Hear that sound? It’s the fat lady singing a dirge for $7.5b of taxpayer money ($25b at risk in total). It’s now as good as spent on a few undeserving automakers. Industry executives and union bosses alike are celebrating their lobbying victory, ignoring their still-dire position for the glorious moment. Congress may have made with the cash in short order, but they aren’t rid of the freeloaders just yet. In fact, no sooner had the ink dried on President Bush’s signature on HR2638 than industry backers were telling the media what TTAC has surmised all along: $25b is only the first step. In its first story on the new law, the Detroit News reports that “Michigan lawmakers plan to return next year to seek another $25 billion in loans for 2009 and 2010, and more flexibility in how the funds can be used.” And why wouldn’t they?
Last year, Congress passed the Energy Independence Act (EIA), directing the Department of Energy to supervise a $25b low-interest loan program to “retool” 20-year-old American factories to build fuel-efficient automobiles: vehicles that must be at least 25 percent more miserly than “similar models in their class.” Since then, with increasing desperation, Motown has been agitating for fewer and fewer strings attached.
Thanks to tireless industry lobbying efforts (and the electoral clout of Michigans pols), it looks like Motown will get its way. This bailout is shaping-up to be the least accountable giveaway since the 1993 Partnership for a New Generation of Vehicles– which ended-up costing taxpayers $1.25b and produced sweet F.A. for American consumers.
Now that the appropriation has been signed, the law goes into the part of the government that School House Rock didn’t tell you about: the regulatory process. Designating the loan program an “emergency requirement,” HR 2638 gives the Department of Energy 60 days to write the specific rules under which the loan program will be administered. This despite Energy Secretary Samuel Bodman’s assertion that it could take “six to 18 months” to award the loans.
To help Bodman draft regulations on such a short time frame, legislators have appropriated a further $10m for “outside consultants” and other professionals. (The EIA originally requested $100k to be spent on administrative costs, but Congress decided to multiply that number by 100.) In essence, American taxpayers will be spending the money to hire industry lobbyists to ensure that that the loan program rules are as weak and Detroit-serving as possible.
Not that there are even that many preconditions for the industry to gut. Other than the hundred-fold increase in administrative expenses and shortened regulatory period, HR2638 doesn’t add any caveats or terms. And lawmakers are already sending messages to regulators, going on the record to say that loans should not be capped at 30 percent of a given plants retooling cost, as originally written.
The upshot of this bailout: it’s custom-built to the needs of only three companies. Sure, there’s money set aside for companies employing fewer than 500 workers. But only ten percent of the total loan package. By not including the 30 percent project assistance cap, lawmakers have ensured that taxpayer funds will pay the entire retooling cost for several factories. This lack of diversification means the Federal Finance Bank will be heavily exposed to the success or failure of a few products and even fewer companies.
This is exactly what Detroit wanted. With the lions share of $25b invested in only three companies, the U.S. government will become a major stakeholder in three highly troubled firms. If those loans “work,” the D2.8 will come back for more. If Detroit’s woes deepen, the U.S. government will have no choice but to step in to further protect their our investment.
And the possible negative consequences are not limited to taxpayer liability for the success or failure of the D2.8, or even the opportunity costs of $7.5b. The loan program is so uniquely tailored to the needs of American firms that a free-trade dispute is not outside the realm of possibilities. There were distinct rumblings coming out of Paris last week, as European automakers intimated that their tolerance depended on a similar bailout across the pond. After another $50b of “more flexible” loans, and European Union intransigence, the other shoe will drop.
There is considerable irony here. As Rep. Sander Levin (D-MI) puts it, “it’s been a struggle here in Washington to secure acknowledgment that a domestic-based auto industry is vital for America.” If Detroit backers are complaining that there was significant opposition to this bailout, then where’s the beef?
Any number of conditions could have been attached to HR2638 to improve accountability, diversification of risk and economic benefits, or even limiting CEO pay during the loan term. Instead lawmakers tailor-made the loan program to Detroit’s specifications while complaining that nobody cares if the automakers live and die.
The chilling reality laid bare by this bailout is not that automakers can already get exactly what they want from DC. It’s that from here on out the going only gets easier. For Detroit, anyway.
Here’s another thing Schoolhouse Rock doesn’t teach the little kiddies:
The Land of the Free…well, that only applies to when times are good. When you are making money hand-over-fist, you are “free”…ie, government will stay out of your business and let you continue on your way. Your profits are yours to keep…that is the “American Way”.
But here’s what they fail to mention: When times are sour, when the toilet has clogged and has overflown the bathroom floor…well, when THESE times occur, your problem is now someone ELSE’S!!
Yes, THAT is the American way- to not only be there when someone fails, ESPECIALLY for those who are totally inept, incompetent, and downright criminal- but to REWARD IT!!!
Yes, the corpulent, acrid-smelling obese woman is now singing. But so is Ricky Wagoner…when he out to be taken out back and pummeled by those thousands upon thousands whose lives have been disrupted (to say the least) by his groveling incompetence.
So kiddies, the civic lesson for today is this: “When times are good, what is yours is yours, when times suck, your problem is now mine”.
