Over the last year, as this unparalleled automotive sales depression has picked up steam, I have observed unprecedented vitriol directed at both Chrysler and General Motors. Here on TTAC; on Autoblog, Jalopnik, CarDomain, et al.; and in the mainstream press, the companies receiving federal aid have been criticized. I just couldn’t understand it. It’s as if the only vehicles these companies ever built were the Jeep Compass and Pontiac Aztek. Critics seem to have completely forgotten all the great cars both companies are building right now and have built over the years. At the same time, they’ve overlooked Chrysler and GM’s importance to their employees, suppliers and countless communities from coast-to-coast. “Stakeholders” who have a direct impact on as many as one-in-ten domestic jobs.
Then came the contentious debate about bailing out Chrysler and General Motors which culminated in President Obama’s address on March 30. Obama gave Chrysler thirty days fix its balance sheet and close its alliance with Fiat—or face liquidation. GM was given an additional thirty days to restructure itself or face bankruptcy. While Chrysler came within days of escaping bankruptcy, a few of its dissident bondholders balked and Chrysler was thrown into a Chapter 11 filing that many pundits felt it would it would ultimately result in liquidation. While many observers rooted for it to failure, Chrysler has emerged from bankruptcy with unprecedented speed. Congratulations.
Back in early November, in what seems like a lifetime ago, the talk in the automotive world was of a possible “merger” between GM and Chrysler. I thought that this was a bad idea and would quickly lead to the dismantling of the Auburn Hills automaker and the loss of at least 30,000 US jobs. I came out and said that there was a far better partner for Chrysler who needed small car technology that they couldn’t afford to develop on their own. That partner was Fiat, which had the obvious and complementary need to sell vehicles in the United States in its quest to become a truly global automaker.
On January 20, Chrysler announced it was in serious partnership talks with Fiat to merge their operations; a move that would help both cope with and survive in the deepening worldwide automotive sales depression. This sales implosion was not only was impacting weak regional automakers but successful global ones like BMW, Honda, and even Toyota. All were seeing sales volumes declining by 40% or more as the virus was spreading around the globe.
Then, as now, I believed that an alliance with Fiat was Chrysler’s best and probably last hope for survival and was pleased to see yesterday’s deal between Chrysler and Fiat concluded. I truly believe that it will have a positive impact on both companies and will give us, as car enthusiasts, additional choices. After all, what can possibly be bad about Alfa Romeos returning to our shores?
Meanwhile, it should be said that other nations have taken extraordinary steps to protect their home-based industries. Why shouldn’t we do the same, especially since we have provided completely open access to our market allowing them to build their export industries? For example, I have absolutely nothing against Hyundai and Kia. But what’s fair about the fact that South Korean manufacturers can sell more than 600,000 vehicles a year here in the United States, yet our manufacturers sell fewer than 10,000 units annually south of the 38th parallel?
Last year, when driving to cover the Los Angeles Auto Show, I was forced to take a detour off the freeway. I stopped at a Starbucks in the Asian enclave of Alhambra off I-10 to get my e-mail. As I pulled into the parking lot, I noticed something strange: there wasn’t a single American brand car in the lot. While there were a few BMWs and Mercedes, every single car in the lot was of Asian origin. I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans? It’s because our market is so open that we can. In retrospect, maybe this explains why the American public—and our politicians—gives our own companies such a cold shoulder.
I hope the restructuring of General Motors is ultimately successful. The fact that some are calling for a boycott of “Government Motors” strikes me as absurd. Collectively, we as Americans will soon own 60 percent of New GM. Why would we not buy vehicles from a company we own?
[Read more of Rich Truesdell’s work at automotivetraveler.com]
“Why would we not buy vehicles from a company we own?”
Because our vehicles suck, and because we are free to do whatever we like with our own money. Or at least we used to be.
People are up in arms because these bailouts go contrary to everything which makes America America: Democracy, competition, self-reliance, creative destruction, etc. It is an alarming step in the wrong direction, by a popular new leader who makes up the rules as he goes.
Why is this so hard to understand?
compare:
“we are free to do whatever we like with our own money. Or at least we used to be”
contrast:
“makes America America: self-reliance”
Hope you have a thick hide there Rich – you are about to get hammered unmercifully.
Because the bailouts should have been tied to mandatory Ch 11 from the very beginning. Because the “new GM” and Fiat/Chrysler will not save American jobs as more and more vehicles will be built in China, Korea, Brazil, etc. Because…
But what’s fair about the fact that South Korean manufacturers can sell more than 600,000 vehicles a year here in the United States, yet our manufacturers sell less than 10,000 units annually south of the 38th parallel?
What’s fair about the fact that lots of Asians come to study at our universities, pay full tuition, and then go home, yet we don’t send our best and brightest to go study at South Korean universities? What’s fair about the fact that American software companies can sell millions of copies of operating systems and Starcraft in South Korea, but South Korean software companies don’t have near so much success with their Korean MMOs and online golf simulators in the US?
That’s a defense?
Listen, I didn’t ask nor do I want to be part owner of GM and Chrysler. Fair? If my brother works at a Hyundai plant here in the U.S. is he going to bailed out? Fair?
This is not about the producers of things in an economy…its about the consumers. American consumers have the right to do whatever they want. Bailouts circumvent consumer preference at the expense of everyone except those luck few “chosen” ones (UAW). It’s called freedom.
Good to see you here, Rich.
That Starbucks was in California, right? I’m not sure that buying Asian cars is an Asian-American thing so much as it’s a California thing. You might encounter a similar mix in any California parking lot.
Seriously, the Compass and the Aztek are the only negative examples of GM and Chrysler production? I propose the following ideas:
1. They were out of the top ten in product quality, except for Buick for at least 10 years. In my mind as a GM owner, their quality was bad for a lot longer than that.
2. Specifically bad moves that include:
-the Chevy Vega (two words – “oil burner”),
-the early version of the Nova,
-the endless recalls for major stuff from GM, Chrysler (and Ford)
-horrible gas mileage stats, even today, on most of their models
-the 1996 remake by GM of the stellar 3800 v-6 that actually made the powerplant much worse,
-transmission nightmares at Chrysler that nearly doomed the starship Minivan
-Lumina and Astro minivans that were butt-ugly, bad on gas, and had horrible build quality,
-as well as the Compass and the Aztek that you mentioned.
If the author thinks these are unfair stabs at history that have been corrected, talk to my friend with the Jeep unlimited that has had two transmissions, major suspension replacement, safety equipment needing replacement, all on a 2008 model.
3. All this from the same companies that didn’t have a hybrid or electric when gas prices spiked, or outright killed one (EV-1).
Nobody has changed position (less one Rick Wagoner, and one Bob Nardelli), so why should we expect there to be any change in the product from either company going forward?
I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans?
According to this, about 1/3rd of the town population is of Chinese origin: http://cityofalhambra.org/about/demographics.html
While I wasn’t there, I am pretty confident that there wasn’t a single Chinese car in the parking lot.
If anything, that should be pretty telling that Detroit could drive a Chinese population to buy cars from Japanese companies, given the nastiness of Japan’s history in dealing with the Chinese. Unlike their counterparts in China itself, the Chinese-American population is not nearly so fond of Buicks.
(I know that Asians may appear to be a monolithic block, but you can rest assured that they are not. Not even close.)
Well thats certainly a breath of fresh air. The domestics have suffered a massive beating.Deservedly so,to some degree.
With the economy showing some signs of recovery,the governments of Canada and the U.S.had a choice. Prop up GM and Chrysler or deal with the ramifcations. The democratly elected governments made the choice. In the next election the voters can support or not support that decision.
The management at GM and Chrysler,and to some extent, the debt riddled Ford, need to take advantage of this breathing room. I can’t see the governments to continue writing checks,with no end in sight.
As a GM retiree, I only can hope that Mr Henderson has the jam to make this work. Cause Fritz you ain’t gonna get another chance.
to Ken G;
You obviously do not keep up with Global knowledge of the auto business. When you state that “if my brother worked for Hyundai, would they get a buyout?” (I know that Hyundai is not Japanese)
What do you think the Japanese government has been doing for years. They artificially set the Yen so that there products have a huge advantage in the market. Further, they tax our products so high that we cannot sell them there in a fair market. Finally, all the profits go back to Japan. Wouldn’t this be government intervention???
Read and learn before posting.
They still make optimists? Thought the last of those ran for the hills when the Dow went under 7000. I’m not going to agree with you, but I won’t get any of my pessimism on you either. Except this: I’m really tired of the “direct impact on as many as one-in-10 domestic jobs” type arguments. Seriously? Except in Michigan, the automotive industry is not that big of a player in our economy. Find independent sources for that kind of argument that aren’t funded by auto-industry special-interest lobbying groups. I’d love to read those studies, if any exist.
I really like that Mr. Farago is comfortable posting editorials contrary to the standard TTAC positions.
Often, I disagree with the TTAC editorials.
However, I see much to disagree with in Mr. Truesdell’s piece of today.
Re paragraph one:
– Product from the past shouldn’t be part of the decision making process.
– Even in the event of a conventional bankruptcy of both GM and Chrysler, not all of the jobs would be lost. Many workers would find work at Ford and other auto makers that would enjoy increased sales as a result of the bankruptcies. The people, suppliers and other stakeholders would get burned, but it’d not be as bad as predicted.
Re paragraph six:
– Just’ cause other nations are wildly protectionist, doesn’t mean that America should go off the deep end and impose heavier penalties on imports. A lack of protectionism is partially responsible for the envied America life style. Many nations protect their industries, but it’s to the detriment of their people in the form of higher prices. Question; How many Americans would want to trade their life styles for that of the average South Korean? If protectionism was the route to prosperity, then China’s 1.3 billion people would be all living the good life.
– Yep, I’m sure that part of the reason for low American auto sales in South Korea is due to tariffs, but I’d bet that even if Korea dropped all tariffs on US manufactured cars sales would still be very, very low. Can’t see hordes of South Koreans lining up to purchase duty free Dodge Calibers.
Overall, I gotta agree with Hugh Hewitt’s shouting that he’s not going to buy cars from GM or Chrysler as long as they’re owned and operated by the US Government. The US Government being so deeply involved in the auto industry is so wrong at so many levels. It’s a legitimate point to not want to reward the US Government by buying cars from a government run company. It’s fair reasoning to want to support the non-subsidized auto manufacturers. Perhaps people shouldn’t encourage the US Government to get involved in more businesses.
I agree with all the posts so far. I cant understand Rich’s line of thinking. I didnt want to “invest” in chrysler or gm. And im sure most everyone else didnt want to either. Not to mention the courts turned the bankruptcy laws upside down to GIVE the UAW majority ownership of Chrysler rather than allowing the bondholders to get in line first. Sad
Rich,
Your greatest mistake is “assuming” YOU know what’s “best” for other people’s money.
You do not. Trust me- that is one GIANT leap of faith.
Keep your hands out of my pocket, ok? Likewise, keep your hands out of my grandmother’s pocket….
It’s called THEFT! Don’t tell me this is a “loan”, ok? Stop with the lies and deceit already.
I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders.
I donno, because white people are tired of the years of excuses and the marginalizing of decades-long mistakes that led to bankruptcy?
Aztek and Compass alone: seriously? Let’s forget the years of neglect or recognition of mistakes to the K-car, Chrysler transaxles, GM box sedans from the 1980s, Diesel and aluminum block V8s from Cadillac, Piston Slapping GM trucks, Corvettes with roofs that fly off, and sub par interiors in 99% of Detroit’s offerings.
Maybe its because I am an Asian that drives American, but I feel this editorial has a serious problem in its lack of context as to why these automakers failed.
