Speaking in Frankfurt, Fiatsler boss Sergio Marchionne warned the world that post-Cash for Clunkers American auto sales are a “disaster.” Like you didn’t see THAT one coming. Sergio reckons the industry benchmark—the Seasonally Adjusted Annual Rate (SAAR)—will fall below the “conservative” 9.5 million SAAR estimated for September. Folks, that’s after August’s 14.1 million number. “Even GM’s Fritz Henderson has thrown in the towel,” iStock Analyst reports, “saying that September will be a ‘very weak’ month.” Me, I’m with Sergio. The September numbers will be so bad that Michael Moore’s rendition of Bob Dylan’s “The Times They Are a Changing” may even be on Bob Lutz’s iPod. Just kidding. But seriously, what now?
iStock takes stock and wonders . . .
We are not sure yet how the MSM will prepare the public for the collapse that is now expected in auto sales when they are reported in the first days of October. The bigger surprise is why the auto industry is not following in the footsteps of Senator Isakson and demanding not only yet another extension to Cash For Clunkers but also an expansion. At this point there is no point in the government pretending it is not subsidizing any and all industry.
You will remember, of course, that the last time the sky was falling in, the federal government spent over $100 billion rescuing GM and Chrysler (and Ford; but shhh, we don’t talk about that). The big question is: will Uncle Sam re-up? Will another $100 billion-plus of your hard-earned taxes disappear down a Detroit-shaped rathole?
This is, of course, a political calculation. And there’s no question that the political forces ranged against Bailout Nation are better organized and less patient than before. We could see a major battle—THE major battle—form around a Chrysler/GM triple dip.
To avoid that possibility, especially in the run-up to mid-term Congressional elections while still doing something—’cause we have to do something—renewing Cash for Clunkers is a logical step. The Cash for Clunkers “success”—i.e., its adoption without political wrangling or damaging Glenn Beckian scrutiny—begs for a repeat performance.
Which raises an uncomfortable question that iStock faces head-on (apply palm directly to the forehead):
As David Rosenberg and other economists have speculated, the government accounts for 80%, if not more, of all the “growth” experienced in the economy. The issue is that, as any first year analyst at an investment bank will attest, all such comparable stimuli are considered “non-recurring” unless of course, they become, “recurring.” But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model. Which, (un)fortunately, is where the US is now and will be for an indefinite amount of time.
Meanwhile, what WE want to know: can GM’s current crop of Old GM incompetents (i.e., their management) survive September’s sales news? They will, no doubt, point to everyone else’s sinking sales and say, see? Not our fault. Again. Still. But that one is getting old, and somethingmust be done. Look for heads to roll—especially when Chrysler and GM’s cash burn is exposed. IF it’s exposed.
Why wouldn’t it be exposed? Didn’t Fritz Henderson pledge, under oath to the U.S. Senate, to maintain transparency on all things GM? Why not face the truth? Now there’s a question for the new, “transparent” GM . . .
But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model. Which, (un)fortunately, is where the US is now and will be for an indefinite amount of time.
You obviously have zero idea what an economy based on “central planning” is. You’re either engaging in hyperbole, or you’re historically illiterate. Or both.
Does the federal government decide how much steel is made? How much toothpaste Kroger gets? How much wheat is grown? How many ball bearings appear at what factory at what time? No. That is a “central planning” model, and we’re not even in the same universe as that.
Oh, forget that thing about Kroger. Under central planning, there wouldn’t be any Kroger’s. There would be a government-owned state store, and that’s it.
Seriously the closest thing I can think of that we have in this country to Soviet-style planning of consumer goods are state liquor stores, and even that doesn’t quite qualify since the distillers are still private even if the stores and distribution system isn’t.
Damn. Any animal in this bad a shape would have been put out of it’s misery a long time ago.
When is all this enabling of the auto industry going to stop?
Why can’t people just admit that the market cannot adjust because there’s too many companies being artificially supported. If the market were allowed to function as a free market should, then the hole detroit would have left would have created healthier companies since the demand they would have left would have been picked up by other companies.
But now we (and by “we” I mean “the US taxpayer”, I’m well out of this one!) have a majpr problem. If the US government were to abort this bailout program for Detroit, then many people will complain that they wasted $100+ billion to no end. So, more than likely, the US government will carry on ploughing money into Detroit, in order to justify what they are doing. In short, they’re going to need a bigger purse….
Also, if I were Ford, Toyota, Honda etc, I’d be looking to put a complaint into the WTO. It, surely, can’t be fair that Ford with their cash hoard can fight a government owned entity with deep pockets? It’s an unfair fight. Whatever money private enterprises put into their business, government owned companies can do 10 times over.