If you REALLY want to be little patriots, do your civic duty and buy a Honda Civic.
Great news,Now America and Americans have a bigger stake in Detroit.I’m sure the heats gonna be turned up in Ottawa to keep GM Canada alive.
Hello Mexico,get your checkbook out!
So now maybe folks are gonna wake up.Maybe,just maybe there is a down side to giving your money to the Germams,Koreans and Japanese.
Mikey,
When individuals are not only sold-out by the companies they once used to support, but by their very own government….
Do you REALLY believe people are going to STOP looking out for their own best interest?
Ph-lease…
I once supported GM, they shafted me every INCH of the way, ….what in God’s-name are you thinking? Do you think my heart is going to open up to their “plight” when they are sticking a dagger into my chest? After all, if the taxpayer choose (and I use that term lightly) to NOT pay the taxman…what in the hell do you think is going to happen? I go to prison for many years.
This “bailout” is legalized theft…there is no other word for it.
And yet, somehow, you think I (and others) will stop looking out for our own individual interests?
Keep dreaming…after all, it’s the American Way.
It’s the Japanese, S. Koreans, Chinese, Middle East, et al, who buy U.S. T-bills to finance the US Government. Without them, we’d be in even more dire straits. That argument (to support America only by buying American) is bunk.
Hmmm.. Let’s see…
The Japanese have a government agency (Ministry of International Trade) that has been virtually exclusively dedicated to the auto, steel and electronics companies for the last five decades.
The Japanese distribution networks were virtually closed to ANY foreign competition for decades and kept American vehicles at bay for well into the late 1980’s. Even into the 1990’s this was the reality.
Then we have some very strong cost advantages thrown against the American manufacturers. The Japanese government pays for employee health-care and also offers a nice fat degree of social security that would shame our own. Our government? Fat chance! That alone results in a nice four figured price advantage in every vehicle they produce these days.
Throw in the Koreans whose protectionism and anti-union practices would probably make Henry Ford blush. Sprinkle in the legacy European automakers who are frequently given direct government ownership and support of their companies, universal health care, and a long-term quota system that effectively kept competition out, and what do you have?
A global automotive industry that has ALWAYS experienced government subsidization. Hate to break it to the chorus of anti-Detroit folks here, but the survival of a given country’s auto industry is heavily influenced by how the government supports and subsidizes it.
In the United States, the industry represents the economic equivalent of millions of jobs. If the learned souls here genuinely believe that we should just play the proverbial fiddle of discontent while the employment base and economic benefits burn into Chapter 11, then feel free to entertain the belief that ‘free enterprise’ is alive and well in any large developed country.
It’s not, and thankfully hasn’t been since the Great Depression. From the Chrysler bailout (which generated hundreds of billions of wealth), to the ‘chicken tax’ (which equivocated Japan’s subsidization of their own industry), to this LOAN (which is far better than direct grants or an across the board tariff), our subsidization is far milder and far more successful than any of you realize.
But hey. Go bitch about a company that can’t liquidate it’s excess divisions or employees without multi-billions going out the window. Go and complain while our state governments force these companies to continue with dealer networks and franchise agreements that had their foundations set in stone well before the ‘Lawrence Welk area’. Go and bitch about how we’ve never made good small cars while, historically, ours have sold far more than the all too enlightened overseas competition for decades. I’m sure all those folks simply ‘Bought American’.
When the dust settles, it will all come down to whether we want the jobs in the U.S., or in the hands of companies that often have their strings pulled by foreign governments. Figure it out.
Maybe,just maybe there is a down side to giving your money to the Germams,Koreans and Japanese.
Mikey,
I think we’ve discussed this before, and I can’t recall what the end result was, so forgive me if this is rehashing an older discussion
The people you want to give your money to are the ones in your local community, regardless of where the head office is. The post-tax profits are the thinnest slice of the overall price of the vehicle.
You’re an Ontarian like me, so we’ll use local examples: it would be foolish of us to buy a compact that isn’t a Civic (Alliston) or Corolla (Cambridge) because we’re sending everything that isn’t tax or dealer profit to workers in the US or Mexico, with a wedge of profits to executives in Michigan and banks in New York or Washington. Ditto buying a people-mover that isn’t a Flex or Caravan, or a large car that isn’t a GM W-Body or Chrysler LX.
The “profits go to Japan” is the biggest hoodwinking of the CAW/UAW membership in history by the union and corporate executive. For the union execs, it kept people buying union-made metal at the expense of non-union transplants; for corporate, it let them play the patriotism card to disguise what was, really, a cash grab. But if you’re rank-and-file lineworkers, low-rank white-collar or (in my case) a supplier, why would you care where the profit goes? What you and I see (in our communities, and thusly our wallets) is the cost to source and assemble, and that cost is a function of assembly location, not corporate nationality.
There’s a small argument to made regarding corporate income tax, but that’s effectively negligible now, in net terms–heck, the tax breaks that were given to GM Canada look more and more like a losing proposition every day.