GM and Chrysler (and Ford, but they’re not getting our money yet) have been losing American buisiness because they built garbage for the better part of 3 decades. Meanwhile, those Korean manufacturers have done nothing but improve their products with every new model. Americans have the freedom to buy what they want, and most have very little tolerance for an inferior product. It’s one thing to go to WalMart and buy a $5 t-shirt that you know is going to be worn out by the end of summer, but to spend 25 or 30 thousand bucks for a midsize sedan with less than average reliability and absolutely poor build quality is inexcusable. Sure, American cars have gotten better lately, and in some cases have closed the gap between them and their foreign rivals, but it’s going to take a long time for them to win back the confidence they lost in the last 30 years. GM (and Ford, and Chrysler) more or less had a captive audience for years. Even with the popularity of the VW Beetle, the Big 3 still held a huge majority of car sales in America, and through poor quality and their cocky attidudes of “we can build anything and they’ll buy it because, hey! It’s American!” absolutely ruined it for them. I am all for supporting them if their products are good and suit my needs (currently I have a Chevy), but they can kiss my ass if they think I’m going to buy a vehicle just to support them. I’m American, and want to support this country’s economy, but it makes more sense to buy what’s best, not what’s most American.
What’s fair about using my tax dollars to prop up union-trashed private companies that have produced decades of product with spotty quality and service?
What’s fair about subverting the market’s voice by keeping factories and dealerships open as a perpetual jobs program?
What’s fair about demanding production of ‘greener’ vehicles that demonstrably do not sell and the market does not want?
What’s fair about government intervening in the affairs of a private company and firing its CEO (even if it was well-deserved)?
Although I have a neutral opinion of the auto bailout. I know GM and Chrysler have not been profitable for years but on the other hand we are saving jobs and an American industry.
The money being spent by the government is small change compared to the Trillion dollars it has spent in Iraq and the 700 Billion TARP bailout to purchase bad assets in financial institutions.
Rich, I for one am glad that you spoke your mind. It’s been something that I have been thinking for quite a while. Except, my writing skills leave a lot to be desired.
I continue to be surprised about the harshness of what is said in this forum on a regular basis. “Let them fail, etc.”. These are real people and they have an impact on everyone of us, whether it be the stock trader on Wall St. or the local store owner in Lordstown, OH.
In the end, no one may like it but government at the city, state, and federal level subsidize business at many levels. Farmers, professional sports team, and yes defense contractors are all subsidized at some level and have been for years.
GM and Chysler are an easy target for everyone to complain about. Personally, I am tired of paying farmers to not grow corn.
Richard Truesdell: Critics seem to have completely forgotten all the great cars both companies are building right now and have built over the years.
Chrysler isn’t building a single vehicle right now that could be characterized as “great.” At the most, it builds a few that are good – 300C, Charger and Challenger.
The “great” GM vehicles in production are the Corvette, Silverado, G8 and Tahoe/Suburban. Not enough to keep it in business.
And while I like GM and Chrysler vehicles from the 1950s and 1960s as much as anyone else, they have no bearing on what I might buy TODAY.
Yes Jimmy, I do have a thick hide.
On the issue of South Korean, our products are in essence excluded because there’s no reciprocity in the openness of each market. There’s is essentially closed to our products, ours is open to theirs. It’s that simple and this issue has been a major contributing factor, possibly as much as the issues of the UAW wages and legacy costs, to the decline of the US auto industry. For that I blame, and have blamed, our legislators in Washington who allowed it to happen in the first place and continue to this very day.
Current third party measurements show that many American cars are competitive with their European and Asian counterparts and in some instances are class leaders. The sad fact of the matter is that in the aftermath of the first OPEC Oil Embargo, US companies responded poorly and slowly to the changing dynamics in the marketplace. In 1976 the first generation Honda Accord was the perfect car for the time and Honda drove itself right through that marketing opportunity and has not looked back.
Many people don’t realize that one third of US new car buyers have never set foot in a domestic brand showroom; that a generation of car buyers is now lost to GM, Ford, and Chrysler. No matter how good a car the new Malibu is compared to an Accord, Camry, or even an Altima, it’s not on the short list of 33% of potential buyers. That’s a gap that’s hard to overcome. (I think that David is better qualified than I to speak on this issue.)
(Don, reports like J D Power — not that I agree with them — don’t seem to back up your assertion that our cars, as a whole, suck as you say. Rather that today, all cars, no matter where they are produced, have fewer problems and last longer than their counterparts from just 10 years ago.)
I’ve owned foreign brand cars and domestic brand cars so I have no ax to grind. But I do believe, as judged by the ill-informed comments I’ve read here on TTAC and other blogs, that I find it hard to believe that they are Americans saying them. I find them to be…short-sighted.
We are free to buy whatever cars we want, that is what makes our country great. But I also feel that the playing field is unfairly tilted against our own manufacturers. I just don’t see the same level of scrutiny directed towards lets say Toyota, on their product missteps. A good example are the rust issues that plague Tacoma pickups. If that rust problem was found in a Dodge Dakota, it would be front page news.
Then there’s the issue of productivity; love their vehicles or hate them, Chrysler tied Toyota in the 2008 Harbour report. Now shed of debt, and with a more competitive UAW contract now in place, Chrysler will be in a position to put more content back into their vehicles. I truly believe the era of Fisher-Price shiny, hard plastic interiors are a thing of the past at Chrysler. What evidence? Look at the interior of the new Ram. It’s not only class competitive, in many ways it leads the category in many respects.
Let the flames begin. Debate on this topic is generally, a good thing.
Wait a minute..The President didn’t fire Rick W.
It was a stipulation attached to the loan.The bank dosn’t force me to have fire insurance,they just won’t grant me a morgage,unless I do.
I agree it’s nice to see well written pieces on subjects that I don’t agree with, because it is educational to read what other people think.
It can lead to one changing one’s mind, if one has an open mind which is not set in concrete (sorry for the mixed metaphors).
Or it can lead to one saying to oneself, well here is why I disagree, which may make a person believe even more what they thought they believed in the first place.
Carm, as for “letting them fail” – the reason so many of us understand this concept is because this was the construct on which our entire American civilization was literally built.
Take risks, and if you fail, you pay the consequences. Take risks, and if you succeed, you reap the benefits.
Not take risks and you’ll be bailed out by friends in high places with money they’ve stolen via taxation (that is a morale risk), then when things go well keep the profits and never pay the debts back.
By the way, Rich? South Korea and the US have recently signed an automotive free trade pact. It was something like 6-8 months ago.
Or hadn’t you heard?
I’m not being rude – just factual.
Like American cars in Japan, American vehicles may not be well suited to South Korea. But American car companies will get to see.
Of course, what American cars will they try to sell there? “American” cars built in South Korea, Canada, or Mexico?
I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans?
We tried to. Who here remembers the 70s? 80s? 90s? Lots and lots of people bought Vegas and lots more bought Pintos because they were american. Lots of people bought Chevettes. Lots of people bought Omnis and Horizons and Escorts and Citations and Phoenixs and Omegas and Monzas and Skyhawks and Cavaliers and Neons. But for our troubles we had engine failures, transmission failures, cheap trim, electrical issues, horrible resale and one relatively minor $200 repair after another.
I still recall walking through a Toyota lot in the late 70s with a friend who was a body and paint guy. We started paying attention to the paint finishes on those cars. Every single inexpensive Corolla had a paint job and body assembly that would put most Chryslers, Buicks and Mercurys that cost twice as much to shame. Even the cheap ones were built with care.
Believe it or not, I am still sympathetic to the US companies. I want to like their products. But look at those that are 10 years old. Other than Panthers, Old Cherokees and pickups, what can you buy that will take care of you without costing you a fortune in repairs?
I didn’t ask nor do I want to be part owner of GM and Chrysler.
Government often does things counter to someone’s wishes. It’s called democracy. Might wish to get used to it.
Rich- you don’t seem able able to grasp that the domestics are not considered by a 1/3 of all car buyers becuase these buyers have been burned by them at some point in time.
Would you and buy a whirlpool dishwasher (even if it was American) if your last one was a piece of garbage? A lot of Americans have been burned by owning a crappy GM or Chysler vehicle in the past. There are too many other good choices in the market place that don’t have the negative stigma.
How many positive ownership experiences do you think people driving GM and Chrysler cars had in the 70’s and 80’s?
Carm, as for “letting them fail” – the reason so many of us understand this concept is because this was the construct on which our entire American civilization was literally built.
Take risks, and if you fail, you pay the consequences. Take risks, and if you succeed, you reap the benefits.
menno: I understand your point of view. However, the same approach should have been taken with all of the banks and AIG. My point is not to single out GM and Chrysler when there are a slew of companies in the same situation lately. AIG and Fannie/Freddy to name a few. The cow has left the barn and now we want to close the door? Sorry to late.
Finally, what I still cannot understand, is that if a bank is to big to fail, than isn’t it too big period? We broke up ma Bell, but yet these banks still exist?
To JPCavanagh: A Ford Ranger!
That said, every other single “domestic” vehicle I have owned in the last 35 years was an unmitigated piece of crap. Fool me once, shame on you. Fool me twice, shame on….you. Fool me nearly a dozen times, and I give up on ya. Sorry. No amount of heart tugging will carry the day further.
Even in the US justice system, you only receive a limited number of passes. At some point, prior performance really IS an indicator of future performance. Neither Chrysler nor GM have anything presently or in the pipeline that interest me. Both are bankrupt in more ways than one. Americans are not buying 17 million new vehicles on E-Z-Credit anymore, nor will they be anytime soon. Economic repressions always separate the chaff out from the wheat. Time to move on.
The US government should have let the market and existing legal precedent work this one out.
Rich: Nice tilting at the proverbial windmill of the mindset here at TTAC. And kudos to what was said above about Mr Farago allowing an editorial here that pretty much goes against most of what you read on the front page here and amongst the more vocal commentariat.
Union-trashed private company? That’s a nice one-dimensional view of a process that had plenty of active input from a lot of conservative white collar types ranging from the guys designing pieces of crap to the executives making decades of crappy decisions.
“what can possibly be bad about Alfa Romeos returning to our shores?”
Ok, what’s wrong is that I’m directly paying for it…even if I buy one or not.
Your arguments are all short term in nature and long term detrimental to what the bailouts supposedly intended – that is, save jobs, industry, etc…
When you remove the (or soften) the impact and likelihood of failure, you remove all incentive to actually fix the underlying problem.
Isnt a healthy domestic automotive industry worth ALOT more then a NO domestic automotive industry?
Our 60% investment in GM is in preferred stock correct? Whats the value of each share when we bought it? I assume really low, less then $2? When GM comes out of this healthy and shows that its strong and that stock rises its not going to take much at all to get a huge return on investment. Are all you going to bitch and moan and turn down the money?
My job relies heavily on the auto industry. I am a graphic artist at a shop that prints direct mail for the dealerships. Probably a job that no one really thinks about, but its here. As well as about 30 others job with in the company. If GM and Chrysler went under this company would not have survived. I can believe that 1:10 jobs is tied to the auto industry.
You gotta spend money to make money. Doing nothing and watching a huge part of America fall apart would have been much worse.
Rich, There is a reason why American cars don’t sell in certain markets: the ones that make better cars.
Toyota tried to be very helpful in selling rebadged Chevys in Japan in the eighties – epic fail!! The Japanese took one good look at the Cavaliers, and said yechh.
How well do American cars sell in Europe? No barriers there.
The problem with the “let them fail” peoples point of view is that those who made the mistakes aren’t the ones who pay the price.
