Why GM and Chrysler Had To Be Bailed Out And Are Doomed Over The Long Haul

If you want to understand what went wrong with GM and Chrysler and what’s still wrong with both of those companies, and to a lesser extent, Ford, it’s not hard to understand.

1) The unions give lots of money and manpower to the Democratic Party. In return, the Democratic Party has given unions way too much power under the law. Once a union is formed, a corporation has both hands tied behind its back in every negotation.

2) Because the unions have such a legal edge in dealing with GM with Chrysler, they’ve managed to secure deals that have driven labor costs to a non-competitive level.

3) Because GM and Chrysler can’t compete with their foreign competitors on cost, they have to reduce the quality of their cars, use cheaper designs, or build larger, more profitable cars to try to make enough money to cover their costs.

Ultimately, what this means is that companies like Toyota and Honda can build a car of comparable quality to the ones made by GM and Chrysler for a significantly lower cost. That’s why, for example, on this list of the 10 Cheapest Cars to Own, there are no GM or Chrysler cars present. Think about what it will mean over the long haul if companies like Honda, Toyota, and Mazda will always have the capability to build a better car, dollar for dollar, than GM and Chrysler because they have significantly lower labor costs.

One word comes immediately to mind; Doom.

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