If you want to do some good, keep the money local–but keep an open mind about what constitutes “local” these days. With the pressure to keep inventories low, transport costs down and JIT flowing, you can bet that parts aren’t coming from far away anymore, so not even the “Americans doing low-value work” red herring applies much, anymore.
Certainly not with GM and Ford doing engineering in Europe and parts assembly in Korea, China and Mexico.
Then we have the modern day reality. Their government pays for employee healthcare and also offers a nice fat degree of social security that would shame our own. Our government? Fat chance! That results in a nice four figured price adavantage in every vehicle they produce these days.
I’d like to state that it’s the same pro-business view that fought comprehensive social welfare for years on the grounds that it would cost too much and impede our ability to do business. The lack of social safety-net-related taxation was often cited as a critical factor in attracting investment and fostering growth in the US vis a vis Europe or Canada.
In fact, it’s not uncommon to hear, even today, about the ruinous tax rates in Europe and Canada that support these systems, and how they’re a drag on economic growth.
Can’t have it both ways, can we?
Let’s be honest: what industry, and the wealthy citizens that speak for it, want is to not pay taxes or for group insurance, and just let poor people make their own way. If they can’t afford health care, well, they’re obviously not working hard enough and deserve to be weeded out, don’t they?
You know, like the good old days in 1890s.
I call BS on this one, Steve. The Koreans are anti-union?
Tell that to some of the most militant union auto workers on this planet. Not only do the South Korean auto workers strike over labor conditions, they also strike over such things as beef imports.
http://www.iht.com/articles/2008/07/02/asia/korea.php
If the link fails to post, google “South Korean auto workers union”.
And if I, or anyone else wants to “bitch”, then so be it. Will you want to stick a dagger in someone’s chest for speaking out too?
Besides, bitching is good. If all of society simply “went along”, just think of where we’d be.
There’s a big difference between ‘bithcing’ and ‘not realizing the pie for what it is’.
The Korean labor costs are far lower…
The distribution market for American cars is effectively closed. The Koreans have over 1300 dealerships in the U.S. Ford has one and the Big three have fewer than 20 altogether.
The Korean market has multiple layers of ever-changing non-tariff barriers, and it’s not just from the manufacturers. Their safety regulations are inconsistent with global standards. This is used to also hold off any major competition in the country. The government also helps to throw red tape at any attempt to establish a permanent presence there. Unlike here, foreign businesses are absolutely unwelcome… period. This goes for steel, electronics, agriculture, or any other industry that the government and the corporate interests deem to be essential.
But according to you this is GOOD:
“…then feel free to entertain the belief that ‘free enterprise’ is alive and well in any large developed country.
It’s not, and thankfully hasn’t been since the Great Depression.”
THANKFULLY HASN’T???
If this is what you give thanks for, then you don’t represent traditional “American” values.
You don’t. So stop saying one thing,…that it’s GOOD…and then complain about the dreaded “expense” of closing plants and laying off workers.
If the union negotiated a deal, then the terms of the agreement should be honored. Unlike the threat from the government (ie, imprisonment), there was no such threat from the UAW. Financial hurt? Sure…imprisonment, nope.
It’s funny how NONE of this mattered one iota when the previous Big 3 ran roughshod against their competition (due to their monopolistic forces), not to mention running roughshod over their very customers.
Again, you can’t have it both ways. You can steal from the populace, but you can NOT force them to buy one of their cars/trucks.
But then again, I’m not saying anything which hasn’t already been spelled out clearly in the monthly sales reports.
Cheerio!! May the taxman who comes a-knocking on your door elevate someone at your expense.
Let the US auto industry die. It doesn’t deserve to live. I’m so sick and tired of the parasitic unions too. Oh and put Wagoner and his cronies in jail.
Just give ’em the money. Small bills, no sequential numbers. A boatload should do. And no strings attached. They’re gonna get it anyway, and they’re gonna piss it down the drain in any case, so why don’t just give it to them? Why kid around about it?
I don’t care how many American jobs are on the line. That’s right, you heard me, I said I don’t care. Look, I lost a nice cushy IT job two years ago with a big aerospace corporation due to layoffs. I went on unemployment. And I found a job that pays half what the previous one did and barely gets the rent and other everyday expenses paid. And never ONCE did I expect or especially ASK for YOUR tax dollars to subsidize my job and save my ass. It’s just not right. Why should MY money pay to save your job to make bad cars I’m not interested in buying? I wouldn’t ask the same of you, but I guess maybe I’m just an idealist… People lose jobs. That’s life. Nobody, EVER, no matter what job they hold, should be ENTITLED to keep that job, for ANY reason, whatsoever. That’s what unions have done to this country. Stop being a crybaby and find something else to do for a living like everyone else has to do. Don’t expect the rest of us to pay so you can keep your job. There are other jobs out there, and if they don’t pay as much, oh well, I guess you’ll just have to lower your standard of living like the rest of us. It’s time to stop asking for handouts and deal with it.
mikey: So now maybe folks are gonna wake up.Maybe,just maybe there is a down side to giving your money to the Germams,Koreans and Japanese.
What I got for my money when I bought 4 Japanese cars was a lot of value for my money in the kinds of cars that I wanted.