Those who are/were at the root of the problem are mostly insulated from the consequences of these companies failures and in turn it’s the innocent ones left to pay the price.
You remember that saying “you don’t throw the baby out with the bathwater” same logic applies here.
I’m directly paying for it
Your taxes were raised by $71? When did that happen?
I didn’t ask nor do I want to be part owner of GM and Chrysler.
Me neither! I am a stockholder, and I have never chosen to hold any automaker. But now I am forced to do so against my wish.
long126mike responded:
Government often does things counter to someone’s wishes. It’s called democracy. Might wish to get used to it.
It was not democracy. Although a case could be made that we indirectly voted on it already in the last Presidential and Congressional elections, I don’t recall anybody outside of Congress being asked to vote on this.
By that standard, THIS is not democracy.
And no, I don’t “wish to get used to it.” I think I’m in good company, too. You see, our Founding Fathers couldn’t bear with “getting used to it (the “it” of their era, that is),” and that’s how America came to be.
Innovation and new ways of thinking often come out of dissatisfaction.
Rich Truesdell:
Not until last November did you discover that Californians were not buying American badged cars?
You could see the same thing almost anywhere outside of Detroit and certain retirement enclaves, long before 11/08. Some people need to get out more.
BTW, it is not the opinions and stories told on TTAC that drove Chrysler and GM to the ground, it was not purported trade policies with Asian rim countries, labor costs or the purchase of SAAB.
It was the quality of their products.
@menno:
as for “letting them fail” – the reason so many of us understand this concept is because this was the construct on which our entire American civilization was literally built.
Really? Where in our founding documents (Declaration of Independence, Constitution, etc.) is anything remotely similar to that kind of economic Darwinism set forth as a foundational construct of our nation?
Remember the Pilgrims? They took a big risk and most of them died for it. All of them would have if not for the generosity of the local Indians. You see, Menno, mutual assistance is unequivocally one of the founding principles of this country. In the words of Thomas Jefferson: “…we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.” I’m sure TJ wasn’t thinking about GM and Chrysler, but I’m also quite sure he wouldn’t agree with your merciless attitude.
It was not democracy. Although a case could be made that we indirectly voted on it already in the last Presidential and Congressional elections, I don’t recall anybody outside of Congress being asked to vote on this.
We are a republic which uses representative democracy. This is not a direct democracy. Our representatives do not need to consult you and every citizen for every decision they make after being elected to office.
If you want a direct democracy, you will need to start by shredding the US Constitution.
And no, I don’t “wish to get used to it.”
Fine. Tough swallowing your own words, isn’t it?
Paul Niedermeyer: How well do American cars sell in Europe? No barriers there.
GM and Ford already have subsidiaries in Europe that design and produce vehicles there for that market. Why should they compete with themselves?
And why waste time and money exporting an F-150 to Europe when it is completely unsuited to local driving conditions? Who wants to park a full-size pickup in London, or pay to fill it up at over $7 a gallon?
Rastus : I wasnt asking for sympathy at all so retract your claws there killer. All i was trying to do is make some people realize how many jobs, jobs they might not have thought about, actually do depends on the auto industry.
We print a pretty significant number of pieces each month. If our company went under our paper supplier would absolutely take a hit. As would the trucking company we use. Maybe they would have to lay-off a few employees. Our company sends so much mail to the local post office to be processed that with out us they would likely have to lay off a few people as well.
Im not asking for sympathy, just trying to get some people to open there minds to how deep the roots actually go.
Nice article, Rich. I agree with most of what you’ve said, especially in your followup :)
Totally off subject here . . . . quoting Paul Niedermeyer . . . “Toyota tried to be very helpful in selling rebadged Chevys in Japan in the eighties – epic fail!! ” reminds of last August in New Zealand seeing a familiar automotive face, a Cavalier, except, it was wearing Toyota badges!!! Talk about cognitive dissonance!
Dear ron h,
I’m perfectly aware and keep up with the global market in automotive manufacturing. You, my friend, obviously do not “keep up” with economics.
You should “read and learn” some 101 before posting. Mercantilism died 300 years ago as a economic theory.
Government intervention happens all of the time on both sides. GM and Chrysler need look no farther than their mirror (and CAFE standards and UAW) for their issues.
BTW: How exactly do the Japanese keep the Yen “artificially” low? And define “artificial” and “low”.
gslippy: What’s fair about government intervening in the affairs of a private company and firing its CEO (even if it was well-deserved)?
They weren’t forced. They didn’t have to take government money, they chose to, and that was a stipulation of the agreement. GM chose this path rather than just go bankrupt.
Mercantilism died 300 years ago as a economic theory.
Except for the nagging fact that the Japanese development model (you know, the one used by basically every successful developing country in the modern day) is neo-mercantilist.
pch101 wrote If anything, that should be pretty telling that Detroit could drive a Chinese population to buy cars from Japanese companies, given the nastiness of Japan’s history in dealing with the Chinese.
You took the words right out of my mouth. Japan has a terrible history with other Asian countries, especially China and Korea. The fact that Chinese and Korean Americans flock to Japanese cars isn’t Asian solidarity, it’s because of the overwhelming perception among car buyers (who are not nostalgic about American cars) that Japanese cars are simply better.
I’ve lived in the Seattle area most of my life and the import market penetration here is tremendous, and domestics have a very low reputation (I know this because I drive a domestic and over the years have been continually asked “why?”).
Decades of bad designs, shoddy quality, and deplorable owner relations sparked a buyer revolt. Consumers cannot be persuaded to purchase Detroit-3 junk at profitable prices when nimble competitors produce desirable, high quality, strong performers and look after customers.
Taxpayer bailouts are unlikely to save chronically incompetent zombie automakers General Motors and Chrysler in a market over supplied by topnotch manufacturers.
Sorry Rich, but you are way off base if you think that Asian’s only buy Asian brands. Stop by Orange County some time and see just how many Asians are driving BMWs, Audis, Mercedes and VWs.
If we want to play the “race” card, then you should be happy that we the white race are buying Mercedes, BMWs, Audis, Porsches, Fiats, Ferraris, Lambos, Renaults, Skodas, Vauxhalls, and VWs. Hey, they are produced by Anglos.
Maybe you should be grateful that we the buyers of the “best” products have forced the domestics to step up their game. I mean, if we all continued to buy their crap, they would not have had any incentive to make their crap better.
Where is the thanks?
Sajeev Metha
Maybe its because I am an Asian that drives American, but I feel this editorial has a serious problem in its lack of context as to why these automakers failed.
It’s the American Way Sajeev. It’s not their fault but our fault for not buying their product.
So it is okay for Japan, Germany, and Korea to support their automotive manufacturing companies, but ours should be “allowed” to fail?
If the USA did not have an automotive industry would we not seek as a society to create one?
The other countries of the world would very much like to have our automotive sector, our aviation sector, and many others. They have proven adept at using governmental support, both local and foreign, to further these goals. When do we accept the responsibility to play the game in our own self interest?
Since when has America been about self reliance? Was the use of slaves to clear swamps, build road and rails, pick cotton, cook our food, and raise our children an example of self-reliance?
Was the taking of lands from Native Americans by genocide self-reliance?
Was the invasion of Mexico by President Polk on a pretext to expand our borders self-reliance?
Was the granting of free land to connected people and businesses self-reliance?
Was the awarding of no-bid contracts in the Iraq war self-reliance?
Was the propping up of the airline industry self-reliance?
Are farm subsidies self-reliance?
Many people seem to view America through a mythological lens. America has never been about self reliance. It is about power and self-dealing. People who play by the rules lose.
There is a defense to the auto bailout, but this isn’t it. The financial bailouts weren’t for the benefit of the recipients of TARP funds, they were to prevent a systemic crash of the economy. Likewise, the auto bailouts are simply jobs programs, designed to avoid catastrophic job losses (hundreds of thousands, millions, who knows?) at a time when unemployment is already climbing into the double digits.
Sites like TTAC (understandably) focus on whether the “investment” of taxpayer funds is likely to be paid back and whether GM or Chrysler can be reorganized into successful companies, and conclude (probably correctly) that the answers are negative. I’m certain that the very smart people in the Administration have reached the same conclusions. But they have proceeded anyway because they are viewing this as a macro, not micro problem. Not surprisingly, the administrations of other major banking and auto producing countries, whether liberal or conservative, have responded in similar ways.
It would be fascinating to see a cost/benefit analysis comparing the impact on the economy and on the Federal and state budgets of allowing GM and Chrysler to liquidate versus reorganizing. But even if the liquidation costs would have been lower (and it’s far from clear that they would have been when factoring in unemployment compensation, pensions, social security, lost sales, income and property taxes, etc.), the political costs of permitting a giant hit to an economy already on the verge of depression would have been unbearable, as both the Bush and Obama Administrations recognized.
As to whether there are long term costs to the economy resulting from bailing out failing firms, again, simple-minded references to Adam Smith aside, that is hard to say and harder to quantify. As many have recognized, there are no purely “free market” major banking or auto producing countries. All governments of countries with these industries “interfere” with what some might conceive as “pure capitalism” through subsidies, tariffs, regulations etc., whether they are explicit or hidden. And the costs and benefits are fun to argue about but impossible to pin down.
While working to put in place management teams that will give GM and Chrysler at least some possibility of succeeding in the marketplace, I suspect that the Feds’ real game plan is to try to postpone liquidation until the economy is in a position to handle it, hopefully sometime after the next election. All cynicism aside, I’m not sure that’s not a sensible goal both for the country and its leaders, albeit one that can’t be admitted publicly.
To me, yournamehere nails it:
“I can believe that 1:10 jobs is tied to the auto industry.
You gotta spend money to make money. Doing nothing and watching a huge part of America fall apart would have been much worse.”
The context here isn’t an idealized world of “free enterprise” sullied by an impure government. It’s an economic cataclysm where we just bailed out the richest scum in the nation, ostensibly to save the economy from collapse because they’re “too big to fail,” and now are confronted by an equally massive disaster — except this time, one that will crush the backs of millions of ordinary working Americans instead of a few Wall Street CEOs.
Notice the contrast in how the two situations are viewed. The Wall Street thieves got their money with a warning from the outgoing administration that we’d better not even limit the amount or ask where it’s going. The car companies — admittedly incompetent in extremis, but not actively sinister like the financial gurus — get grilled before they get LESS money. Even worse, their workers are demonized as the heart of the problem. Gee, you don’t think the corporate oligarchs who own our mass media have anything to gain by propagating this viewpoint, do you?
geeber;
All of the Big 3 have sold their US vehicles in Europe for decades, with varying degrees of success. Back in the fifties, sixties and early seventies, big American cars sold reasonably well there, as luxury cars, until the new big sedans from Mercedes and BMW (and later Audi) blew them out of the water.
But they continued to sell various products, and during times of a weak dollar, they made some money doing it. Certain products were successes, like the early Chrysler and GM mini-vans, again until the local products showed up and wiped them (mostly) out.
Most recent attempt (and failure): Cadillac.
Good article Rich. I’m with you on this one for one reason. GM from what I read is going to do a 180 degree turn-around and it is in the works as we speak. I have talked to many new workers and it seems that things are really changing fast. With less “Divisions” to support, the ones left will reap huge R&D benefits and in qualtity. Robots are being installed in most of the surviving plants and new agreements are now being drawn up with suppliers for signing as soon as they “exit”……….probably shortly after June 25th.
We are a republic which uses representative democracy. This is not a direct democracy. Our representatives do not need to consult you and every citizen for every decision they make after being elected to office.
Excellent point. If you would like to see a REAL democracy in action where legislators often refuse to make the tough decisions they were elected to make and instead ask the voters to make the decisions instead, look at California.
