering money building cars in China. Mr. Wagoner mildly answered that GM's China operations are profitable, and actually help to offset massive losses in the U.S.

Ford and GM are able to run profitable auto businesses all over the world, but not in the U.S., because the United Auto Workers union (UAW) is present only here.

Congress's CAFE fuel-economy rules, not labor law, have been the biggest factor in preserving the UAW's monopolistic power. CAFE effectively requires the Big Three automakers to lose tens of billions making small cars at a loss in U.S. based UAW factories. CAFE keeps the Big Three from profitably importing small cars, and removes any ability to control labor costs by moving some production to factories in Spain, Taiwan, or Poland. Let's face it, that's what other successful U.S. manufacturers do.

CAFE intentionally gives the UAW the ability to keep wages high and uncompetitive in the face of global competition. It has nothing to do with giving Americans efficient cars. Yet, not a single legislator doubted the idea that Detroit's woes result from an improbable series of "stupid decisions" (as another Massachusetts congressman put it) by 18 CEOs over 30 years.