Now, for my tax money, Detroit can still continue to build cars that I do not want. With what’s left over, I’ll still buy whatever works best. That will probably be another Japanese car.
After all, Detroit has no reason to improve the quality or suitability of the product if we just hand them checks to continue to build crap.
It will be interesting to see what happens to Korea in a global downturn. It may prove to have been a huge mistake to be so overtly protectionist, given their reliance on exports. They are the most convenient whipping boy, the best target to be made an example by an America finally ready to pay attention to reciprocity in trade.
It’s a less drastic option than going toe to toe with Japan or China, each of which holds over a trillion in USD reserves. BUT it sends a message.
Steven Lang :
October 5th, 2008 at 12:07 pm
When the dust settles, it will all come down to whether we want the jobs in the U.S., or in the hands of companies that often have their strings pulled by foreign governments. Figure it out.
This argument could be brought by any government worldwide. It has been especially the US who has asked and even forced governments worldwide to open their industries, their business to foreign competiton – with the clear goal that american business should take its share. The US has pressed for WTO and for rules against subsidies for industries which are not competitive. And now, suddenly, all this is not true any more? Companies failing due to their mismanagement now shall just get subsidies, because they stand for “american jobs”?
After the decision for this subsidy, the US will have lost any credibility in the world in asking for opening of markets which have been closed up to now to protect local workers.
Something to cheer everybody up-
Figure for every buck the Gov pays out they need 3-5 bucks in taxes!
I love government efficiency.
Sweet dreams,
Bunter
lzaffuto, just because you had to settle for a crap job doesn’t mean everybody else should have to settle for that as well.
quasimondo: lzaffuto, just because you had to settle for a crap job doesn’t mean everybody else should have to settle for that as well.
And what exactly qualifies you to deserve a cushy job over everyone else living in the real world without any job guarantees whatsoever…
Asking, cause you seem to be speaking for yourself as you should.
I lost a nice cushy IT job two years ago with a big aerospace corporation due to layoffs. I went on unemployment. And I found a job that pays half what the previous one did and barely gets the rent and other everyday expenses paid. And never ONCE did I expect or especially ASK for YOUR tax dollars to subsidize my job and save my ass.
The difference is bailing out your job versus bailing out hundreds of thousands of jobs.
If you lose your job, it doesn’t affect me. If you and ten percent of the working population lose your jobs, well, I’ll feel that. Heck, I’d probably be joining you, considering that I live in a part of the world that’s heavily dependent on the automotive industry.
The auto industry counts for ten to fourteen percent net employment, and the domestic marques count for most of that. Visualize what throwing even a quarter of those people out of work would do. Now, visualize all the people (not just parts suppliers, but grocery store clerks, gas station attendants, call-centre employees, paperboys, toenail polishers, etc, etc) who get paid in part from those people’s salaries. Now, imagine the impact on them. And so on. The ripple
That’s a huge pool of consumer spending just gone.
Even bankruptcy would be bad: these are not the airlines; they cannot just continue to operate under Chapter 11 as if things are sort-of normal. You do not want that kind of shock to the economy when it’s already teetering.
Handouts keep the dependent unable to become independent.
This bailout is an act of immorality… the unintended consequence is that it will not help these companies operate more independently. Just the opposite will occur.
Pathetic.
The auto industry counts for ten to fourteen percent net employment
Can someone (anyone) provide a reference for this figure?
What, precisely, does this figure include? Sure it includes UAW employees, but does it include convenience store clerks at locations where gasoline is sold? Does it include the gardener at my local Chevy dealer?
According to the US Bureau of Labor Statistics “The civilian labor force [was] 154.7 million” in September 2008. http://www.bls.gov/news.release/empsit.nr0.htm
10% of this figure is 15.47 million, 14% is 21.66 million. So the high estimate is that 22 million people work in the auto industry?!?
“If you lose your job, it doesn’t affect me.”
-psarhjinian
It sure does. Eventually, when enough of our IT work is shipped overseas, your personal data will reside on servers all over the world. Some of these servers reside in countries that are not as friendly to the US. With nobody around to prosecute the crimes, what is to stop any disgruntled IT employee halfway around the world from stealing your identity?
From an economics standpoint this will never make sense. You don’t overhaul the supply side to change demand as you’ll waste most of your time / money. You change demand (just like how $5 gas prices made fuel efficient cars top sellers) directly in order to change it quickly and cheaply.
The easiest, cheapest and smartest thing we can do is tax gas to make it expensive. Those that use too much pay much more which creates the obvious incentive – buy a vehicle they really only need that gets good mpg. If the Cavalier was the best subcompact during the SUV times it wouldn’t have sold anyway – people want big huge SUVs for image and false sense of security.
Nope we go a bassackards route as a “tax” is always bad (and “democratic”) and we need to spend 10x more to get that same effect (90% wasted on loopholes and executive stupidity – which is why they are in this position in the first place) b/c our country is so scared of “taxes” even when they are the best solution. Look at cigarette sales – substantial drop in sales – it actually reduced the amount of teenage smokers b/c it became prohibitively expensive (the main goal) creating a barrier to entry (cigs or text plans for cell phones) – and the ones who have to smoke pay more and when they need earlier healthcare from health problems they’ve paid into the system.
quasimondo,
Excuse me your majesty, but your sense of entitlement disturbs me, although it isn’t unexpected.
