Wednesday, November 11, 2009

Tale of two Industries

I showed a similar picture last week, it was the difference between the Democrat-Pelosi Health Care Bill and a competing Republican bill. This picture shows the 2007 Master Contract between the Ford Motor Company and the UAW on the left, and the same contract back in 1941, yes that is a paper clip and a pen to give you scale.
You want to know why Ford-USA will ultimately fail and go out of business or be taken over by the Government similar to the way GM and Chrysler went. There it is the stack on the left defining the many (thousands) of different job classifications and work rules imposed on Ford by the Union.

The funny thing is that Fords best cars from a quality standpoint are both built in a non-union factory in Mexico. Yes, the Ford Fusion and the Lincoln MKZ are rated by Consumer Reports higher than other vehicles in the same class (that would be the Toyota Camry and Honda Accord for the Fusion and the Acura and Lexus against the Lincoln).

This brings to mind a thought that I have had regarding this, that is the issue of Investment Choice. Let me explain.

I have in other venues complained about Boeing spending so much money in China. Many years ago Boeing started investing in China, setting up at first a repair and overhaul activity. This evolved into manufacturing smaller size aircraft components like panels and doors or flight control surfaces. This investment included not only cash to buy facilities but also in technical expertise. You can't simply open a factory, hire warm bodies and then ship Flaps for B747's. It took Boeing many years and hundreds of millions of dollars but it is paying off. Large parts of the B787 Dreamliner are being built in China and flown to the US for final assembly. Soon the Chinese will be able to design, develop, engineer and then build aircraft that will compete with Boeings product line. Part of me thinks this is swell, it is what capitalism is all about. This investment is paid back with orders for Boeing product by the national airlines. A good thing for Boeing.

But, my criticism is not about the actual investment which is an important thing for Boeing to do. What I protest is that they did that in China. I contend that this investment is better spent in Mexico. Why China, was it because there was a bigger market for Aircraft, most likely. But I think in the long run, if you are going to build an industry from scratch and I am really talking about taking pheasants out of the fields there in China some 30 years ago and training them from the ground up. Why can't those have been Mexicans? Would not this have been better for not only our country but Boeing too? I read somewhere that by the time a B787 finishes assembly; it will have 26,000 miles on it because of all the parts being flown in from out of the country. Would it not have been cheaper to fly those major assemblies up from Mexico and not across the entire Pacific?

Benefits to the Mexican economy and to some of the problems here in the US regarding immigration need no explaining, but 30 years ago Mexico was as blank a slate as China was back then. No one who has lived with and seen Mexicans at work can complain about their work ethic. It is to be admired. And that is with them toiling in the mundane, I can't imagine what you get if you give them some education and technical work to do.

Well, actually you can, just ask Ford.

Hat Tip to: Carpe Diem and the WSJ

BT: Jimmy T sends.

1 comment:

Barco Sin Vela II said...
This comment has been removed by the author.