Here’s an article just yesterday addressing the fiscal meltdown in CA. Hey, at least one Democrat out of the lot of them here in CA gets it. The others may be starting to understand basic arithmetic after his brutally honest address:
http://www.latimes.com/news/local/la-me-cap11-2009jun11,0,5657738.column
@ yournamehere.. Good job defending yourself. Living in a GM town I witness the ripple effect everyday.Many people far removed from the car buisnees are feeling the impact.
Its sad that some folks are totally lacking a social conscience. The good news is that such folks are a small minority. We can be assured that thier views,will never amount to more than an annoying iratation.
@tonycd….well said
ron h-please look at the yen vs. dollar valuation over the last 30 years and ask yourself whether your “yen manipulation” stance holds water. The charts are readily available at most finacial websites.
Just a thought.
Bunter
Notice the contrast in how the two situations are viewed. The Wall Street thieves got their money with a warning from the outgoing administration that we’d better not even limit the amount or ask where it’s going. The car companies — admittedly incompetent in extremis, but not actively sinister like the financial gurus — get grilled before they get LESS money. Even worse, their workers are demonized as the heart of the problem. Gee, you don’t think the corporate oligarchs who own our mass media have anything to gain by propagating this viewpoint, do you?
All part of the war on labor and the middle class conducted by certain parties and people of a political and idealogical bent.
Nothing more to see here people, move along. Apply for your next job at Wal-Mart and be happy for it.
Greedy CEO’s:
http://aflcio.org/corporatewatch/paywatch/pay/index.cfm
Something else that I find quite ironic with Southern Banks. The same ones who oppose these bail-outs. Hypocrits it would seem.
http://www.southernstudies.org/2009/02/southern-banks-receive-quarter-of-bank-bailout-funds.html
@orenwolf:
I totally agree with you. They should not have taken the money. Those who do become enslaved to the government. The same thing happens with the US welfare system.
But technically, the money was a loan, not majority stock ownership. Rick’s firing was akin to the bank removing me from my house before I made the first payment. Or something. It was just politics.
There are 3 lies or wrong assumptions with this defense:
1) We own GM/Chrysler.
No. We don’t. I own my house. I own some Honda stocks. I buy these properties at my own will and I can sell them at any time. I can vote one where they should go.
In contrast, I cannot do shit about GM. So, I don’t own GM. Obama and UAW can do all the shit about GM, well, as you have correctly guessed, they own GM.
It’s the same with Communist China. Citizens are supposed to own the entire nation’s wealth. At least that what Chairman Mao wanted them to believe. No, I am not joking.
2) There will be massive job less at liquidation.
Seem right on the surface, knowing that Honda rejected Chrysler’s proposal for marriage in one day.
But no. Honda rejected only because they know all too well about Washington politics and UAW. They have no way of dealing with UAW after the merger.
In a liquidation, however, UAW would be gone when all workers lose their job. But the buyers of the plants, likely Hyuidai, Chery or Tata, will definitely hire most of the workers back. Only this time they are un-unionized new employees.
So yeah, there will be some job losses, as in any other industry. But it’s nothing like the end of the world Obama wants you to believe.
3) Bailout of GM saves jobs.
Another lie. One dollar spent on GM, is one dollar not spent on housing/education/defense. Ultimately the question is: how much does it take to save one middle class job?
In GM’s case, it’s about $750k for each existing UAW worker so far, according to another TTAC article.
But really no. Because as I said before, not all jobs will be lost in a liquidation. Let’s say 50% jobs are lost in a liquidation, and 20% jobs are lost without a liquidation (a.k.a. now). So, the actual cost to save one UAW job would be
$750k/(50%-20%) = $2.5M !!!
If we regard this cost as a contractor bid for preserving one job, then, will there be lower bids? I am certain there will be tons of reputable companies willing to add one more job to the economy at a cost of $0.25M. In other words, for each UAW job saved, we lose 10 jobs in other sectors. But unfortunately, Obama does not allow competing bids, and we are getting a very bad deal from this only bidder.
This bailout eliminates jobs.
ron h-please look at the yen vs. dollar valuation over the last 30 years and ask yourself whether your “yen manipulation” stance holds water. The charts are readily available at most finacial websites.
http://news.bbc.co.uk/2/hi/business/1750379.stm
If you would like to see a REAL democracy in action where legislators often refuse to make the tough decisions they were elected to make and instead ask the voters to make the decisions instead, look at California.
Funny that you mention California, as one needs a supermajority to override an obstructive minority.
Hardly “majority rule.”
orenwolf :
June 11th, 2009 at 3:41 pm
They weren’t forced. They didn’t have to take government money, they chose to, and that was a stipulation of the agreement. GM chose this path rather than just go bankrupt.
——————————————
A lot of banks are forced to take TARP. The intent is that Obama can have greater control of everything. For instance, many GM/Chrysler bond holders are TARP recipient (some of them forced) and so that they cannot go against Obama’s agenda.
wsn: No, the intent of TARP was to force liquidity and lending in the banking sector. They weren’t allowed to pay it back until they could show that they would be able to maintain acceptable levels of liquidity and lending. 9 banks have begun paying it back, as they have done so. TARP is going to be a success at this rate, and none of that has anything to do with GM’s *choice* to take bailout bucks.
orenwolf, in which section of the American constitution says a bank must lend?
If the Fed wants to lend to GM, just do so. If that’s against the law, that’s against the law.
By forcing a bank to take TARP and lend it to GM, it’s not any more legal.
Notice the contrast in how the two situations are viewed. The Wall Street thieves got their money with a warning from the outgoing administration that we’d better not even limit the amount or ask where it’s going. The car companies — admittedly incompetent in extremis, but not actively sinister like the financial gurus — get grilled before they get LESS money. Even worse, their workers are demonized as the heart of the problem. Gee, you don’t think the corporate oligarchs who own our mass media have anything to gain by propagating this viewpoint, do you?
Very well said.
I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans?
There are so many things wrong with this statement. First of all, Asia is not a nation. It is a continent. There are countries in that continent such as China, Korea, Japan, Thailand, etc. Second, many of those people that you refer to as Asians are in fact Asian Americans. Born and raised in the USA. They are as American as you or anyone in Detroit. Finally, as many other posters have repeated, it’s the quality of the cars, period. Any perceived nationalism has nothing to do with it.
1. When Toyotas and Datsuns firt started showing up in my town I knew Detroit was in trouble. The attention to tiny details, the orderliness under the hood, revealed a commitment to quality and an interest in giving the customer more than he expected — not the least he’d accept.
2. To those who don’t seem to be able to post a comment without including a snark about America as a horrible place with a horrible past: please tamp down the politics. You sound like acolytes of Howard Zinn.
3. In an industry with massive overcapacity, propping up certain companies leads to creating or saving some jobs by preventing or destroying jobs at other companies. Talk about “the forgotten man”!
4. NoSubstitute, thanks for contributing a good analysis of the political/economic logic that supported the bailout decisions. Not that I agree with the bailout — but I concede the government did have reasons for what it did. The path is often paved with good intentions.
Paul Niedermeyer: All of the Big 3 have sold their US vehicles in Europe for decades, with varying degrees of success. Back in the fifties, sixties and early seventies, big American cars sold reasonably well there, as luxury cars, until the new big sedans from Mercedes and BMW (and later Audi) blew them out of the water.
Believe me, I’m not going to argue with you that American cars have not been competitive enough to thrive in Europe for the past 30+ years, or that a 1970s Cadillac wasn’t a wheezy, obsolete barge compared to a contemporary Mercedes E- or S-Class.
But since the 1960s, Ford, and to a lesser extent, GM, have integrated their European operations, and it would seem curious for them to bring over products from North America that compete directly with the products of the home team. Especially since European and American designs look to be converging in the coming years (due to fuel economy and price pressures).
Well said Rich…well said.
There are so many things wrong with this statement. First of all, Asia is not a nation. It is a continent. There are countries in that continent such as China, Korea, Japan, Thailand, etc. Second, many of those people that you refer to as Asians are in fact Asian Americans. Born and raised in the USA. They are as American as you or anyone in Detroit. Finally, as many other posters have repeated, it’s the quality of the cars, period. Any perceived nationalism has nothing to do with it.
I think your generalization – that it’s about the quality – is equally as specious as claiming that ALL Asians and Asian-Americans behave monolithically (which I don’t see anyone saying and is prima facie absurd anyway).
Also, though India is technically Asia (and so is most of Russia for that matter), I think when people say “Asian” it’s in reference to East and Southeast Asians, and Americans of those heritages, not South Asians or Russians.
That said, I live in an area that has a heavy Asian and Asian American population, and it is a rare sight to see any of them driving anything but vehicles from East Asian makers, with a heavy concentration in Japanese maker vehicles – particularly Toyota and Honda (Toyota for family people and Hondas for the kids).
That is a general tendency, not an absolute. I often go by a Hummer parked next to a Camry outside the home of a family of Asian descent.
Clearly it’s not nationalism, of course, but there definitely is an element of ethnic and regional pride that comes with it.
In East and Southeast Asia, of course, brands from those regions completely dominate vehicle sales, so it’s to be expected that the recent immigrants to this country would go with brands they are most familiar with.
There’s not the kind of animosity towards Japan, coming from people of other East/Southeast Asian nations (or of those heritages), that one may expect. Despite the historical conflicts, there’s also a long history of opposing Western economic and military incursions to the region.
*BOYCOTT GOVERNMENT MOTORS*
Why? Because the Federal Government is plunging us into a national debt that will cripple our economy for years to come. Spending $100 Billion of the taxpayers money to save the jobs of folks (from Rabid Rick and Maximum Bob down to the lowliest janitor on the night shift) who have lived off the fat of the land while gutting a great institution is just plain daft.
The world has way too many car makers and way too many marques. If we want to have any remaining in the US we must be prepared for some of them to disappear. To me Ford has stepped up, GM and Chrysler should be given decent burials and the cash should be saved for the widows and orphans.
As many have recognized, there are no purely “free market” major banking or auto producing countries. All governments of countries with these industries “interfere” with what some might conceive as “pure capitalism” through subsidies, tariffs, regulations etc., whether they are explicit or hidden. And the costs and benefits are fun to argue about but impossible to pin down.
“Free markets” don’t account for external costs (or any other cost, really), even tho reasonably self-contained pricing needs to be axiomatic for the ideology to even work.
How can a price be considered a “market value” when you can just push off a chunk of the cost to society or whomever?
The whole free market spiel is quite obviously intended for people with poor ability in basic logic.
—
orenwolf, in which section of the American constitution says a bank must lend?
If banks don’t lend, the economy stops. Trying to argue this on constitutional grounds is not only wrong, but monumentally stupid.
long126mike :
June 11th, 2009 at 5:41 pm
Clearly it’s not nationalism, of course, but there definitely is an element of ethnic and regional pride that comes with it.
——————————————–
As a Chinese Canadian, I can tell you that the so called “ethnic and regional pride” doesn’t exist. If anything, it only back fire.
I cannot speak for Japanese or Koreans, but Chinese are very racist. No, they don’t think they are the best. Instead, they regard Caucasians as the first class race, and Africans the last. In addition, some Chinese outright hate Japanese during to legacy issues from the WW2 era.
The reason that they still buy Japanese cars is that they are thrifty. Notice they are good saver and typically have large houses? Guess they cannot afford that house if their cars need replacement every 5 years.
As for the Americans, if no one ever owned a car by 1980, then Japanese cars would totally dominate the market by then. But then, they didn’t start from a clean sheet. By the time Japanese cars were competitive, American cars were already dominant. Change takes time. But on the flip side, what slowed down the demise of Detroit is haunting them now.
