Well, it only makes sense. You build cars in former communist countries a stone's throw away from the world's most militant (and deeply entrenched) labor unions and it's only a matter of time before the union boys show up and the term "low cost" no longer applies to your Eastern European factories. After reporting the end of the 19-day strike crippling Renault's Romanian Dacia plant, the Financial Times says Eastern Europe's wage inflation mirrors the majors' Spanish/Portuguese experience. "In the mid-1970s… Ford, General Motors, Renault, Peugeot-Citroën, Volkswagen and Fiat all established operations or joint ventures in the Iberian peninsula. But by the late 1990s, Spain had priced itself out of the market as a result of demands for higher wages and improved benefits from car workers and labour unions. A similar pattern seems to be spreading in eastern Europe – with one worrying difference. If it took roughly 20 years for the low-cost cycle to run its course in Spain; the current one looks like it will last only 10 years in eastern Europe." [thanks to starlightmica for the link]
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Where next? India, Vietnam and China? Probably. Where, after that? Africa? Only “maybe”.
The greedies wanting to take advantage of low wages to increase their profit margins (not lower the price of cars) are almost out of options.
I bought a supposedly American car (my last ever one, in fact) in a 1999 Dodge Neon. It ended up costing me a huge headache (head gaskets should NOT blow out on modern cars which receive good car and maintenance), cost me $14,000 and THEN I found out it was manufactured in Toluca, Mexico as I concluded the deal.
With 60 cent an hour wages in Toluca, that car should have only cost me $6000, not $14,000.
In reality, it wasn’t worth $3000 new.
A pox on Chrysler.
There will always be a a global bidding war about who can make something the cheapest. That’s why there are sweatshops in the world. Yesterday Spain, today eastern Europe, tomorrow India and China. That The Money moves elsewhere just means that the median income in Spain and Romania has risen above lowest povery, and that’s a good thing. Spain is on par with the rest of the western Europe, and hopefully the rest of eastern Europe will follow.
When I looked at the utterly forgettable Saturn Astra, the content list said some parts of the Astra are from Hungary. Maybe it was the engine. Some are from China. Maybe it was the tranny. The whole car was so average I can’t remember what came from where. Collect all parts for assembly in Belgium, however. No wonder that thing loses money. Gotta keep the King and Queen in chocolates.
I suppose it’s inevitable that this will happen when you try to take advantage people who work factory rat jobs.
Well, maybe my English reading skills are not so good today, but having looked at the article, it seems to say the rising cost of labor in Eastern Europe is worrysome, but I can’t find the word “doomed”.
FT: “Companies may need to search even further afield for long-term solutions to their costs.”
Yes, and that means that some components will be outsourced to cheaper places such as Ukraine. Good news, as far as I’m concerned.
What’s the alternative? Dictatorships such as China? For sure, they have less “problems” with labor unions.
After Henry Ford gave his workers hefty raises, he was attacked by his co-capitalists as a traitor to the cause. Subsequently, his workers had enough money to buy Ford cars. It works both ways.
Jobs would have moved to lower-cost countries whether or not workers in the USA and Europe were unionized – so given that, it’s better to be unionized anyway!
This problem will solve itself long term, because one of the following will happen:
1. Every manufacturing country will be unionized, even China, or
2. Robots will build everything, or
3. The few humans left will be too worried about catching their next meal and fighting off flesh-eating mutants to care.
Patience, my friends. I know we all look at things on a pretty short term perspective but I think if we are all patient enough, evidence indicates that eventually, the USA will be the low cost producer of goods. Or we’ll all be one big happy family.
Does anyone care what the wages are in Stuttgart? No. It all depends on what they build, not on what the workers make. Trying to make Ladas or Trabants in a reasonable cost structured plant isn’t going to work, but having educated, hard working employees in a modern, well equipped plant isn’t a hardship with the right vehicles.
The traditional cheapass Eastern European/Russian models will disappear and really, do you think anyone will miss them?
Imagine that, factory workers everywhere want to have a decent quality of life once they get a shot at it. Boy they have nerve!
This is what you get with a common currency – complete price and wage transparency – prices align, wages align – you have a big United States of Europe.
I think Ireland is still pretty cheap compared to some of the others – or you could just bite the bullet and go back to Germany where you get what you pay for (theoretically, the productivity of labor is directly proportional to wage).