SALES OF American cars in late August were nearly one-third lower than a year earlier. Also in late August, the foreign cars' share of the American market reached a new record. Meanwhile, back in Detroit, Chrysler's employees have been threatening to strike when the contract expires tonight if they don't get a raise. They argue that since Chrysler--with the help of federal loan guarantees--is no longer in a state of financial crisis, it can afford to pay the same wages as GM and Ford.
Labor costs, including cash wages and all the fringes, now average $19.60 an hour among production workers at Chrysler, according to the company. They are $2.60 an hour higher at GM and Ford. Those wages are more than half again as high as the average for all American manufacturing workers. In the past, the United Auto Workers justified that tremendous wage differential by citing the high productivity in the automobile factories. But now their grip on the American market is being eroded by competitors whose wages are lower and whose productivity is higher.
Why do the Japanese cars keep taking larger shares of American sales, even though the American companies now produce small cars of high efficiency? The House Trade subcommittee published last month a study by the Congressional Budget Office analyzing the difference in prices. Last year, the total compensation of an auto worker in this country averaged $17.55, compared with $7.74 in Japan. But the truly astonishing disparity is in labor productivity. The American manufacturers use about 200 hours of labor to build a subcompact car, the CBO calculated, while the Japanese use 111 hours. The result is a price differential of about $2,000 in a subcompact car -- two-thirds of it in the hourly cost of labor, and one-third in productivity.
The present wage pattern in the American automobile industry is the product of a period when it had, in effect, a monopoly in the American market. Through good organizing, the UAW made the most of its opportunities. Now the expansion of world trade and the changes in consumers' tastes have destroyed that monopoly. That leaves American auto workers, and not only those at Chrysler, with a bitter but unavoidable choice. To the extent that they can preserve the industry's high-wage tradition, they will destroy jobs. Work in auto factories will always be well paid, but the days of monopoly incomes are over. An industry that can't move to meet its competition does not have a brilliant future.