In East and Southeast Asia, of course, brands from those regions completely dominate vehicle sales, so it’s to be expected that the recent immigrants to this country would go with brands they are most familiar with.
Not really. A lot of immigrants often come from areas where cars are not common household items, and most have few prejudices about the US market in general.
What actually happens is that a lot of them end up buy a older domestic as their first car due to low price… you see where this is going.
agenthex :
June 11th, 2009 at 6:05 pm
If banks don’t lend, the economy stops. Trying to argue this on constitutional grounds is not only wrong, but monumentally stupid.
——————————————-
My bank willingly lends me my mortgage at 1.75%, not forced by anybody.
Banks still need to pay their employees, so they will lend. They just don’t want to lend when the borrower won’t be able to pay back.
Talking about stupidity, even heard of sub prime? Now the Fed is forcing banks to make sub prime loans.
Bull long126mike there is absolutely no crossover ethnic pride between Chinese Americans buying Japanese cars. I’m 46 my parents were Chinese and i grew up in Florida when I was growing up japanese products were verbotten in our home. My parents Chinese friends and my relatives were the same way.
People in England don’t buy BMWs over Toyotas simply because the Germans are also Caucasian. Its the cars not the race or skin color.
Sorry *Instant Rebate*
Robots are not going to save GM and Chrysler!!!
Unfortunately GM and Chrysler are likely damaged beyond repair.
At least GM went out fighting with some desirable products.
Banks still need to pay their employees, so they will lend. They just don’t want to lend when the borrower won’t be able to pay back.
You don’t seem to understand how systematic problems work. A bank may not want to lend into an uncertain economy, perhaps in part also due to leverage problems, so it holds onto money much more than usual. It makes sense for an individual bank, but when they all have the tendency to do this, the economy stops.
It’s the very role of a system manager (in this case the gov/fed) to makes sure the latter does not happen, and actions include what is necessary to normalize lending levels.
I don’t quite understand if the free market tools don’t realize this, or rather they think following ideology is more important than having a functioning economy.
Bull long126mike there is absolutely no crossover ethnic pride between Chinese Americans buying Japanese cars. I’m 46 my parents were Chinese and i grew up in Florida when I was growing up japanese products were verbotten in our home. My parents Chinese friends and my relatives were the same way.
That’s why I specifically, more than once, said I was speaking in general terms and not absolutes. Of course everyone is different, but tendencies exist and are readily measurable and observable.
People in England don’t buy BMWs over Toyotas simply because the Germans are also Caucasian.
I didn’t say they did, but now you’re making an absolutist statement that isn’t true. You can bet plenty of Caucasians buy only vehicles made by makers from majority Caucasian populations, and there’s also plenty of people who restrict themselves only to their home county’s products. Have you never heard the derogatory terms “Jap crap” and “commie cars” used by some Americans?
Its the cars not the race or skin color.
Ideally that would be a nice world to live in, but that’s not always the case. People have their biases and they act on them all the time. Just look at the anger over the auto bailouts – the intensity of that is often fueled by partisan tendencies. It was not long ago that GM was one of many jingoistic symbols (which they gladly helped propagate and still do), yet look at the abrupt about-face by many now that their political “enemies” are exerting some control over them.
geeber, GM has owned Opel since 1936, and Ford has been active with European cars since before then.
But as a former European, and keeping up in the market there, the Big 3 have also sold their US vehicles alongside their Opels and Euro-Fords. Chrysler is still trying. It’s been a marginal activity all along for them.
Anyway, the real point is, do you (or the author) really think that Koreans or Japanese would snap up US Fords and Chevies. It was never really about protectionism, than inferior products, especially the small cars that sell in those markets.
As a Chinese Canadian, I can tell you that the so called “ethnic and regional pride” doesn’t exist. If anything, it only back fire.
It may be potentially counterproductive, but it most certainly exists.
I cannot speak for Japanese or Koreans, but Chinese are very racist. No, they don’t think they are the best. Instead, they regard Caucasians as the first class race, and Africans the last. In addition, some Chinese outright hate Japanese during to legacy issues from the WW2 era.
The reason that they still buy Japanese cars is that they are thrifty. Notice they are good saver and typically have large houses? Guess they cannot afford that house if their cars need replacement every 5 years.
Now I’m seeing all kinds of bald generalizations by you. “Chinese are very racist”? Really? All of them? More so than people from other countries?
And all Chinese are “thrifty” and “good savers” and have “large houses”? Talk about stereotypes! Are they all math geniuses, too?
If someone is thrifty, a Japanese car isn’t probably a good choice. Korean cars tend to be cheaper compared to competitive models.
or rather they think following ideology is more important than having a functioning economy.
“Better to reign in hell, than serve in heav’n.”
“Stakeholders” who have a direct impact on as many as one-in-ten domestic jobs.
How can you have an inpact on 1 in 10 jobs and NOT be profitable?
And…
The last I recal, the entire market share of these two was proof that this could not be.
I think they are all UNDER 49% WITH Ford added in.
So, how can this keep getting repeated?
What do you think the Japanese government has been doing for years. They artificially set the Yen so that there products have a huge advantage in the market. Further, they tax our products so high that we cannot sell them there in a fair market. Finally, all the profits go back to Japan. Wouldn’t this be government intervention???
Read and learn before posting.
OTOH, Japan obviously builds cars we want. Detroit? Not so much. The new Mustang is the first domestic I’ve looked at in nearly 3 decades.
Oh, also, I’m tired as well of paying farmers not to grow crops. And welfare cheats. Hate them.
And all Chinese are “thrifty” and “good savers” and have “large houses”? Talk about stereotypes! Are they all math geniuses, too?
It’s important to distinguish within the categories of any immigration-heavy group. Folks fresher off the boat are more likely to identify with their native culture & its biases than subsequent generations who fit more into America’s ‘asian’ label.
On the other hand, given US selective immigration policy and the self-selective tendencies within the immigrant population in general, it shouldn’t be surprising that these groups fit into broad stereotypes.
long126mike there certainly may be ethnic pride such as people of Chinese descent may have pride in there background but there is virtually no cross over between pride in Chinese background crossing over to Japan or the Philippines etc. You might believe that but you would be mistaken. People of Japanese ancestry are one of the smallest groups among Asian American. Most are Chinese or from the Philippines.
What do you think the Japanese government has been doing for years. They artificially set the Yen so that there products have a huge advantage in the market.
Please explain how this link (of yen-dollar exchange rates since 1971) supports your position, because it obviously doesn’t: http://www.economagic.com/em-cgi/data.exe/fedstl/exjpus
Further, they tax our products so high that we cannot sell them there in a fair market.
US tariff on imported vehicles: 2.5% for cars, 25% for trucks.
Japan’s tariff on imported vehicles: 0. As in none.
Now, tell me who has the lowest taxes?
Finally, all the profits go back to Japan.
Actually, they don’t, unless you think that the facilities, R&D, etc. paid for outside of Japan are funded with magic pixie dust, and unless you ignore the dividend payments to shareholders.
The funny thing is that you missed the one thing that Japan really does to keep out imports. I’m surprised that the actual barrier to trade that is used by Japan never ends up on these bogus “fair trade” websites.
Before I start I would like to make one thing perfectly clear, especially to ktm I wasn’t playing any sort of race card. And I lived in Orange County for nine years so I know exactly what you speak. I made an observation and qualified it by stating the time and the place, Alhambra, California in the fall of 2008. I am someone who makes my living with words and I thought I chose them with great care. It just goes to show you that any statement, when taken out of context, can be interpreted in a number of different ways. And to Pch101, of course there were no cars of Chinese origin in the parking lot. Might be interesting to look in the same parking lot in five years, will we find some Hummers there?
Now on to some of the points raised by some of the posts here.
To grog: I’m not tilting at windmills. It’s something that I believe in, and tried to articulate my position as best I could. I knew full well when I made the post, that the responses would be almost uniformly negative. I realized into what den I was venturing.
To Michael Karesh: The parking lot ratio here in Southern California is usually 25% domestics, 75% imports. In this parking lot it was by my count 0% domestics, 10% German imports, 90% Asian imports. I just wish that Google maps could zoom in with enough detail to monitor it in real-time.
To Tavert: I think you need to be a bit less myopic. Others here have explained the trickle-down effect so there’s no need to repeat what’s already been said earlier.
To shabster: Yes you’re right, we enjoy an envied lifestyle here in the US. We have an insatiable appetite for low cost goods from flat-panel TVs to luxury cars. It’s what’s made Walmart the biggest retailer in the world. But do we have a domestic consumer electronics manufacturing industry any more? Where have those jobs gone and have we replaced them? You might say it was replaced by higher tech, like software, but what happens when that’s gone? To maintain our standard of living, we still have to make “stuff” be they cars or commercial jetliners, furniture, or something else. I’m not in favor of protectionism, you missed the point I was trying to make is that for free trade to work there can’t be barriers in either direction. That is not the case with the vast majority of our trading partners, going back again to the fact that we want inexpensive consumer goods.
Ptrott: Not only would I have not preferred to “invest” in GM, I had even less of an appetite for investing in BofA, Citigroup, AIG, and the other financial sector bailouts but were we really willing to let them take down the entire economy? Was the potential alternative better than how this has played out?
Rastus: I didn’t assume anything and I don’t think your position was advanced by calling me a thief.
Capdeblu: Actually in many fiscal years over the last two decades Ford, Chrysler, and GM were profitable. In those years they built and sold what consumers wanted, usually light trucks. I’ve always thought it interesting that in 2006 it was the Chrysler half of DaimlerChrysler was profitable on the success of the 300C/Charger while the Mercedes-Benz half was losing money because of smart division and well-documented quality issues with the E-Class.
Geeber: In the unedited version of my post I mentioned specific cars, like 300C, which upon introduction was universally acclaimed by critics, reviewers and consumers alike. And I would say, having driven almost every car available in North America, that the Viper is a great car. It’s not the most sophisticated or the best built, but for what it costs to buy, and the level of performance it provides, it is unrivaled by cars costing twice as much. It’s simply so much fun to drive even though I burn my leg almost every time I get in and out of it. And what can one say about the Corvette ZR1; it is world class in every measurable way. Yet critics have to keep carping on the quality of its interior in comparing it to cars costing twice as much. In the real world price stratosphere, I agree with you on the G8. Let’s hope it’s reborn as a Chevrolet. And speaking of Chevrolet, even the critics have pointed out that compared to its direct competition – Camry, Accord, Altima – it measures up in almost every way, surpassing its competitors in many ways. That it wasn’t properly launched with the kind of budget it should have received and is testimony to GM’s ongoing problems to too many brands, too many models philosophy that pushed them into Chapter 11.
Menno: Yes I know about the automotive free trade pact with South Korea. Why did it take so long to get passed? In the eighties when Hyundai first entered the US market they sold inexpensive cars that had a tendency to fall apart the minute the warranty expired, sometimes even before it did. It took years, more than a decade to address that perception of the brand, leading Hyundai to offer an unprecedented 10-year warranty to get bodies into showrooms. As an observer of the automotive industry I admire what Hyundai and, to a lesser degree, Kia have accomplished in the marketplace. That Hyundai can go from the 1988 Excel to the 2009 Genesis is a remarkable achievement but it doesn’t alter the fact that South Korea’s market has been closed to US-built vehicles from 1988 to the present day.
