One solution to the high cost of union labor, its pension and health-care requirements, is to build cars outside the US. The UAW will fight to the death to keep the jobs they have at Chrysler (DCX), Ford (F), and (GM) “in country” but the fact of the matter is the the number of cars produced in the US isn’t what it used to be.
Bank of American is out with a report that shows China’s car production hit 5.2 million vehicles compared to 4.4 million in the US during 2006. Ten years ago, China only produced 6% as many cars are the US built.
Clearly the Chinese market is one of the fastest growing in the world, but the numbers point to another trend. American cars sold in China are usually built through joint ventures with local companies. US can companies are also building product in places including Mexico and Australia. With market share dropping the the US, the Big Three are trying to solve the problem, at least in part, by moving to the low cost environments outside the US.
Moving production creates a number of problems including quality control, but the US auto worker may be heading the way of the Dodo.
Douglas A. McIntyre can be reached at email@example.com. He does not own securities in companies that he writes about.
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