Of Toyota’s retirees and the auto industry’s woes

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In the comments to my Monday Chrysler post, James asks a couple of interesting questions:

Do you feel that Toyota and other rising automakers will face challenges similar to the Big Three in the future, once their current workers start to retire? Of all the industries facing waves of boomers retiring, why has the auto industry been hardest hit?

The answer to the first question is no, at least not nearly on the same scale. Eduardo Porter had a good article on this in the New York Times a year ago. I’ll sum up: In Western Europe and Japan, governments play a bigger role in pensions and health care, meaning that more of the costs are borne by all taxpayers rather than individual employers. In Germany and France, the government pension systems face funding crises far worse than our own Social Security as populations age, but that’s another story. Also, U.S. health care costs are the world’s highest, which increases the burden here. As for foreign automakers with operations in the U.S., most offer retirement plans in which employees, not the companies, bear the risk, as well as far less generous retiree health packages than the Detroit Three.

And why has the auto industry been so hard hit? I think the steel industry has been hit even harder, with only one old-line steel company–U.S. Steel–surviving intact. But auto manufacturing was the pinnacle of the 20th century industrial economy, so its woes have been most visible. For whatever reason, the industry also never generated a Jack Welch-style corporate-reinvention genius. Of course, if Jack Welch had been in charge of GM he probably would have gotten it out of auto manufacturing.

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