Detroit's decision
Decision time is at hand in Detroit. Officials of the US auto industry and the United Automobile Workers union are huddled in crucial bargaining talks, what with the current labor contract set to expire at midnight Sept. 14.
For the good of the American auto industry - facing tough competition from abroad - as well as the future well-being of the United States economy itself, it is essential that both sides avoid a strike and fashion a mutually acceptable contract.
* The industry should grant automobile workers as much long-term job security as possible in exchange for a modest wage-benefit-increase package from the union.
* Given job security, the union and industry also need to work out changes in work rules that inhibit productivity. Industry analysts expect US auto firms to post productivity gains averaging about 5 percent annually over the next several years. But that is not enough. Japanese firms - with their lower wage packages helping to hold down production costs - are expected to post annual productivity gains of about 10 percent.
* Auto executives should rethink the wisdom of granting themselves large bonuses, as they have in past months, while arguing that larger benefits packages for workers are damaging to the industry. Fairness is fairness.
* Finally, the US industry needs to consider a bold, dramatic step to help boost sales of American-built cars. Cut car prices. Or at least, hold the line on prices. Doing just that - cutting prices - is an idea advanced by Business Week magazine in its Sept. 10 issue. The proposal makes sense. Henry Ford, it might be noted, found that slashing prices on his car products back in the 1920s - when the idea was truly novel - meant increased sales as car prices were brought into line with the wages of American workers.
Unfortunately, US firms are going just the opposite route; i.e., announcing higher prices for 1985 passenger-car models. Granted, the increases are modest. They average between 1.7 percent to 2.2 percent. But considering that most new cars now run in the range of $10,000 and up, even a 2 percent increase is not inconsiderable for a family strapped with other obligations.
Imports now make up about 25 percent of the US car market. Current import restrictions against Japanese carmakers end next March. Barring a last-minute reprieve from Washington, it seems increasingly unlikely that the quotas will be continued for another year. But that means that the percentage of imports could rise, perhaps eventually climbing to 40 percent of total sales or higher. That is why Detroit - as Business Week argues - needs to take bold action to protect and expand its market share. Thanks to their current sizable profits, US firms could surely absorb price cuts.
A final point: A strike should be considered unthinkable. One effect would be to exaggerate the natural slowdown now taking place in the growth of the economy. Would the US auto industry, or auto workers, really benefit from such a scenario? No. Who would? For starters - probably the overseas auto producers. Something for Detroit to think about in these halcyon days of heady sales, climbing profits, and humming assembly lines.