Commando—2 more national election cycles
“stars9texashockey :
September 17th, 2009 at 9:58 am
Commando—2 more national election cycles”
Of course. What was I thinking?
“2 more national election cycles”
You seem to forget it was the GOP that launched bailout nation.
Let’s not forget who fathered this TARP.
Brace yourselves, friends. Its the beginning of the end of Corporate Centrism. With Republicans calling it communism and the Democrats calling it privatizing the Treasury, the idea that bipartisanship is good for business has totally been thrown out the window.
+1 on BDB
I’m more than a little tired of hearing about how the current government is “socialist,” “communist,” and so forth myself.
People who believe that the market can handle things all on its own are living in a fantasy land, not the real world. When the market is left to its own devices, you get huge boom and bust cycles and a much lower average quality of life.
What we have is neither socialism nor pure capitalism. We do have a government trying to deal with a mess partly of its own making, but largely created by business.
On a different note, some people seem to conveniently forget that the bailouts didn’t begin with Obama. For the same reason that the war isn’t ending with Obama. When people are in a position where they’re not just talking, and their actions have definite consequences, and they feel responsible for these consequences, they don’t end up with a lot of latitude, and you can’t simply act out an ideology.
But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model
This is nothing close to that. Seriously.
Just because we don’t live in some anarcho-capitalist Somalian paradise does not mean that we’ve turned pinko. You may as well claim that we’re followers of Mein Kampf because we built an interstate system modeled after the Germans.
Let’s not forget who fathered this TARP.
But it’s much easier and more convenient if we do. Following the guidance of Orwell, when they don’t like history, the GOP just rewrites it.
The Republican party is good at pointing fingers, but forgets that when you point a finger at someone else, you end up with three pointing right back at yourself.
Let’s not forget who fathered this TARP.
You know what? I’m in the weird position of being against TARP but for the auto bailouts. I think manufacturing is the core of an economy, whereas Ivy League financial whiz kids pushing paper around are pretty much the closest thing to parasites on our economy that we have.
Looks to me that sales are going to stay in the tank as long as prices remain high and dealers attitudes refuse to change. I live in the Detroit Metro area and I’m in the market to buy or lease a new crossover vehicle as my current lease runs out in a few weeks. Myself and several people I know have gone out to buy/lease new vehicles only to find sticker shock and GM prices that are locked in concrete. They are unwilling to dicker at all even on 2009 models. If I lease again, my payment would nearly double.Buying even with a 72 month schedule is out of the question with payments a couple hundred above what my lease payment was. No way can I afford it. Can someone explain to the car dealers that a 2009 is yesterdays news when they have brand new 2010 vehicles on the lot? I’m tired of pointing out that a 2009 should be fire saled now as it has depreciated significantly once the 2010’s hit the lot. I’m looking at something used. It’s easier.
Katie P….could not agree more. Ford and others are in an unfair fight with government owned entities.
That said, one thing consumers can do is vote with their pocketbook. I recently took a job where the company gave me a lump sum to go buy any car I wanted.
My daily commute is pretty long (80 miles each way–mostly highway) so I wanted something comfortable. Being domestic biased in my choice—it came down to a 2010 Buick LaCrosse(yes I could get one)or a 2010 Lincoln MKZ.
Although the LaCrosse was a very nice car, I chose the Lincoln because I have had a very good experience with my 2007 MKX—but also I didn’t want any money going towards government motors. Net, I voted with my choice—I think other consumers are as well given the fact Ford is growing share while GM continues to decline.
Anyone with the least bit of common sense could see that artificially inflating demand for cars would result in an exaggerated deflation of demand once the program was over.
And yet, the so-called “leaders” of our nation can only engage in thinking that is short-term, knee-jerk, pandering to special interests, and designed to get votes.
We have no mature adults capable of sound reasoning left in Washington.
My comment of “2 more election cycles” applies equally to candidates of both parties.
Retardedsparks: “You seem to forget it was the GOP that launched bailout nation.”
Response: Look what it got them.
Sales are plummeting? It’s perfectly obvious what must be done: renew the Cash For Clunkers program, triple the subsidies, and ensure that any car I own or acquire qualifies for the giveaway.
Showrooms will be packed! And that’s the important thing, right?
Katie
I too agree with you. However, it is all about who’s ox is getting gored. Jag and LR are the least important in my world and certainly can’t support themselves. I read about lots of British “help” disguised as other things. Those little niche parasites should be the first to go. Plenty of others to take their place.
You know what? This is the head of Chrysler talking. Of course he’s going to try to lower expectations for September sales, because for Chrysler they probably will be a disaster. Because Chrysler’s lineup is mostly garbage right now.
Did you ever think that entered into his statement?