To Paul Niedermeyer: I recall the example you cited but believe it only reinforces my point. If I lived in Japan and was presented the option of buying a Toyota Corolla or a Chevy Cavalier where they cost approximately the same, I’d had probably picked the Corolla, but you left out one important point. Even with Toyota’s help, the Cavalier still cost 20% more in Japan due to the taxes and duties. Tell me, here in the US would the average consumer have bought the Corolla had we slapped a 20% duty on it and it cost 20% more than the Cavalier? Toyota, Datsun/Nissan, and Honda prospered here in the US due to a variety of factors; a high quality product and a built-in cost advantage due to the openness of our market and the ongoing manipulation of the yen by the Japanese government to the advantage of its exporters. And then when forced to build vehicles here in the US we had states tripping over themselves to offer incentives – not offered to the Detroit Three – to locate new plants primarily in right-to-work, non-unionized states. Every time I see someone like the self-serving and hypocritical Senator Shelby showing his face I the nightly news it makes my blood boil.
To jackc10: I noticed it the minute I moved out here in 1997 to become the Editor-In-Chief of Car Audio and Electronics. You see this phenomenon mostly along the coasts. In the vast majority of all 50 of the states I’ve visited on countless road trips, the ratio is far more balanced.
To geeber: In my many visits to Western Europe over the last 10 years, as an AMC guy, I have never ceased to be amazed at the number of early XJ Cherokees I’ve seen in Europe as well as the number of Graz, Austria-built first and second generation Grand Cherokees. And I’d love to tell you about the time I blew by an M5 on the Baden Baden to Karlsruhe autobahn in a Chrysler 300C SRT8 Touring station wagon at 170 miles per hour. When I picked up the car at the Chrysler press garage at the dealership in Berlin, I asked the salesman how could he expect to sell the car in Germany for $75,000? He replied as he pointed to the Mercedes-Benz dealership across the forecourt, “Because of our taxes here in Germany, a Mercedes-Benz AMG E-Class costs at least than 20 thousand euros more.” As I went by the M5 on the autobahn I said to myself, “It’s great to be an American.” Although it seemed absurd that the 300C SRT8 was $75,000 in Germany – which I believe was built in Austria – at least in Germany the playing field was somewhat level, that a car with its performance envelope under priced the home town team. I am not saying that the SRT8 was a direct match-up with the M5 because it’s not. It offered the same performance for $30,000 less, and had a huge cargo area to boot.
To Paul Niedermeyer: You said “…big American cars sold reasonably well there, as luxury cars, until the new big sedans from Mercedes and BMW (and later Audi) blew them out of the water.” See my point above.
Take a look at the Korean Won. Significantly down vs the USD..
http://finance.yahoo.com/q/bc?s=KRWUSD=X&t=5y&l=on&z=m&q=l&c=
The Chinese Yuan is essentially pegged against the USD.
They now own a couple of trillion in US Treasuries to support the peg.
In addition, the fact that health care is publicly financed in most of the importing countries and a big chunk of their revenue is VAT also gives them an edge.
We need balanced trade rather than unlimited free trade. There are ways to accomplish this without destructive tariffs.
Anyone familiar with a deflationary spiral (aka the thirties) never wants to see another one. Any individual or firm with any leverage is crushed.
I think the total losses on the bank bailout will be less than $100 billion or 1% of the GDP. If you throw in the FDIC, add another hundred. Almost a quarter of the initial funds are in the process of being paid back with interest. Citi and AIG will cost some money.
The auto bailout’s net cost is going to be a lot less if it is offset with the various savings in other government programs (unemployment insurance, pension guarantees, taxes paid by workers, suppliers, an increase to GDP, etc.
I do regret that Chrysler wasn’t allowed to fail when we weren’t in a deep recession, as it would have been helpful to Ford and GM.
For those that believe that an unprofitable industry *Can’t* reestablish itself as a profitable business, I would point to Conrail. Superficially not a success, but we maintained continuity of service and they were sold off to companies that are now profitable. In fact, the government first got serious about developing a regulatory environment where railroads could succeed. A business that was unprofitable during most decades of the century was finally profitable after 1980.
“If all 10 banks return the money, the government will recoup roughly one-third of the $200 billion so far invested in about 600 banks under the Treasury’s financial rescue plan.”
http://www.kansascity.com/news/politics/story/1243688.html
So it is more like 1/3 of the initial TARP funding.
The earlier estimate of government losses from the bailout is too low — The losses from the initial funding will be fairly low because they excluded most of the basket cases (except Citi). However, AIG and Citi will cost some money.
I don’t have a decent estimate, but most of the loans will be paid back with interest.
In East and Southeast Asia, of course, brands from those regions completely dominate vehicle sales, so it’s to be expected that the recent immigrants to this country would go with brands they are most familiar with.
This is a pretty bad generalization, in part because it’s not true. If I’m not mistaken, isn’t the number one selling car brand in China… Buick?
My dad immigrated to the U.S. from China in the 1970’s, and he always LOVED American cars. He was a big fan of the full-size V8, RWD sedans. Growing up, I remember sitting on the bench seat of my dad’s 1980 Chevy Caprice Classic, peering over the huge dashboard. In the early nineties, when it came time to replace it, there were only three cars he considered: another Chevy Caprice, the Buick Roadmaster, and the Ford Crown Victoria. He went with the Crown Vic. Within the span of 2 years, he had to replace all four power windows, all four power doors (twice), the radio head unit (twice), the power antenna, and a myriad of other miscellaneous leaks and engine problems. He easily poured a few thousand dollars into maintaining it. Oh and the fabric on the roof began peeling.
That was the last American car my dad ever owned. He started driving an Acura in 2000, despite his initial misgivings about its puny V6 and FWD. But that Acura has given my dad ZERO grief, and it’s still running strong. Our family has never looked back. Nowadays, when I talk about American cars with him, he just shakes his head.
I guess the point of this story is that quality trumps “ethnic pride”, whatever that means. Asian-American car buyers are like any other American car buyers: they buy cars that present them with the best value proposition. And right now, those are foreign cars.
Rich,
Even though you’ve stated that you weren’t playing a race card, I’m still going to have to take you to task over the Asian homogeneity comment.
My wife is Thai, and buys Hondas. Thai people have no sense of of being “homogeneous” with the Japanese or Koreans. She buys Hondas because our first one, more than 20 years ago, was great, and each successive one has been great. Why switch? Our first Honda wasn’t bought because it was Japanese, it was bought because it was a Honda. The other car we could afford at the time was a Chevette. I think you’ll have to agree the Civic was a better choice. Over the years, we (well, primarily my wife) continued to buy Hondas not because we liked them, but because we were delighted with them. We’ve never bought a Honda out of a desire to be “homogeneous” with the Japanese (whatever that means – respectfully, I don’t think you chose your words well at all) nor out of any desire to support Japan, which is neither my wife’s nation, nor mine. We simply wanted good value for money, and the Americans weren’t providing that 20+ years ago. They may be today, but why should we switch from a brand that has delighted us?
As an aside, we lived in Hawaii for several years, and though the islands have a lot of Japanese cars, we knew many Asian-Americans who went out of their way to buy American cars.
BTW, I’ve bookmarked your website and will visit often.
“horrible gas mileage stats, even today, on most of their models”
All cars the same size and same capability get similar mileage. If one company gets “better” mileage than their cars are a different size or have different capabilities.
“Lumina and Astro minivans that were butt-ugly, bad on gas, and had horrible build quality”
The Astro was awesome, getting rid of it is another thing that “killed” GM
the Asian race card is an example of an erroneous notion trying to come accross as true by being delivered in a persuasive and eloquent manner
let me ask you this… do Jews stay away from Mercedes, Porsches, BMWs and Audis?
the Germans weren’t so nice to the Jews a while back?
secondly do you think that Chinese Americans would embrace Cherys and Jianglings and Ding Dongs and whatever Chinese cars are going to be available soon just because they are Chinese?
give me a break
The fact is Chinese Americans are no more friendly to the Chinese government than most white westerners. Chinese are proud to be Chinese but their love of China is probably be typified by why so many decide to live abroad. Why what happened on June 4th 20 years ago?
There are many examples of white westerners embracing Japanese products.
A while ago it you would not see a Japanese car in the various returned servicemen clubs and bars. Owning a Japanese car in a WWII biased constituency would be asking for a brick through your window.
Now the sterotype is that these returned servicemen clubs are filled with Corollas and Camrys. Japanese executed these soldiers during WWII. And yet now they drive Japanese cars.
You don’t need to look far for an example of success. The Koreans built some excreble cars in the 1980s and 1990s. Engines blowing up, suspension falling off at speed, incredible bad service and interiors.
We bear no ill will to the South Koreans. Now we drive their cars over the Japanese. Why?
Build cheap, reliable, relatively stylish, relatively good driving cars with long warranties and don’t screw me on pre and post sales. They don’t need to be the best cars in the world. They just need to be able to hit the 90% mark and the market will speak.
I appreciate your thoughtful look at this topic but I could not disagree more.
We are not other countries.
We have a system that has worked damn well when compared to the rest of the world.
To see that system dismantled by Mr. Hopeychangey and those ass-clowns in congress is indefensible.
This is a pretty bad generalization, in part because it’s not true. If I’m not mistaken, isn’t the number one selling car brand in China… Buick?
Oh, it’s not true? I didn’t realize that. Do you have actual facts to back that up? Because I’m dealing with what I see and my experience, as you are as well.
You may first wish to know that Chinese-speaking immigrants are collectively outnumbered by Filipinos and Vietnamese. Toss in the other Southeast Asian immigrants, plus the Japanese, Koreans, and Pacific Islanders – and that’s more than double the immigrant Chinese-speaking population.
Cars are relatively new to China in terms of their saturation. Not so in many other countries in Asia.
If you’re going to stick with the “quality” argument, you realize that holds no water, right? At this point, the quality differences between major makers is inconsequential. This isn’t the early 80s any more.
Funny that you’d mention Buick, too, since that’s regarded in many ways as one of the highest quality brands, sharing 5 star dependability ratings from JD Power with Jaguar, Lexus, Toyota, and Mercury. Funny how I’ve never once seen an Asian or Asian American in my town driving a Buick, Jaguar, or Mercury, and plenty of them can afford any of those.
So much for your “quality” theory.
We have a system that has worked damn well
What “system” would that be and how exactly is that “system” being “dismantled”?
Funny how I’ve never once seen an Asian or Asian American in my town driving a Buick, Jaguar, or Mercury, and plenty of them can afford any of those.
You may wish to revisit my prior post as to why this may be.
I’ve seen and also heard from better sources that a high percentile of first gen immigrants purchasing old domestics, because on paper they seem a great value to the relatively poor and uninformed. They learn very soon the downside of owning such vehicles, and seek more reliable and fuel efficient transportation as their wealth builds.
Trends like this are culture-forming, because you see the subsequently purchased civic get handed to junior/ricer and then ricer jr. This has been forming for at least couple decades as skilled immigration from that part of the world has increased.
The asian transplant’s vehicles also match the selective values of immigrants in general like fiscal conservation (lol) and stability.
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Cars are relatively new to China in terms of their saturation. Not so in many other countries in Asia.
If you’re traveling to modern day china, you’d see the dominance of each region’s major JV’s. For example, in Shanghai, it’s VW/Audi, Buick; Beijing, Hyundai, et al. Imported german luxury brands are all hold extreme cachet despite seemingly ridiculous prices. Sure doesn’t seem nippon-centric to me.
It’s the same deal everywhere, people buy what’s convenient, ditch bad products, and form life long prejudices.
I’ve seen and also heard from better sources that a high percentile of first gen immigrants purchasing old domestics, because on paper they seem a great value to the relatively poor and uninformed. They learn very soon the downside of owning such vehicles, and seek more reliable and fuel efficient transportation as their wealth builds.
