Who, or What, Killed Detroit? Union Greed
Cities: Poor Detroit. It hasn't had any good news for decades, and now, despite a $77 billion bailout of the auto industry, its population continues to implode. The No. 1 reason: the United Auto Workers union.
Census data released Tuesday show Detroit's population has plunged 25% since 2000 to just 713,777 souls - the same as 100 years ago, before the auto industry's heyday. As recently as the 1970s, Detroit had 1.8 million people.
What's happening is no secret: Detroiters are fleeing an economic disaster, the irreversible decline of the Big Three automakers.
In his now-famous Super Bowl commercial for Chrysler, rapper Eminem drives up to a theater in a sleek new 200 model and says, "This is the Motor City. And this is what we do." But, sadly, that's no longer the case. Detroit's decline has been shocking.
Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit's decline is the greed of the industry's main union, the UAW, which priced the Big Three out of the market.
As recently as 2008, GM, Ford and Chrysler paid their employees on average more than $73 an hour in total compensation. The 12 foreign transplants, operating in nonunion states mostly in the South and Midwest, averaged about $42 an hour.
Guess which manufacturers are healthiest and expanding their market today? In 2008, the Big Three still made 59% of all cars in the U.S. But, according to recent estimates, their market share is now 46% - with foreign companies selling the bulk of all U.S. cars. So Detroit's loss has been the South's and Midwest's gain.
Behind this is the gold-plated benefits package once guaranteed to UAW workers. We're not against workers getting what they deserve, but total pay and benefits for a full-time worker for the Big Three until recently averaged about $140,000 a year.
The transplants? Just $80,000. Add in an estimated $2,000-plus per car for retiree health care and pensions for the Big Three, and the cost gap is huge.
Two years ago, the Center for Automotive Research estimated that for every job created by a foreign transplant, 6.1 jobs were lost by the Big Three - many of them in Detroit. No city can take that much economic abuse.
Nor has the $77 billion bailout of GM and Chrysler - which enriched the UAW at the expense of bondholders and shareholders - helped. True enough, sales have bounced back some, but neither one is out of the woods.
Even as Detroit collapses, new UAW chief Bob King promises to "pound" the transplants into submission and force them to drink his union's poison, too.
Given what we know, every town that is now home to a foreign automaker should be very afraid. If King has his way, they'll soon suffer Detroit's fate.