But at that point the economy is effectively one based on central planning: the key construct in any Communist/Marxist economic model. Which, (un)fortunately, is where the US is now and will be for an indefinite amount of time.
Jeff, you can do better than this. It’s extreme and inaccurate and undercuts your point about car sales. Every line is factually incorrect.
I’ve deleted the lengthy analysis I had originally put here, but feel free to contact me over email (my name at gmail) if you want an explanation about what Communism and Marxism actually are, as well as their relationship to central planning, and the actual, non-alarmist position of the U.S. right now.
Michael Karesh: When the market is left to its own devices, you get huge boom and bust cycles and a much lower average quality of life.
Maybe for financial markets – one can certainly make a strong case that one of the primary responsibilities of a national government in a modern industurial economy is to prevent wild swings in the banking and financial sector – but not in the automotive sector.
Continued bailouts of the automotive sector only lead to robbing Taxpayer Peter to pay UAW Member or GM Executive or GM Dealer Paul. That isn’t raising the overall standard of living.
The brutal truth is that GM and Chrysler, along with several second- and third-tier foreign marques, are still in very big trouble. GM and Chrysler didn’t do all that well under the Cash For Clunkers program, and now that this artificial stimulus is gone, are going to be in a world of hurt.
Yes, the bailouts prevented the total collapse of the automotive sector at a very delicate time. But, in GM’s case, they also removed the urgency for the dramatic change in corporate and union culture that the company really needs to survive. (Chrysler may be too far gone for anyone to save it, but we can hope that it’s Fiat’s problem now.) Plus, there comes a point where continued government support hurts the one domestic company that HAS tried to change the way it is doing business.
Ironically, for all of the wailing about President Obama running GM, it looks to me as though he didn’t go far enough. More than Wagoner’s head was needed to effect true culture change at GM. I see very little difference between the old GM and the new GM. Yes, the new cars are better (so what – many of them had nowhere to go but up), but I’m not seeing anything that makes me want to swap my Honda for a Chevrolet or a Buick. But we are looking at Fords, and not because it hasn’t taken any TARP money. What is on the showroom floor does reflect corporate culture, for better or worse…
Perhaps true culture change is impossible with a government bailout.
The simple fact is that the longer GM sputters along, the more of a liability it becomes for both Obama and Congress. The majority of Americans (including Democrats, by the way), initially opposed the bailout of GM and Chrysler. Having to pump more money into GM isn’t going to convince them that this was a good idea.
Strip away all of the hype about jobs and history and the UAW, and the simple fact is that GM is a consumer products company that is failing at its basic mission – attracting enough paying customers to turn a profit for its shareholders. The more this drags on, the more taxpayers are going to ask why they should prop up a company that is failing in the marketplace.
Talk about exit strategies – the President had better have one prepared for GM within the next year or so, if things don’t turn around soon.
If you are in any type of sales job…
Ahem… well… best of luck to ya. You will need it.
Zombie houses… spooky economy… sprays of red ink… beckoning undead… I’m feeling a groove comin’ on!
The real problem is car industry overcapacity, too many vehicles chasing too few buyers. The carmakers try to sell 11-12 million new cars every year, because that’s how many they can build. It’s hard to sell that many at an appropriate profit during the best of times. Exasperating the issue is improved durability. With reasonable care a modern car can last 15 years and more than 200,000 miles. The 1960s fleet recycled every 5-7 years. Population increases cannot absorb the surplus capacity.
North American car market players tripled in the same period. In 1970, GM controlled about 50 percent of the U.S. car market; Ford and Chrysler had 20+ percent each. AMC was insignificant. VW, Toyota, Honda and Datsun (now Nissan) hardly registered, and they produced small cars only, not the full range of models they offer today. Mercedes, BMWs, Audis and Volvos were rarely seen outside the coasts. There were no Acuras, Lexi or Infinitis; the U.S. luxury car market was almost exclusively Cadillac and Lincoln.
Instead of allowing the weak and incompetent to fall by the wayside, capitalism’s natural order of things, for self-serving political reasons the U.S. and Canadian governments threw taxpayer dollars at the floundering automakers and unions like confetti. It can only delay the inevitable. The jobs supposedly saved will ultimately be lost because the market cannot absorb 12 million new cars every year. Reality will win out if we don’t bankrupt ourselves first, but by then the politicos will have found new ways to look after themselves on our dime.
Since we are on political/economic theory
People forget that all of the overcapacity in the market was a result of economic policy from 2000-2008 (not just cars, but housing, debt, everything). By trying to avoid a minor recession (related to dotcom, Y2K and 9/11) we ended up creating a major one. (And its not all on the republicans, an independent fed sets interest rates).
The first Bush lost his second term because he did nothing when there was a minor recession (which was exactly the right thing to do, economies have corrections and by allowing what is wrong to correct, you open the door to the next stage of growth).