This is exactly what is wrong with this country. When you lose your job, you take what you can get, or you lose everything and you don’t eat. You don’t ask everyone else to subsidize your standard of living as if you deserve it more than they do.
Auto workers turn screws and nuts. That’s what it boils down to. I know because I turn screws on laptop computers for a living now. And I could just as easily turn them on cars, trains, planes, air conditioners, refridgerators, or any widget you can name with appropriate training. You do what you have to do to keep a roof over your head and food on the table. Those autoworkers can, should, and would find jobs elsewhere. Despite what the UAW would have you believe, they aren’t any more entitled to keep that job than you, me, or anyone else in the United States of America. Or were you thinking you lived in the Soviet Union?
Steven Lang,
Only problem is with all that protectionism, I’m not seeing any evidence that Japan and South Korea are any more prosperous than the U.S.
And as for this:
“Sprinkle in the legacy European automakers who are frequently given direct government ownership and support of their companies, universal health care, and a long-term quota system that effectively kept competition out, and what do you have?”
In the case of Europe, you have companies that bascially could not compete in the American mass market (Peugeot, Renault, Fiat, Lancia, Alfa-Romeo, British Leyland, and, increasingly, VW) or companies that retreated to niche markets in order to survive. GM, Ford and Chrysler aren’t being driven out of business by Mercedes, Audi, Porsche and Ferrari. And please note that Daimler basically gave Chrysler away because it didn’t know how to compete against the domestics, let alone Honda and Toyota.
It sure does. Eventually, when enough of our IT work is shipped overseas, your personal data will reside on servers all over the world.
I do actually work in IT myself, so yes, I understand. Your data already exists on servers all over the world. Between datacentre redundancy, distributed systems and the incredible number of places you do leave kibbles of data, there’s no way you can ensure that. It’s a global network, and there’s not much you can do about it.
If you mean “Is Rajinder in Bangalore any more or less likely to rip off data than, say, Joe in Menlo Park?” my answer would be “Are you treating your employees well, and do you have reasonable security on your data?”. In other words, location does not affect security.
The point was, though, that one person losing his or her job is not the same thing as tens of thousands of people doing the same thing at the the same time. That’s why we don’t bail out individual losses, but do shore up industries. You and I are just two guys; GM and it’s suppliers and the people who work in the towns in which GM and it’s suppliers are located, employ a lot more than just us.
lzaffuto,
Pardon me for chuckling at your oversimplification of manufacturing jobs, especially automotive assembly jobs that seem to be so easy that a monkey can assemble a car. I laugh because I hear these comments from people who don’t even know how to replace brake pads on their car that’s just oh so easily put together.
I laugh because the simplicity you describe making a career switch obscures the fact that the years of experience a worker builds up in his current career could potentially mean didly in another. A man who assembles cars is simply not qualified to assemble airplanes without significant resources dedicated to retraining him.
And what exactly qualifies you to deserve a cushy job over everyone else living in the real world without any job guarantees whatsoever…
Asking, cause you seem to be speaking for yourself as you should.
I ‘deserve’ my cushy job because I’ve earned it. It’s as simple as that. If you don’t think you ‘deserve’ the job you have, then perhaps you’re working for the wrong people who obviously don’t value what you bring to their company.
But in case it hasn’t been realized, quality employment is not a luxury, it’s a requirement for the stability of our economy. If I’m not making beyond what’s necessary to survive, that means I’m not buying somebody’s goods, and that means somebody else isn’t being paid, which means he’s not buying somebody else’s goods, and this monster begins to feed upon itself. This is a consumer-based economy. Our role in this globalization game is to buy somebody else’s goods. When we can’t do that, bad things happen.
Don’t hate the player, hate the game.
My problem with Detroit is that they don’t make the kinds of cars that I want to buy and drive. Making them better (i.e. more economical and reliable) isn’t going to change that. Given the choice between a Miata and Solstice, I will take the Miata every time. Ditto for 911 over Corvette or G37 over GTO or G8.
Okay. Get your knives and other instruments of flaming ready — because I’m going to suggest a different future.
First off: the people who write editorials here, and the majority of people who read and comment on them, are intelligent. Thoughtful. Reflective, speculative, cerebral, rational, and just plain smart.
Most people aren’t.
In fact, most people are about 12 years old, intellectually. Yes, they have memories — but actual learning? No. 12. Maybe 13 in some places, 11 in others.
So what? So what is this: the 12 year olds out there (in the bodies of 30, 40, 50 and 60+ year olds) have been buying GM for years and STILL ARE. I mean TODAY. Today. Right NOW in fact, as you read this, someone is buying an Aveo. Not just someone. MANY someones. And it doesn’t stop there.