Nope, the 1st gen Asian immigrants in this town drive beater Japanese vehicles almost exclusively. This town is a little more extreme than others I’ve lived in, but I am very confident in my general observations.
If you’re traveling to modern day china, you’d see the dominance of each region’s major JV’s. For example, in Shanghai, it’s VW/Audi, Buick; Beijing, Hyundai, et al. Imported german luxury brands are all hold extreme cachet despite seemingly ridiculous prices. Sure doesn’t seem nippon-centric to me.
Which doesn’t contradict my point. This may filter over here eventually, but the bulk of the 1st and 2nd gen Asian immigrants in this country are Southeast Asians, and if you’ve been to Southeast Asia in the past few decades you’d know that Japanese brands absolutely dominate over there.
Maybe recent mainland Chinese immigrants will start bucking these trends, but it will take a long time for that to start showing over here in terms of the overall situation. I doubt it, though, as the Chinese are going to have a strong domestic industry in short measure.
@long126mike:
You’ve mentioned mercantilism a couple of times, and I get the impression that you favor it. I’m of the belief, however, that it’s a blinkered system that inevitably leads to higher prices. In order to keep the balance at surplus you are either going to have to overproduce in good times or underconsume in bad ones. Japan’s economy has been in the toilet for a decade-plus now, and I think mercantilism is center stage. PCH mentioned that Japan does have a barrier to trade, and I believe he’s talking about the byzantine customs and checking system. All the extra workers and bureaucracy keeps people employed, but drives the prices up in the homeland.
As for not recognizing the “human cost”, I do recognize it. I just don’t care enough about it to screw other people or generations over. Call me an ideologue, but I do believe in creative destruction. I think GM liquidating and being sold in bits would have been a better way of going than the political morass we have now.
And I find your dismissiveness about the major dissatisfaction over the bailout of the automakers disturbing, because it shows that once people get into power, they no longer have to care about the opposition. That to me is dangerous.
You’ve mentioned mercantilism a couple of times, and I get the impression that you favor it.
No, what I said is that the Japanese development model is favored by developing nations that have seen success in development. I’m not making a value judgment, but rather pointing out what should be obvious – it works.
As for Japan, their decade of stagnation was mostly deflationary, not inflationary. They had an asset bubble and it popped and they didn’t deal with that very intelligently. The only relation the asset bubble had to their success as net exporters was that they got very rich very quickly. The trade approach per se had nothing to do with the lower growth.
As for not recognizing the “human cost”, I do recognize it. I just don’t care enough about it to screw other people or generations over.
The conspicuous silence from the right-wing during the Bush presidency about debt accumulation, save vociferous efforts to minimize it, makes statements like that ring hollow. It’s easy to be a fiscal hawk when your party no longer sets policy. Republicans had complete control of the federal government for six years, and they took what was a trajectory of abundant surpluses and created a staggering amount of debt instead.
To give you a sense of the magnitude, Bush’s original budget was heavy with the assumption that by 2010 the cumulative surpluses would have totaled $5.6 trillion, basically enough to erase the public debt. This projection was used to justify his tax cuts, among other things.
By contrast, by the end of Bush’s last fiscal year (September 30 of this year), the public debt will have grown to an estimated 12.9 trillion dollars from a starting point of 5.8 trillion dollars. In other words, he was handed a trajectory of a $5.6 trillion surplus and instead racked up $7.1 trillion in debt. That’s a net difference of $12.7 trillion, or approaching 1 year of US GDP.
$50 billion, while by itself a large amount of money, is almost a rounding error of $12.7 trillion. And it remains to be seen whether that investment will bear fruit or not. If the economy begins to stabilize, then simply avoiding a deeper meltdown EASILY makes up for that amount of money, and that’s not including the offsetting public assistance and crime costs that would have directly stemmed from the collapse of the domestic auto industry as a whole – something the critics keep missing or failing to acknowledge.
@long126mike:
I’m not surprised. I was apolitical/apathetic for nearly all of Bush’s presidency, and now that the party has had a few months to look back on it, there’s a sense of hangover. Except this time the drug wasn’t alcohol, but power. Bush and the neocons sold out their party’s chief economic principles for, IMO, a fantasy democracy proliferation campaign.
People don’t like being told “no”, but sometimes it’s what they need to hear. I hate politics because it’s not about doing the right thing, it’s about doing the popular thing. As long as that statement’s true, we’ll have a worthless government.
I’m not impressed by the “avoiding a deeper meltdown” argument for the same reason I don’t accept the “stimulus saves jobs” argument. You can’t prove that it was that the government intervention and not the natural cycle of the economy that did it. You’re just claiming credit for everything. How much do you want to bet that if it fails (and GOD I hope it doesn’t, because we’re incredibly screwed if it does), they will not take one drop of blame? I know they won’t, because they’re politician. That’s how they roll. Very little of the stimulus money is out (5% or less, last I heard), but we’re seeing signs of a recovery. What is the main motivator? Is it the stimulus? Is it people gearing up for the stimulus? Or is it just that supply is high, prices are low, and demand is coming back? What will the ratio be in six months? A year? Five years? Does anyone in power care?
Bush and the neocons sold out their party’s chief economic principles for, IMO, a fantasy democracy proliferation campaign.
You really buy that story? Those guys could obviously care less about democracy, human rights, and the well-being of anyone, least of all in the Middle East. Pure diversionary tactic.
I’m not impressed by the “avoiding a deeper meltdown” argument for the same reason I don’t accept the “stimulus saves jobs” argument. You can’t prove that it was that the government intervention and not the natural cycle of the economy that did it.
Life is not a double-blind study. We have ample historical evidence that a do-nothing approach can have catastrophic consequences. Look at the Great Depression or look at Japan’s lost decade. There’s no such thing as a “natural cycle of the economy.” Business cycles have widely differing periods, so if they were “natural”, as you claim, one would be able to predict their movements, just like we can with other natural phenomena.
Perhaps you don’t know the GDP formula, but here it is:
GDP = consumption + gross investment + government spending + (exports − imports)
Consumption is by far the largest component of our economy, and that took a MAJOR hit. Gross investment, which had been held up by housing sector investment – another huge hit.
So all that’s left to support GDP is government spending. Since most states have balanced budget requirements, cannot print money, and can’t just run up debt if their credit ratings start tanking, that leaves the Feds as the last resort. This is why fiscal stimulus is turned to.
Of course fiscal stimulus creates jobs. For example, a road that may have been scheduled to be fixed or built in 2012 gets put on the schedule for 2009. That is a job that the government is directly funding in the present day that otherwise would not have been there. That person, who is in an employment category with high unemployment, now can draw a good income, pay taxes, and patronize businesses — all of which helps maintain or create jobs above a level in which he’s simply drawing welfare.
Very little of the stimulus money is out (5% or less, last I heard), but we’re seeing signs of a recovery.
No, we’re seeing signs of a slowing of the recession. It’s possible the business cycle trough is starting.
Getting caught up in who takes credit or whatever is irrelevant. It is a president’s job to make difficult decisions in an environment filled with uncertainty and risk. If he were to do nothing, then what is the point of having a leader? Anyone who simply eschews human intelligence and leaves things up to chance is outrageously irresponsible. This does not mean that acting always creates positive results. Far from it.
Basically, given the “let the free hand deal with it” approach is like a baseball player stepping to the plate and never taking a swing. He’s just going to let fate decide whether he gets hit by a pitch or walked. But he doesn’t do that and he swings quite a bit, and even the most successful players only succeed about 1/3 of the time. But often that’s enough for team success.
If he never swung, it’s almost certain that his team would always lose.
Thinking that this whole mess would have just worked itself out without any intervention is foolhardy. We could easily have seen the entire international financial system go in the crapper for a very long time. And it wouldn’t have just taken the US auto industry with it.
Fortunately, enough people are smart enough to realize the risks of doing nothing are almost always greater than giving things your best shot. Disagree with his politics all you want, but at least people can be confident that it’s people near the top of the intellectual food chain, and who are unusually ethical for the political class (especially the president) who are the ones in charge.
Nope, the 1st gen Asian immigrants in this town drive beater Japanese vehicles almost exclusively. This town is a little more extreme than others I’ve lived in, but I am very confident in my general observations.
Absolutely the more they are involved in the local culture. Southeast asians also tend to form closer knit communities in the US than their northern and western neighbors.
I’m not trying to invalid your observation, but explaining how this cultural transform came about from what I’ve seen. Older domestic clunkers simply make for poor purchases for people looking for least cost/hassle transportation, especially during the period when immigration from these regions increased starting in the 70’s.
It’s very unlikely because asians of vastly varying ancestral homelands decided to “stick together”.
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Maybe recent mainland Chinese immigrants will start bucking these trends, but it will take a long time for that to start showing over here in terms of the overall situation.
The point I was trying to make with that portion of the post is that asian-proper culture (or any region) is not necessarily the same as asian-american culture. Culture is localized and not ethnocentric.
I don’t think I’ve ever seen a ricer in all of asia outside of Japan, and the majority of American ricers are not Japanese and increasingly not asian.
Cultural influence easily dissipates within a generation anyway, as the observation that german cars are popular with new-gen “azn’s” in many hot spots on the west coast.
Fortunately, enough people are smart enough to realize the risks of doing nothing are almost always greater than giving things your best shot.
Well, I don’t know about that. Iraq and Afghanistan were certain much worse than doing nothing after 9/11.
It’s better that we evaluate all action on its merits.
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Bush and the neocons sold out their party’s chief economic principles for, IMO, a fantasy democracy proliferation campaign.
I’m pretty sure there was plenty of warning about how clueless and corrupt those guys were. Unfortunately, a large portion of our citizens don’t heed the advice of society’s best and brightest.
Better start listening to those people now.
Good points. I knew it was ill-advised to wade into such a tangent, but I’m not fond of absolutist generalizations, and I was seeing both “Asians drive Asian cars ’cause they’re Asian” and “No, they drive them ’cause Asian cars are high quality” – both of which don’t always hold. “They drive all kinds of cars in the same proportion as everyone else” is equally absurd.
I thought my measured and qualified comments would sufficiently cover my view on the matter, but apparently most people didn’t read my caveats and instead just simply call me racist or something close to it. If they actually saw me and met me, that would be worth a very hearty laugh.
Suffice it to say, it seems we can all agree that observationally, people of Asian descent are probably more likely than the rest of the American population to drive vehicles made and/or branded by Asian companies. If we had the actual data available, I’m confident it supports that hypothesis.
A cursory search for consumer preference studies by ethnic origin yielded nothing but walled-off marketing pieces.
Perhaps we’ll be fortunate enough to have an industry marketing insider give us the scoop on actual research, which of course exists.
You’re absolutely right, CarShark.
One-party rule is working to transform this once-great country into a tyrannical utopia. This is the closest they’ve come to pulling it off. And, they’re just getting started.
Well, I don’t know about that. Iraq and Afghanistan were certain much worse than doing nothing after 9/11.
OK, now try to imagine Bush having not responded at all to the attacks. That would have ended his career right there and then.
Point is, people expect a president to do something, and rightly so. In an extreme situation, some sort of action is usually warranted. The results of that often take a very long time to know. Just look at Iraq for an example. It’s still unfolding.
The most that we as citizens can ask for is that a leader make a well-informed decision with the best interests of the nation, and the rest of the world, in mind. I think Iraq was problematic because it wasn’t a response to the provocation at all and thus his motives for doing it – rightly so – were suspect. And I have a real hard time sitting here listening to bellyaching about the collapse of the world as we know it over $50 billion put in a speculative investment, as we just saw a guy flush $2,700 billion down the crapper with no measurable upside and which got tens, if not hundreds, of thousands of people killed.