What the second Bush did was to allow an economy that had become fundamentally flawed to continue and instead of closing the damper, gas was poured on the fire (especially considering that he inherited a balanced budget)
And therein lies the problem with this country, in government/politics it’s no longer about what’s best for the country, it’s about what’s best for making sure that you (and your party) are re-elected. And until that trend stops the reality is a sad one (there was a President, I forget which, after being elected, stated (paraphrased), I am not going to run for re-election I am going to do what is necessary to fix what is wrong with this country and that’s what he did, and that is what we really need right now, a President that will veto every budget that is full of shit and actually pay for the benefits that we do receive or we need term limits for congress and to make the “line-item veto” a constitutional admendment (that was the best law ever enacted, one that worked beautifully and one that congress knew the supreme court would throw out)
Well, the relentless pursuit of Volt development looks a little like central planning to me.
1. It has no (profitable) business case.
2. It is a governmentally-correct ‘green’ product offering.
3. Won’t be one of the vehicles ‘Americans want to buy’.
4. Heavily subsidized by the government.
Juniper,
I’d be interested to read about this “help” Jaguar and LR got, because the last I read they were promised help by the UK government, but it never materialised, so Tata got funding of their own accord. No problem there.
I’m not questioning you, I just want to see if I’ve missed something.
The first Bush lost his second term because he did nothing when there was a minor recession (which was exactly the right thing to do, economies have corrections and by allowing what is wrong to correct, you open the door to the next stage of growth).
Jimmy Carter, as maligned as he is by certain segments of the public, ran into the same problem. He needed to get rid of inflation, and the only way to do that was to raise interest rates. So he appointed Voelker as Fed chair who raised interest rates to outrageous levels to purge the economy of 1970s inflation. This caused two nasty recessions and Carter the Presidency, but it worked. And Reagan took the credit.
We’ve known for a long time that there are too many auto manufacturers, and those American companies that depended on their US share had to lose when all of them converged in the US market. Even if US sales didn’t tank, the additional volumne would damage US companies.
The formerly Big Three had to change – and they did over the past fifteen years – to SUVs and trucks. They took the profits and bought up all the global brands they could. But they didn’t do enough.
When the economy tanked, the jig was up. There is nowhere else to go but down – and fast. Now we see that those companies that have been growing overseas, are in a better position to weather this economy than the US companies. The little global companies lose their US share, but not the share they grew up on – they have a reserve.
But the US companies don’t have that reserve because they lost the only market they where they were profitable. They lost any of their reserves when they bought up global companies during the 1990s. They have nothing. Is that OK with you?
We can either support the US companies through bailouts during this economic downturn, or we can let the weakest go under first, hoping that the last man standing – Ford – can survive long enough to pick up any market pieces from GM and Chrysler. Even if Chrysler goes under now – that would be an additional 3% of the market available for the survivors. IF GM and Chrysler go down – it frees up about 20% of the auto market for Ford, Toyota, Honda and Hundai/Kia to weather the economic downturn.
But even then the downturn will continue here in the US. Those laid off from the GM/Chrysler debacle will force the economy down further – forcing a continued reduction in the auto market.
The US automaker situation is one where we cannot do nothing. The bailouts are our best gamble if we wish to stop our economic freefall. Whatever billions is spent on them has to be considered in light of the billions that would be spent supporting unemployment, regional markets, and social costs. The bailouts will help us keep the infastructure in place – viable after the global economy rebounds. If we let these companies crash – we lose trillions and never get those manufacturing processes without NASA size investments.
So, it’s either billions now – or trillions later. If you think the bailouts are expensive and should stop – imagine how many trillions it will cost to return us to where we were in 2008!
Gardiner Westbound, exactly…
As a fellow Canadian, how many times have we seen federal, provincial, and to a lesser extent municipal governments trying to lure new business or prop up old ones that simply aren’t economically viable? Outside the car industry, my favorite was the massive tomato greenhouse out east that they ended up selling for $1.
The simple fact is that investing in a business plan that isn’t viable is just a subsidy, and that as soon as it runs out, more is required to prop it up. Couple that with the politicians inability to grasp ‘sunk costs’ and the taxpayer gets it in the neck.
I think the idea of substituting newer cars that pollute less is laudible, the fact is the longer it goes on, the more sales are being drawn back from future months. Do this for another six months to a year and hangover is going to be catastrophic.
I think you all are focusing a bit too much on the very end of the sales channel (consumer purchases) and not at the major factors that affect the entire supply chain / sales funnel.