The point: if people were as sensible as this apocalyptic connect-the-dots posits them to be, then, paradoxically, GM would have been dead *ages* ago and the GM deathwatch would be a retrospective instead of a prediction.
People are not sensible. People are Sarah Palin. They are 12. They are emotional — and remarkably irrational. And because of this, and because all of the recessions and depressions in the world CANNOT change this; in fact, it can really only deepen it and give it new, ridiculously accurate ways to manifest, I’m boldly — but boring-ly, if you live in my head — predicting that all of this overwhelming fear that is saturating the US right now will, sooner than later, need a target; it will need an enemy. That’s old news — we all know this. But since we can’t justify spending $10B a month to blow up non-white people, and we can’t afford the psychosocial consequences of blowing up white people (at any cost), the new enemy will be foreign companies. It won’t matter that, say, the Camry is the 3rd most “american” car. That’s being smart again, and this has nothing to do with smart.
This has to do with primal, base, human nature — which has been around a hell of a lot longer than any of us and will bury our grandchildren without breaking a sweat.
So, yes, people will galvanize and start to hate foreign companies — including and especially foreign car companies. They will — absurdly, wrongly, horribly, stupidly — ‘blame’ foreign companies, or those that buy foreign, as being “part of the problem.” There will be a radical pro-US movement that will be borne out of this financial sewer.
No, the unacceptable irony of this won’t be lost on smart people — like people who post here, or write columns for the New York Times or that kind of thing. But Joe Sixpack who STILL thinks that America is land of the free, and will actually seek to take away YOUR freedoms if you disagree (and will then probably kill you if you try and point out the irony of it, because irony is just fancy talkin for no good anti-american giving comfort to the enemy-speak), will buy ‘domestic.’
The end game here? Domestic automakers — even those who hillariously outsource to Mexico and elsewhere (anyone here drive a Vue?) — will actually be rewarded.
All it will take to make this happen is a spark; someone to be the catalyst that will tell stupid americans how to BE an american in 2008: hate foreign companies.
John McCain is that person, and that’s why he’ll win.
Carry on.
The problem with the Big 2.8 is the pathetic management. For so many reasons that have been discussed at length on this site: brand mismanagement, overpaying for more brands (Volvo, Saab), making poor quality cars (my first new car: 1974 Vega – I swore then I will never buy a GM car again – their fault).
I want to focus on management’s biggest error: acquiescing to the UAW. They did so because in their view in the 60s, 70s & 80s it was better to do so to keep making/selling cars that hold the line on costs. Of course, back then there wasn’t substantial foreign competition.
That problem has now snowballed to bite them in the ass. I recall as a youngster reading about the UAW contract paying a ridiculous amount of money for what is essentially an unskilled worker (Steve Lang), superb benefits and great job security. Worked great for a while. Now, GM can’t make a car for a competitive price because not only do current workers (UAW wages for GM landscapers!!!) cost too much, but there are far too many retirees to support.
I recently bought a Toyota Tundra (made in USA, Steve). I went back on my promise to myself and checked out the Silverado. I think the Tundra is a better vehicle, both by spec and by quality, but that is arguable another time. Chevy wouldn’t come close to the deal I got for the Tundra. What should I have done, Steve? Bought what I consider the lesser vehicle for substantially more money? To pay for UAW landscapers? I don’t think so.
Back to my original thought: it’s management’s fault – they caved to greedy UAW demands. Now both fall victim to the predictions made at the time. Too bad. Many people will be hurt. Your fault, Steve, not mine.
denial:A radical pro- US movement?Sign me up.
Crony capitalism. First, not one dollar for the little three, until their management steps down, with no golden parachutes. Secondly if we are going to protect autos, we need to protect all industry as well – for example, reserve 50% of clothing to be made in US. US massively subsidizes agriculture for no good reason, now autos. Where is the fairness to individuals who work in other industries?
I can understand the need for protection to minimize the trade deficit and defend the dollar- however, transplants which make enough content in the US should count as domestic (which really is only Honda at this point). Give Honda loans too since they have such high US content.
If Chapter 11 is ok for airlines, then it is ok for auto companies. Actually they should be forced to file for Chapter eleven before they get any bailout money (which the guaranteed loans really are).
Actually I have to admit, I like the GMC Sierra better than the Tundra. Toyota needs to drop that turkey.
Guys don`t worry about money, we here ,bunch of good fellas at Denver mint have been working our butts off since 2007 to stamp Amero.By the way, we shipped 800bn of those recently to Bank of China. So you will have money to buy some stuff. some. Don`t worry about bailouts!
People who think J6P is too stupid to notice that the domestic automakers are closing US plants while foreign automakers are opening them are quite mistaken.
I work literally across the street from a Ford truck plant and this kind of behavior from the 2.2 is well known and not popular. Three people have bought Honda Civics in the last year. Another bought a Camry. No one questions their patriotism or judgment, and no one blames foreign automakers for selling them cars.
J6P didn’t make the endless string of moronic decisions that have wrecked GM, Ford, and Chrysler.
Those companies were, however, run by really really smart people who believed their J6P customers were stupid enough to buy their junk forever no matter what.