Disagree with his politics all you want, but at least people can be confident that it’s people near the top of the intellectual food chain, and who are unusually ethical for the political class (especially the president) who are the ones in charge.
I wonder if you were singing that tune before last November.
You’re absolutely right, CarShark.
One-party rule is working to transform this once-great country into a tyrannical utopia. This is the closest they’ve come to pulling it off. And, they’re just getting started.
LOL.
I wonder if you were singing that tune before last November.
Why would I be singing that tune when my leader was transparently corrupt, a phony, and a middling intellect at best? Are you one of those 23% dead-enders that still holds delusions to the contrary?
Now shouldn’t you be headed back to your bunker? The black helicopters might spot you with their night vision.
OK, now try to imagine Bush having not responded at all to the attacks. That would have ended his career right there and then.
If he had been a good or better president, he could and should’ve convinced the nation to moderation and reason instead of common knee-jerk overreaction.
The greatest leaders arise not to march to the expected but instead motivate the more rewarding solution down a more challenging path. This is why Obama is close to being a great leader, maybe even in the same vein as FDR or Kennedy.
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I wonder if you were singing that tune before last November.
Intelligence and forthright diligence make a difference. It makes a difference in private enterprise and public governance.
The smartest people disliked the last admin, but general agree with this one. This should tell you something.
If he had been a good or better president, he could and should’ve convinced the nation to moderation and reason instead of common knee-jerk overreaction.
Come on. I don’t think any president could have pulled that off. This isn’t some Zen monastery. This is flag-waving, chest-pounding, USAUSAUSA-chanting, xenophobic, ill-informed America. It is simply not plausible that 19 Muslims killing 3,000 people in the way they did could have been met by some Thich Nhat Hanh exercise, even if that were the best course of action.
Carter is a good, very bright, and measured man, and look what he got for asking Americans to turn down their thermostats a notch in response to our energy situation. Look what he got for being patient with the hostage crisis. I would have much preferred he had been a little more savvy if it had meant getting two terms and fulfilling his energy policies more fully. Just look how history turned for 30 years because of his tone-deafness to what Americans ask for from a leader.
Relatedly, by going out on a limb with energy like he did, that is an example of him taking action when he could just as easily punted it along like his predecessor (and successors) mostly did.
Carter is a good, very bright, and measured man, and look what he got for asking Americans to turn down their thermostats a notch in response to our energy situation.
That is why he’s not a great leader. Smart guy ahead of his time, but unfortunately not a leader.
It’s somewhat of an undervalued trait among more academic circles, but in reality it matters because that’s how humans collectives work.
How many really thought in ’61 that there would be a man on the moon by the end of the decade?
Society could only wish that only our competent heads of state are charismatic, and the duds unattractive.
Getting caught up in who takes credit or whatever is irrelevant.
@long126mike:
That’s a damn lie, and you know it. If the stimulus works before the 2010 elections, the Dems do the victory dance, pillory the GOP into the next geological epoch and ride the wave to a super-mega-ultra-majority of the seats in both houses of Congress. They will run untethered for at least a decade.
If it works, but not until after the 2010, the Dems will lose some seats, but may gain more than enough back.
If it fails, the GOP will lord it over the Dems and likely get some seats back, at least enough to get their filibuster power back in the Senate. Maybe by 2012, if the failure is still fresh in people’s minds, they might get a house of Congress back.
Assigning blame and taking credit will be HUGE.
Well, let’s hope the best for Chrysler and GM.
BTW: The state of Lower Saxony still has a 20% share at VW and VW is not conceived as Government-Wagen. So, the question of ownership is secondary, provided there are decent products.
But I doubt that cars built for the US market will gain market shares abroad.
Ford never made any attempts to sell the Mustang in Europe. although they have a dealership. You also won’t get a F150 here.
In the case of Chrysler their cars (manufactured by Magna Steyr) were simply overpriced. The same car sold in the US for about 30,000 $ was about 50,000 € here.
Giving away lots of money in ways that benefit people and organizations who have supported your campaign sounds like more of the same old stuff, not a more “challenging path.”
Basically, with Obama we’ve got the same old wine in a more articulate bottle, and with better abs to boot.
That makes him a potential coverboy for Men’s Health & Fitness, not a great leader.
long126mike :
June 11th, 2009 at 6:39 pm
Now I’m seeing all kinds of bald generalizations by you. “Chinese are very racist”? Really? All of them? More so than people from other countries?
And all Chinese are “thrifty” and “good savers” and have “large houses”? Talk about stereotypes! Are they all math geniuses, too?
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As true as Japanese cars are reliable.
You can find counter examples if you really want to. But for most people, most of the time, that’s as close as it gets.
agenthex :
June 11th, 2009 at 6:28 pm
You don’t seem to understand how systematic problems work. A bank may not want to lend into an uncertain economy, perhaps in part also due to leverage problems, so it holds onto money much more than usual. It makes sense for an individual bank, but when they all have the tendency to do this, the economy stops.
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This is not about free market. This is about having control of your own money.
Are you going to lend money to your drug addict cousin? Most people won’t, if not out of principle, it’s about his ability to repay the loan.
Same with sub prime burrower, be it a house flipper in Vegas, or GM. No one is obligated to lend to any one.
When you are in a hole, the first step is to stop digging. We are in a deep hole of sub prime loans, and your are advocating more sub prime loans? And even worse, this time all tax payers are forced by the American military to be the lender.
After reading the site for almost two years I’ve decided to make a comment. As a foreign national and citizen of another country, Where American brands share market with Japanese, and Europeans are just aspirational, I can say that the Det3 had this coming and race here does not have much to say. I also own a beater 1989 Plymouth Voyager that is more reliable than the 1997 Pontiac Transport. There doesn’t seem to be much difference in the underpinnings of both. If anything, the Pontiac has more gadgetry inside (which fails constantly, like the electric sliding door), and ABS, but not much more different. What happened to almost 10 years?
It’s funny that GM and Chrysler have not lost that much market share here, even as terrible news come from the US. I guess people read less blog commentaries and stick with the “pro” opinions to make their purchases.
In the end, I think it is the sharing of opinion and freedom of expression that’s helped the US community realize what they had, and punish the manufacturers for their lack of commitment to customer satisfaction.
long126mike :
June 12th, 2009 at 1:22 am
GDP = consumption + gross investment + government spending + (exports − imports)
Consumption is by far the largest component of our economy, and that took a MAJOR hit. Gross investment, which had been held up by housing sector investment – another huge hit.
So all that’s left to support GDP is government spending.
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China has the best GDP growth among major nations, and there is a popular story there:
Two executive MBAs are jogging together when they see a pile of dog shit. Person A proposes to person B, “if you eat it, I will give you $50M.”
To earn the money, person B eats the shit.
After awhile, person A starts regretting the expense and person B starts feeling really bad about self-respect. So, when they see another pile of shit, person B proposes the same deal and person A accepts.
Now they are confused that neither of them earn any money and yet each of them eats a pile of shit. After knowing the story, their professor tells them “Don’t worry, it’s worth it. We have $100M extra GDP now!”
The lesson is that GDP = shit.
It’s “wealth” that matters. Government stimulus does increase GDP, but it also dilutes the dollar. Overall wealth is not increased. It may even decrease, since each action the government takes only adds to the inefficiency.
The lesson is that GDP = shit.
It’s “wealth” that matters.
You might as well have said, “People shouldn’t eat meat. They should eat the flesh of animals, instead.”
Nobody who actually knows anything about economics argues with the GDP = C+I+G+(X-M) formula. We might be better off if posters here would keep these political rants to a minimum, as they deviate from the topic and misinform people at the same time.
long126mike :
June 12th, 2009 at 4:06 pm
Really? So if the government comes in and builds a bridge across a river that previously required ferries to cross, and that ends up allowing commercial surface shipping to go through without stopping, this “adds to the inefficiency”?
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Of course.
The longest bridge in Canada is the one that connects P.E.I to the mainland. It’s a private investment. It finished on time (not that I care if it didn’t) and without costing taxpayers a dime.
In contrast, my local municipal government cannot even get an intersection overpass done right. Now, it’s over-budget 200% as compared to 2006 estimate already.
long126mike :
To summarize, when a mess occurs on a Republican watch, it’s “both parties’” fault, as well as that of “everyone,” which means no one.
FWIW, I’m a registered Democrat in an area that is largely Republican, but I do not go through life with blinders on. Do you have to see everything thru the prism of partisan politics?
I stand by what I said. My memory goes all the way back to IKE and there have been as many screw-ups from one side of the aisle as the other.
Pch101 :
June 12th, 2009 at 2:04 pm
Nobody who actually knows anything about economics argues with the GDP = C+I+G+(X-M) formula.
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That formula is fine. I never said it would yield wrong GDP numbers. I merely said GDP is not a measure of wealth.
I merely said GDP is not a measure of wealth.
It isn’t and no one claimed that it was. It’s a measure of income.
I wonder how this would work in a school. Johnny gets 8 out of 10 questions right. Timmy gets 2 out of ten. But since they both have errors, they both must be failed.
Exactly.
The fundamental rhetorical trick is like this:
If the president of the United States starts a war without provocation that directly expands the public debt by $2.7 trillion, and which gets 10s of thousands of human beings killed, all the while financially benefitting his biggest backers and the world he comes from while the rest of humanity takes it on the chin, which then leads to the brink of the total collapse of the global financial system, the natural wingnut response to this is to find some random left-wing whacko like Ward Churchill saying something mean and then comment, “See? Both sides are bad!”
The “Dems bad/Repubs good” and “Repubs bad/Dems good” nonsense gets really old.
I agree, strawmen arguments get really old. I never said that nor implied anything of the sort.
If the president of the United States starts a war without provocation that directly expands the public debt by $2.7 trillion, and which gets 10s of thousands of human beings killed, all the while financially benefiting his biggest backers and the world he comes from while the rest of humanity takes it on the chin, which then leads to the brink of the total collapse of the global financial system, the natural wingnut response to this is to find some random left-wing whacko like Ward Churchill saying something mean and then comment, “See? Both sides are bad!”
No – that’s your trick. Bush was not being discussed here, but so far as I am concerned he should be prosecuted for murder – see Bugliosi, Vincent. That said, ever heard of Vietnam? I did, up close and personal – 57,000 American deaths thru another lie. That one happened to be Democratic.
And there we go, another dash of false equivalency, more lying, and some gratuitous personal insults. What would a healthy exchange with an outmatched wingnut be without the predictable ending?
I am actually very funny, it’s just that the humor seems to elude those with lesser intellects.
And you have the nerve to accuse me of gratuitous insults?
All I’ve ever said is that crackpot partisans exist on both sides of the aisle. From that, you have quickly deduced that I am a right-wing nut because I take issue with you.
At his point, I bow to your superior intellect and give up.
to the tin hats:
1) It’s not “the ” government – it’s “your” government. If you really believe in “freedom” absorb this and figure out when this concept of government apart from the people became common thought.
2)If you want to see how congress makes decisions follow the money.
3) If you want to judge who’s pulling a fast one start with anyone who waves the flag and cries “freedom” at any opportunity. HINT: watch the hand that’s not waving the flag.
4) use google – do some simple research to back up your ideas. Separate facts from opinion and from those facts derive an opinion.
5)Here’s a good question: why are unions and health care bad for the US and good for every other industrial state on the planet earth? Wait – use google – ask a foreign tourist in your town – think – follow the money.
5) Try to treat the next guy well – and tip your waitress.