As it’s been pointed out dozens of times – automakers show revenue when they ship a car to a dealer. The question you have to ask is whether or not dealer orders are still going strong. When Chrysler’s dealers in 2008 refused to take on additional inventory; that was a major problem that manifested itself after many months of poor sales at the retail level. One crater month at the retail level does not necessarily mean disaster as you move up the channel.
Don’t get me wrong, customer purchases are a huge factor in the auto industry and are still important. Obviously dealers care very much about their sales. I’m just pointing out that everyone in the auto industry knows that you don’t forecast things on a year over year basis or based on a single data point. But yet that’s how sales get reported; the MSM and armchair pundits tend to focus on YoY changes. Luckily most volume forecasts within the supply chains tend to focus on projected SAAR, seasonality patterns, segment changes, known new model launches, and market share.
This editorial mentions SAAR, but grossly mis-uses it. It’s not as if during the month of August the entire auto industry suddenly shifted to a forecast of 14M SAAR going forward only to be slapped in the face at a lower SAAR in September.
Just because there isn’t A CENTRAL 5 YEAR PLAN in the US, doesn’t there no central planning. There is at municipal, county, state and federal level, all of it contradictory, all expensive.
Just because there isn’t A CENTRAL 5 YEAR PLAN in the US, doesn’t there no central planning.
There is no “Soviet-style Communist” planning in the U.S. economy outside of very limited sectors (like the defense sector), full stop. And NONE in consumer goods, period. Regulations, subsidies, and tax incentives are not the same thing as Soviet-style central planning, and they’re something every advanced economy engages in.
Here’s what I would do:
1) Not renew cash for clunkers.
2) GM still has too many brands. I would whittle it down to 2 brands: Cadillac and Chevrolet. Forget about Pontiac and Buick. Lots of people will lose jobs, but I just don’t see how that can be avoided long term. Better rip off the band aid all at once than to slowly peel it off.
3) If I was Ford, I would get rid of Mercury.
4) Chrysler is just crap. Let the Italians do what they will, but frankly, I think it has to go.
gslippy :
Well, the relentless pursuit of Volt development looks a little like central planning to me.
1. It has no (profitable) business case.
2. It is a governmentally-correct ‘green’ product offering.
3. Won’t be one of the vehicles ‘Americans want to buy’.
These might be aspects of the Volt program, but they are not inherent in central planning systems. To say “these are present here, and present in centrally planned economies, therefore this is a centrally planned economy” is a logical fallacy. Why not say “Derek Jeter wears a uniform, Fidel Castro wears a uniform, therefore Derek Jeter is a Cuban revolutionary.”
4. Heavily subsidized by the government.
In my opinion this is the closest you get to what central planning actually is. But then not.
Consider the phrase itself: Central and Planning.
Where is the “central” decision making apparatus?
In the Ministry of International Trade and Industry? GM makes its own very bad decisions about the Volt, and the government has written several large checks. But if we’re going to call the economy “centrally” managed, we’d need to see the majority of economic decisions coming through one office, place, person, etc. We can point to a few, even several, places the Federal government has been the nexus for decision-making economically (Hank Paulson’s October 13, 2008 meeting with the banks comes to mind), but no, it’s not the case that the heads of all the industries are in the same building, having daily meetings.
As for “planning” — who is doing the planning? If anything, the problem with GM and the Volt is that it’s not been planned at all. What is the plan for GM? Who is writing the business plan for GM? What orders has the government given to GM, other than “cut costs”.
The Volt program is stupid, and the government shouldn’t be subsidizing it. But if we’re going to call it central planning, we may just as well call it a potato, because in reality it’s neither.
BDB: So he appointed Voelker as Fed chair who raised interest rates to outrageous levels to purge the economy of 1970s inflation. This caused two nasty recessions and Carter the Presidency, but it worked. And Reagan took the credit.
Carter did take steps that helped him lose the election (the Iranian Hostage crisis also hurt him badly).
But remember that Reagan could have fired Voelker, but didn’t. He stayed the course, too. Also remember that by early 1982, the media, Democrats and pundits were calling the downturn the “Reagan Recession.”
Justin Berkowitz: The Volt program is stupid, and the government shouldn’t be subsidizing it. But if we’re going to call it central planning, we may just as well call it a potato, because in reality it’s neither.
Can we call it government subsidizing a bad and very expensive idea, which isn’t much better in the long run?
But remember that Reagan could have fired Voelker, but didn’t.
I don’t recall a President ever firing a Fed Chair. Since the Fed is supposed to be apolitical, it would be a horrible move.
BDB: But then that takes the edge off of Carter’s loss…it wasn’t as though he remained stalwart while the Federal Reserve Board raised interest rates. It was more like he suffered under something that he couldn’t do much about, but that had to be done.