Turns out J6P was smarter than that. Maybe Rick Wagoner can write a NYT editorial explaining how wrong he was.
denial: All it will take to make this happen is a spark; someone to be the catalyst that will tell stupid americans how to BE an american in 2008: hate foreign companies.
John McCain is that person, and that’s why he’ll win.
I guess you weren’t paying attention during the primaries. It was Senator Obama who was running around Ohio bashing NAFTA and free trade to win votes. And it was Senator Obama who from day one enthusiastically endorsed the bailout of the domestics to win votes in Michigan.
That certainly sounds like a wonderful combination – bashing foreign companies (i.e, free trade) and handing out taxpayer money to failing companies to win votes.
As for GM buyers being “stupid” – it’s best not to disparage people you apparently haven’t met. For many people, GM vehicles still work. GM DOES make some reliable vehicles. GM vehicles really have improved. Unfortunately, the improvements are not spread evenly across the range. The new vehicles, while a big improvement over what went before, aren’t spectacular enough to overcome GM’s reputation or distract the customer from competitive models. Even worse, the images of its brands are muddled. Meanwhile, management can’t accept that GM will never reclaim 30 percent of the market, let alone 50 percent.
But someone isn’t necessarily “stupid” for liking a Malibu, Corvette, Silverado, Tahoe/Suburban, Lambda-platform vehicle, CTS or even the Buick Lucerne enough to buy one. It’s just that those vehicles aren’t nearly enough to support GM, especially in a market that is rapidly heading south.
Question:
If our native auto industry consisted of player like Honda, Toyota, Nissan, Hyundai, BMW, etc, would we be importing the equivalent of USA built Ford or GM models today?
The next question is what domestically produced GM or Ford mainstream vehicle(s) do you think folks in Japan or Korea desire?
Notice that even GM and Ford understand that the trash they dump into the USA market would never sell outside of this country. That is why they make other BETTER cars in and for the other markets.
Look at an American Lucrene and than have a good look at those Chinese Buicks, now tell me which car would you rather have? I have to agree with the other here and say I will not buy a crappy car just to support the UAW lifestyle.
Go ahead and contiune to “earn” you way out of your jobs!
Oh, I too am one of those IT workers who are earning less than I was a few years ago. For the sake of arguement I have a college degree, serveral business certs, and I am also quite skilled with my hands (I know my way around workshop) and in very good physical shape. Trust me I can be trained to do the job of a UAW assembly worker far quicker than a UAW worker could be trained to do my job.
Granted working the line in an assembly plant may be difficult and stressful and does require skill, it is still a job someone can be trained to do in a matter of weeks at most, NOT the years of formal education and advanced technical training required to do my job.
Considering that the UAW workers in the USA are actually doing the same job as those guys south of the border in Mexico why do they believe that hey should be paid more than the Mexcian auto workers WORKING for the same company?
denial: I want you to be wrong so badly, but…
There is considerable irony here. As Rep. Sander Levin (D-MI) puts it, “it’s been a struggle here in Washington to secure acknowledgment that a domestic-based auto industry is vital for America.”
Too bad no one felt this way about the IT industry in this country.
Detroit has been lobbying since the 1970s to prevent the government from mandating higher fuel economy and now it wants the government to pay for it to improve fuel economy because it can’t sell its crappy inefficient vehicles.
In the financial @#$%storm we are about to enter, the strong businesses (those with cash and desirable products) will weather the storm and increase market share, while the weak will be destroyed.
The government should use the money it is about to burn by loaning it to the big three to instead provide health benefits to former non management auto industry employees.
Wow. Now I won’t even feel a tinge of guilt when I cross-shop a foreign make relative to an American one the next time I buy a ride. I already pay GM for nothing, so why do I need to keep paying them for a car on top of that? Ha.
The complainers who think Japan and Europe have it figured out socially and that is the reason for their automoitve success are somewhat misinformed. One poster said that Japan had “free” health-care and a fat social pension system, which solved some big cost headaches for their car companies, quite unfairly vis-a-vis the D2.8.
But that isn’t accurate really. Looking at Japan’s balance sheet as a country, the only thing that keeps them afloat is that they are net exporters. The public debt in Japan is almost two times the GDP! That health-care isn’t quite so free, I guess. Their postal office-pension scheme for retirement has basically financed lots of Japanese bonds to do things like build bridges to nowhere (literally, you gotta see some of the highways there…eight lanes to a village of 10,000 people), finance endless cronyism in essentially a one-party parliamentary mess (kinda like Mexico), and maintain a level of bureaucracy that is the envy of France. For all their “savings” in their national-retirement scheme, the Japanese people have probably gottent the worst return on capital out of any industrialized country (barring the United States Social Security scheme of course, there’s probably some bomb craters in Grenada that we are still paying interest on).
Its obvious from the transplants that you can build world-class cars profitably with American workers in America proper. If we want to see an American car company doing that (instead of foreigners) we need to make it easier for companies to get in the car business from a regulatory and legal liability standpoint. It takes hundreds of prototypes and millions of man-hours to get a car legal in the United States. That regulatory regime dooms startups from, well, starting up. If Google or Intel or Microsoft needed a couple billion dollars just for compliance with The Man for their products, they never would’ve happened, we’d all be running government-subsidized IBM junk while secretly pining for a sexy, sleek Fujitsu from the damn Japanese.
