UAW Strike May Hasten Detroit’s Decline

Decades of regulations and subsidies have left the Big Three uncompetitive in the age of electric cars

By Clifford Winston. He is a senior fellow at the Brookings Institution. Excerpts:

"Some policies have weakened them by raising their costs; others have assisted them, with the unintended consequence that they failed to address the sources of their declining market share."

"The federal government has helped U.S. auto makers by protecting them against foreign rivals and by giving them financial assistance after economic shocks."

"in 1964, when Lyndon B. Johnson’s administration imposed a 25% tariff on light trucks."

"the tax on light trucks remains"

"The Reagan administration tried to give the Big Three time to become more competitive with the Japanese by negotiating voluntary export restrictions with Tokyo"

"by 2000, a dozen years after they ended, U.S. auto makers hadn’t closed the gap between the quality and value of their vehicles and that of their foreign competitors."

"by the eve of the Great Recession, U.S. auto makers still hadn’t addressed their production-cost problems and product deficiencies."

"During that recession, General Motors and Chrysler went into bankruptcy, but the government didn’t allow them to go through a court-supervised reorganization or to fail, which would have allowed their more-profitable light-truck operations to be acquired quickly by other companies. Instead, the Obama administration advanced roughly $80 billion to the companies and their financing arms and provided tax benefits not normally available to bankrupt companies."

"In response to the Covid pandemic, Congress made loans available to the auto companies and provided other benefits, such as a 50% employee retention tax credit. Most recently, the Biden administration has helped the auto companies record profits by providing billions in tax credits to spur purchases of new and used domestic electric vehicles.

Government policies that have reduced auto makers’ competitiveness include inefficient safety and environmental rules and mandates. Regulations mandated installation of various safety devices, such as shatterproof windshields and energy-absorbing steering columns, that raised auto makers’ costs but didn’t reduce overall highway deaths. Legislation required auto makers to install air bags on both sides of the front seat by 1998, increasing costs and risking the safety of smaller passengers. Corporate average fuel economy standards enacted in 1975 continue to increase, raising auto makers’ costs and consumer prices with uncertain benefits to the environment. And state and federal mandates to increase dramatically the share of electric vehicles on the road are pressuring auto makers to transform their production processes."

"Unfortunately, the legacy of government assistance and costly policies is that U.S. auto makers have significant catching up to do to compete effectively in an industry gearing up for large-scale production of electric vehicles and ultimately autonomous ones."