BDB: But then that takes the edge off of Carter’s loss…it wasn’t as though he remained stalwart while the Federal Reserve Board raised interest rates. It was more like he suffered under something that he couldn’t do much about, but that had to be done.
But he appointed him, knowing he was basically appointing a interest rates sadist to be Chairman of the Fed.
It puts the rate hikes on its skin or it gets the stagflation again…
George H.W. Bush also doesn’t get enough credit for beginning the 1990s reduction in our deficit and debt and ultimate surplus. Even though it lost him the election, his budget deal where he raised taxes/slowed spending to reduce the deficit was the right thing to do.
Of course our politicians today learned the lessons of Carter and Bush the Greater too well, it seems.
Er, too well and in the wrong direction.
@ Gardiner Westbound and Nick R..I don’t 100% disagree with Gardiners post. There is no escaping the reality of the Canadian situation.
Our governments were left with no choice. If they hadn’t propped up GM and Chrysler,they would have simply packed up and gone home.
Lets also keep in my mind,fellow canucks,our social safety net,and our not so free health care,come’s with a wicked price tag.
Who is going to pay the bill?
Now,that being said. I really can’t see either the feds or the province/taxpayer having an appetite for any more bailouts.
The Ontario auto industry is certainly picking up right now. But the industry,including the transplants,is on shaky ground. The rising dollar is also not helping our cause.
I guess we wait and see
Hey, they had their shot, I coulda run the big 2.8 down the drain for waay less than they were paying the CEOs etc. Same deal with auto czar.
BDB: Of course our politicians today learned the lessons of Carter and Bush the Greater too well, it seems.
That’s what happens when the focus is almost exclusively on winning, and one-term presidents are treated as some sort of loser barely worthy of mention.
@BDB and geeber:
One more thing – One of the things Carter hung around Ford’s neck in the ’76 election was the “misery index” = infaltion rate + unemployment rate. Reagan in turn hung that around Carter’s neck when it was worse 4 years later.
Hoist on his own petard.
But you both make good points.
“y Robert Farago
September 17, 2009
Speaking in Frankfurt, Fiatsler boss Sergio Marchionne warned the world that post-Cash for Clunkers American auto sales are a “disaster.” Like you didn’t see THAT one coming.”
Hi Bob,
While I fully agree with you above, look at your colleagues in the Detroit area: Especially that nice Polyanna John McElroy, in whose show Autoline After Hours you were a guest a few weeks ago.
Can you believe this guy? WIth a straighty face, he keeps babbling the same myth of how allegedly great the CFC program was! And has done two or three different shows so far where he and his guests parrot that Big Lie, with no opposing views considered!!!!
I work in the hotel industry, in part working with developers figuring out if a new hotel should or should not be built. 10 years ago we did a study for a man in Detroit, he wanted to build a Holiday Inn Express which is generally a pretty easy business decision. When we were done doing our feild work we came back with the conclusion that not only should you not build another hotel, you should sell the ones you currently have there. There is no future for that city simply because there is no future for sustained levels of 14+ million annual sales in the US. We simply cannot pretend that people will ever be buying cars like they did before they were seen as appliances with wheels. The 100 billion is a sunk cost, and the bailouts for the autos are some of the lowest in public approval (less then 10%?) so hopefully the general populous understands that throwing good money after bad is simply crazy. Lets all quit trying to wake up the dead horse and instead just go find another. same goes for every UAW worker, its called college or some other form of advanced training. We need to move on and refocus, and I understand it can’t happen over night. It’s just taking longer and costing more then we had hoped.
Food for thought: Is the 100B really wasted if it goes into out economy. Granted its for shaping and shipping metal no one wants but that money largely ends up with suppliers, advertisers…its not like its totally vanishing.
“Retardedsparks: “You seem to forget it was the GOP that launched bailout nation.”
No. It wasn’t the GOP. It was Bush. The congress, especially the GOP, didn’t want to give them the money. Have you forgotten hearings already?
PeterMoran: Sorry that the commentary is not to your liking. But free speech is still in force at TTAC. At least for now.
“Bush the Greater”
Wonderful, and much catchier than H.W. But remember the fate of Ajax the Greater: Outdone by a sly, womanizing, cunning rival who is remembered far more than the Greater. Homer knew his stuff.
No. It wasn’t the GOP. It was Bush. The congress, especially the GOP, didn’t want to give them the money.
The Republican leadership, as well as a majority of Congressional Republicans, voted for TARP. So did the Democratic leadership and majority of their Congressional delegation.
It is true that both the left wing of the Democratic Party (especially the black and hispanic caucuses, for some reason, along with blue dogs) and the right wing of the Republican Party opposed it. But both support AND opposition were strangely bi-partisan, so you can spin it either way.
Oh, and Bush was a Republican. Just reminding you.