The bureaucrats and lawyers (not to mention their super-hybrid overlords…politicians) pine over the decline of the American car business, and don’t realize the best fix in the long-term (if “long term” means five years or more) is for them (bureaucrats, lawyers, politicians) to get the hell out of the situation…which for them is no solution at all. So, we are doomed as Americans to driving Hondas while subsidizing Chevies (thus ensuring Chevy’s continued ineptitude). Sweet.
Wether its job loss due to the economy or job loss due to fully automated assembly lines, the autoworker is a dying profession.
Learn how to do something else.
All it will take to make this happen is a spark; someone to be the catalyst that will tell stupid americans how to BE an american in 2008: hate foreign companies.
John McCain is that person, and that’s why he’ll win.
Carry on.
Methinks the financial events of this week has put the fly in that ointment – especially one month before the general election. The catalyst has shifted from “hate foreign companies” to “hate Wall Street and the U.S. Banking System”, as well as “hate the politicians who voted yes on the $700 Billion Bailout package”.
History has shown that the political party who resides in the Oval Office during bad economic times has paid dearly at the polls. It happened to the Carter Administration, to the first Bush administration and is on track to occur again to the current Bush Administration…
Japan is no longer a net exporter, I think they were neutral this month. The problem with moving up the food chain, there are natural limits to how far you can move before other lower cost countries take over.
I agree with the IT person, if you protect one industry, you need to protect all. It is not fair that those who are connected get corporate socialism, while the rest of us fight out a Darwinian existence.
A partial trade restriction could be negotiated to protect US interests, like the voluntary trade restraints which had been negotiated with Japan many years ago. This still allows a good portion of free trade, but maintains a domestic industry.
Total auto employment is a far smaller part of the economy than it was in 1960. When GM goes out of business, much of the impact is already gone – so many have already lost their jobs. And entire new industries have been created.
The loss of an IT job is just as important as the loss of an autoworkers job. Both are important, we need to find ways to keep more jobs here.
I think in view of what’s happening in the good ol’ USA lately the idea of free markets as trumpeted in America is laughable, not in America itself as this would require a certain amount of introspection which is not something Americans do well, but in the rest of the world.
The free-market is a good rhetorical device as long as it blinds the masses and is advantageous to the upper social echelons of the country. In reality free market is nothing but a ploy from the well-heeled to increase their wealth and keep the masses busy trying to make a living so they don’t have time and strength to think what deal they are getting and vote accordingly. The money people think nothing of going to “Communist” China to exploit the semi-slaved labor there to produce their company trinkets on the cheap, all the while railing against socialism and branding everybody who points this out a closet communist who should be locked up in Guantanamo or shot.
That’s one little irony. The second irony already mentioned is that all these companies are for free markets even while they are asking for government bailout. Perhaps a bit of cognitive dissonance there one might think. Hardly, these companies might say, ‘we just wan’m fureiners trade fair and square. If they did we wouldn’t be in trouble’. Yet when independent trade bodies rule that foreigners are actually trading fair in a specific instance and in fact rule so repeatedly often the American government still imposes tariffs. If you don’t believe me ask Canadians.
Look at an American Lucrene and than have a good look at those Chinese Buicks, now tell me which car would you rather have?
Can someone (anyone) confirm this? Is a Chinese-made Buick a better all around car than an American Lucrene? Is GM priming the pump to import Buicks from China? With China, of course, being the current low cost producer (until the Vietnamese get their act together in 5 to 10 years.)
luscious :
October 5th, 2008 at 10:41 am
If you REALLY want to be little patriots, do your civic duty and buy a Honda Civic.
I recently ordered a Civic Coupe! It should arrive sometime this month. Came down to that I don’t want another UAW built vehicle for the party they tend to support. And I am a Jeep guy too.
ra_pro: I think you made some really good points.
I think another thing to notice is that the guys/gals at the top are making HUGE (GIGANITC) money compared to the average workers near the bottom.
So how do you control greed without a Robin Hood tax scheme?
While those of us working folks are getting by okay, earnings have risen at the top by leaps and bounds and earnings at the average Joe level are stagnating.
I’ve never gotten much of a raise b/c the places I have worked have always told us “we just can’t afford to pay you anymore” despite me getting very good evals. My increased wages have come only from changing employers. My friends report the same. Meanwhile the guys at the top do well…
One small business proprietor I used work for during college was entertaining. She used to complain that she couldn’t afford to pay us more than the penitence she did yet she vacationed in foreign lands, bought new Mercs/BMWs/Caddies annually and had a full range of toys in her garage. The answer was simple – she was greedy.
None of us stayed there for too long. She didn’t care if she had a high turnover.
What is next in America? A society like the one that I saw in Venezuela – really rich and really poor and not much in between?
Is this how a third political party arrives on the scene? I can’t imagine the Libertarians doing much taxation of the rich…