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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (127518)	7/26/2005 6:27:44 AM
From: John Carragher	Respond to of 793544

"The data suggest that if car companies succeed in keeping consumers happy, they don't need to cut prices. just build the next toyota plant in canada because its cheaper labor than u.s. but expect u.s. to buy the cars.

To: LindyBill who wrote (127518)	7/26/2005 7:20:23 AM
From: John Carragher	Read Replies (1) \| Respond to of 793544

July 25, 2005 Toyota, Moving Northward By PAUL KRUGMAN Modern American politics is dominated by the doctrine that government is the problem, not the solution. In practice, this doctrine translates into policies that make low taxes on the rich the highest priority, even if lack of revenue undermines basic public services. You don't have to be a liberal to realize that this is wrong-headed. Corporate leaders understand quite well that good public services are also good for business. But the political environment is so polarized these days that top executives are often afraid to speak up against conservative dogma. Instead, they vote with their feet. Which brings us to the story of Toyota's choice. There has been fierce competition among states hoping to attract a new Toyota assembly plant. Several Southern states reportedly offered financial incentives worth hundreds of millions of dollars. But last month Toyota decided to put the new plant, which will produce RAV4 mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives to choose a U.S. location, the company cited the quality of Ontario's work force. What made Toyota so sensitive to labor quality issues? Maybe we should discount remarks from the president of the Toronto-based Automotive Parts Manufacturers' Association, who claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use "pictorials" to teach some illiterate workers how to use high-tech equipment. But there are other reports, some coming from state officials, that confirm his basic point: Japanese auto companies opening plants in the Southern U.S. have been unfavorably surprised by the work force's poor level of training. There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system. Opponents of the tax hike convinced voters that it would cost the state jobs. But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States. You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs. To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without. So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending. But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending on emergency rooms, which are heavily subsidized by taxpayers. Funny, isn't it? Pundits tell us that the welfare state is doomed by globalization, that programs like national health insurance have become unsustainable. But Canada's universal health insurance system is handling international competition just fine. It's our own system, which penalizes companies that treat their workers well, that's in trouble. I'm sure that some readers will respond to everything I've just said by asking why, if the Canadians are so smart, they aren't richer. But I'll have to leave the issue of America's comparative economic performance for another day. For now, let me just point out that treating people decently is sometimes a competitive advantage. In America, basic health insurance is a privilege; in Canada, it's a right. And in the auto industry, at least, the good jobs are heading north. E-mail: krugman@nytimes.com

To: LindyBill who wrote (127518)	7/26/2005 1:25:29 PM
From: greenspirit	Read Replies (2) \| Respond to of 793544

Toyota may be sitting in the drivers seat currently, but their future success is not predetermined. Customer value is definitely dependent on quality, but it's also dependent of price and delivery. If American car companies can bridge the divide and offer "value" which is a combination of the three factors, they could succeed and take Japan Inc down a peg in the automotive world. The problem is American car companies need to become more innovative with their designs. And I was recently dismayed by Chrysler's recent decision not to offer the Smart Car for the U.S. market. I'm sure they performed thorough market surveys, but sometimes surveys don't account for the emotional appeal of unique designs. How else can you explain the success of the Mini Cooper?