Great article today about Posner’s conclusion that we’re following the Britain right off the cliff:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aj6qdHrVNXhk
The U.S. has an apparent aversion to surpluses, and deficits and the debt have never grown so fast (excepting a very short period during WWII).
We are on a fast track to ‘lack-of-credibility-status’ and manufacturing obscurity.
Get rid of the FED and tie the US back to the gold standard. FYI neither party right now has to courage to tell and or do what is best for America right now. So get ready for more of the same in the future until this elephant can no longer dance no matter what you do.
BDB :
September 17th, 2009 at 9:37 am
Does the federal government decide how much steel is made? How much toothpaste Kroger gets? How much wheat is grown? How many ball bearings appear at what factory at what time? No. That is a “central planning” model, and we’re not even in the same universe as that.
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Let’s get this straight.
1) The federal government does decide how many cars shall be made. The market is pointing to less than 9M/year. Had there been no bailout to GM/GMAC/C4C. We would probably be at 6~7M/year as of now.
2) By deciding the number of cars to produce, the government indirectly decided how much steel to produce. Not a high percentage, but it nonetheless exists.
3) Of course the federal government decides how much wheat to grow. And subsidy is constantly adjusted to reach the desired level. With no government planning, the production level would have been much much lower.
4) Ball bearings? Yes. The government is actively operating GM now. If they have no control over how many ball bearings appear at what factory at what time, the task force is not doing their job.
WSN, you’re confusing subsidies with central planning.
Let me expound on that:
With subsidies, the market is merely distorted. With central planning, market forces are removed entirely.
EVERY economy engages in subsidies of some kind. Even in Glibertarian Randroid Dreamland we’d still have the government building infrastrucutre that corporations would use at the very least. That’s a subsidy.
Wait, aren’t we (the United States of American, through actions of politicians and individual consumers alike) already like an over-extended borrower, looking at the inevitable abyss of bankruptcy, as it is?
Max out those credit cards, baby! …just before the chapter 7 filing!
Justin Berkowitz :
September 17th, 2009 at 11:15 am
Consider the phrase itself: Central and Planning.
Where is the “central” decision making apparatus?
In the Ministry of International Trade and Industry? GM makes its own very bad decisions about the Volt, and the government has written several large checks. But if we’re going to call the economy “centrally” managed, we’d need to see the majority of economic decisions coming through one office, place, person, etc.
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I agree with you in that the current state of affairs isn’t identical to the Soviet central planning. With the Soviets, the government actually had agencies to do calculations and determine the production levels at least one budget year ahead.
However, this is not to say the bailout is not “central planning.” It is more of a fixing in nature. But:
1) It is still “central” in that Obama is the one person (you asked for it). He may not have the exact number of cars to produce in mind, but he definitely has the final say as how many dollars GM would receive. Central planning doesn’t have to be measure in units of products. It can be measured in dollar amount too.
2) It is still government planning. Don’t tell me $1000B+ bailouts and $3T stimulus doesn’t change the rule of the game. If anything, “smart” businesses, instead of trying to meet the needs of consumers, will go where the bailout and stimulus money go.
# BDB :
September 17th, 2009 at 1:12 pm
WSN, you’re confusing subsidies with central planning.
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Same thing. And you thought Soviet state owned factories can maintain their planned production levels without subsidies?
One had to have seen the whining and crying from those who work in the auto industry coming as TaxDollars for Clunkers wound down.
“More taxdollar sugar, please!”
BDB :
September 17th, 2009 at 1:18 pm
Let me expound on that:
With subsidies, the market is merely distorted. With central planning, market forces are removed entirely.
EVERY economy engages in subsidies of some kind. Even in Glibertarian Randroid Dreamland we’d still have the government building infrastrucutre that corporations would use at the very least. That’s a subsidy.
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You have a point, but if a 10% subsidy is a “distortion”, an 80% subsidy is no different from central planning.
With the auto bailout, each GM car/truck is subsidized about $20k, 80% of the price of a typical vehicle.
Not to mention, with competition as fierce as is and margin as thin as a razor blade in many industries, even a 1% subsidy is probably a 100% margin advantage/disadvantage.
Same thing.
No, no it’s not. Subsidizing a market is not the same thing as replacing it with a planning bureau.
And you thought Soviet state owned factories can maintain their planned production levels without subsidies?
No, but this is a fallacy. There are subsidies in central planning, but just because subsidies are present, it doesn’t follow that the system must be central planning. You could take that logic to stupid extremes like, “Nazi Germany had a highway system built by the government. So does the United States today. ZOMG! THE USA IS NAZI!”
You have a point, but if a 10% subsidy is a “distortion”, an 80% subsidy is no different from central planning.
If this were the case, we’d be having symptoms of a centrally planned economy. Shortages, a black market, long lines, years long waiting lists for cars, etc. None of these things are present.
I’d also like to see a link for “80% of the purchase” statement.
To get the automobile sector to start showing the classic signs of a planned economy, the government would have to drive down the price of new Malibus to about $4k or something ridiculous like that.
BDB :
September 17th, 2009 at 1:34 pm
If this were the case, we’d be having symptoms of a centrally planned economy. Shortages, a black market, long lines, years long waiting lists for cars, etc. None of these things are present.
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No, central planning can go either way, shortage or over production. It’s like when you shoot a target, your shot doesn’t always land on the left side of the bulls eye. It can land on the right side as well.
When I was still in China, there were stories that a lock factory produced too many locks and couldn’t sell them. They had to pay the workers locks instead of cash. It happened to other sectors too, frequently.
Right now, we see an over production in the auto sector.
The Soviet style shortages are not directly caused by central planning. The planners were not stupid. Of course they know they would need 100 tons of pork, instead of 50 tons available. But the productivity was low. So, not enough was available even if they could plan more on paper.
Why was productivity low? That happens when the government divert hard working people’s money to bailout state owned factories. There simply wasn’t enough incentive to work hard.
P.S. Even with free market, shortage and over production still exists, only that you don’t pay for someone else’s mistake.
I would personally appreciate a cease and desist on who started what bailouts because that is history that cannot be changed. The more important question is, who has the cajones to stop the madness?
BDB:
“The Republican leadership, as well as a majority of Congressional Republicans, voted for TARP. So did the Democratic leadership and majority of their Congressional delegation.”
You’re still missing the point. TARP was for the financial system, pushed by the Treasury Secretary (who really was a democrat), the President (who really wasn’t a conservative), and both sides of congress (which was under the control of Democrats, but with lukewarm, if any, support by conservatives). We are talking about the auto bailout which was not supported by the GOP in congress but was taken from TARP by an outgoing president against the wishes of his own party.
“If this were the case, we’d be having symptoms of a centrally planned economy. Shortages, a black market, long lines, years long waiting lists for cars, etc. None of these things are present.”
So you mean I can go out and buy a diesel version of my favorite car just like they can in Europe now? Free market FTW! (I know not the same as a shortage, but the government IS a restriction on the marketplace even if it’s not a central planned economy. Besides, you think the day after the revolution the Russian economy went to central planning? It didn’t happen over night, and I’m sure the people were told that it was for their own good.)
Regularguy is right. Cars are not affordable. That is the problem. When I graduated in 1972, you had a choice, of a two year loan, or a three year loan. I financed a new 350V8 Nova over three years, cost if I can remember, was about $2200.
The blue collar wage has declined in inflation adjusted terms, continuously since 1973. Those of us who form the mass market cannot afford cars. Nothing the government can do will save the auto companies, until they realize a bottom up solution is required, not a top down solution. People need more income, bailing out GM, Ford, Chrysler won’t work. Ford by the way is no better than GM or Chrysler, if anything their debt level and product lineup is more twisted. Ford should have done Chapter 11, but it would mean Ford Family would have to give up control of the company, so more than likely Ford will die as it cannot carry so much debt, in a Depression. Ford Family is stupid and killing Ford, rather than give up control. There is no reason to favor Ford, and consumers will buy value over who got aid nonsense.
@wsn:
You should listen to the others — the bailout and/or subsidies don’t even remotely approach ‘central planning’ as it is understood in political or economic theory.
There are many valid reasons to criticize the bailout or C4C, but suggesting that it is “central planning” is not one of them. While this may feed into the bizarre argument that Obama is “socialist” because he wants to have universal health insurance, it’s simply inaccurate.
Go ahead and criticize the bailout, public health care, anything — there’s lots in there to pick at. But when you bandy about terms that carry real significant meaning in a way that is simply inaccurate to anyone with a dictionary, you harm your arguments.
@Matt51 – It’s not that cars are unaffordable, it’s that people want more car than they need. Nobody NEEDS to commute to work in a 5000lb leather-lined pickup truck, or a $50K BMW. A $9999 Nissan Versa will get you there in the exact same amount of time, just with a lot less style. Similar to the fellow a bunch of posts back whinging about sticker shock because he wants a new crossover. Waaah – if what you are looking at is too expensive, how about looking at something CHEAPER?? What a concept! Automakers set those prices based on what it costs them to make the vehicle, with an expectation of everyone involved actually being able to make a profit on the thing!
At this point, I think the American Empire has pretty much reached the “bread and circuses” stage. I just hope we can hold off the barbarians long enough for me to shuffle off this mortal coil! At that point I could not care less what happens. I am doing my part for the poor overpopulated planet by not breeding.