Comments on: Guest Post: Obama’s Plan for the Auto Industry

By: The Competition « Glaring Health Code Violations

The Competition « Glaring Health Code Violations — Thu, 09 Apr 2009 16:45:15 +0000

[...] Read more on the current auto industry crisis and the government’s ideas on how to deal with it at Baseline Scenario. [...]

By: Wilberforce

Wilberforce — Wed, 08 Apr 2009 01:50:09 +0000

The industry was destroyed by its stockholders, who also sit on oil company boards and forced management to build gas sucking lemons. It would be easy to design a modern vehicle, or retool the industry to build rail and clean energy generation. But the financial industry and oil companies still call the shots. So long as the public sit on their hands and commefcial media lock out educated speech, the great rip offs will only continue.
Likewise, the stimulus package is a huge disappointment. We need fiscally responsible, Clinton economic policy to get us out of this mess. Instead, Obama and the dems give us a Keynesian hog fest from an bygone era.
Please see Stimulus Redux at http://a-civilife.blogspot.com

By: D. Christopher Leonard

D. Christopher Leonard — Tue, 07 Apr 2009 12:27:27 +0000

Unmentioned by any of the commentators is the issue of “legacy costs”. It is as if people who worked for automobile manufacturers had set out to sink the ‘big 3′by living past the date of their employment. It needs be remembered that the absence of either a national pension scheme or a national healthcare system are the product of resistance by large U.S. corporation in the late 1930s that was solidified during WWII. When firms collapse (e.g the steel industry two decades ago), they abrogate their contractual obligatons, dumping the cost on the federal government’s over-taxed fund.
There is a long tradition of this behavior dating back to the origins of the insurance/pension industry at the end of the 19th century (I recommend J. Klein 2003:For All These Rights (Princton U.P.) for some much needed historical perspective).
The viability of heavy manufacturing in the U.S. in the future may well depend to a considerable degree on the outcome of the current “debate” (or what passes for one) on healthcare.
Every time a new frenzy of creative destruction occurs, a new batch of retired workers find that commitments made to them over their working lives are worthless.
There is nothing to vouchsafe any industrial sector in this regard in the future. It is never just an issue of ‘industrial policy’, ‘competitiveness’ or market discipline.

By: Kenneth Davis

Kenneth Davis — Mon, 06 Apr 2009 08:51:17 +0000

This talk “pro” and “con” on saving the U.S. auto industry should remind all of us that we are running $700 billion trade deficits every year that increaseo our huge foreign debt. We add to the problem by shifting our own production to China and Mexico while shutting down factories here that will never reopen unless we adopt a national “industrial policy” That policy must encourage and support “competition” in global markets, not “protectionism”. If we cant compete in the world’s biggest product field – automobiles – we won’t win overall, and we’ll never be able to pay off our trade debts. The financial services guys are getting most of the attention and funding now when we should be adopting and funding a strong “industrial policy”. We are late to that party, but there’s still time with the right leadership from Washington. So far, no one like that is in evidence on the Obama team
Ken Davis – former IBM V.P./CFO and U.S. Assistant Secretary of Commerce/ International

By: adios amigos

adios amigos — Sun, 05 Apr 2009 20:33:12 +0000

Erich,
I’m personally am not involved in television set manufacturing in any way. Evidently those idiots at Sony, JVC, and the mountain of other volume electronics manufacturers must not have figured out their losing money providing the planet with television sets. Erich, I believe you should call the CEO at Sony and let him know that he’s losing money peddling the TV sets. I would bet those people at walmart are probably losing money selling them retail too. You better call them too Erich.
AA
AA

By: Erich Riesenberg

Erich Riesenberg — Sun, 05 Apr 2009 13:37:29 +0000

Friend, the US is still the world’s largest manufacturer. Friend, we manufacturer 20% of the world’s goods with 5% of the population. Friend, can you please report on how profitable is the manufcturing of television sets?

Thank you, friend.

By: Don

Don — Sun, 05 Apr 2009 12:24:50 +0000

You make very little, manufacturing-wise, that is of any substantial value in America.

Manufacturing production has actually increased even as manufacturing employment fell. Basically we are using more capital and less labor to produce goods. Our workers have also become more productive.

http://angrybear.blogspot.com/2009/01/industrial-production-vs-real-gdp.html

http://www.cafehayek.com/hayek/2008/04/the-strange-wor.html

We are consuming much more than we produce, which is a bad thing. I’d rather that our production had kept pace with our consumption. I think many of the advocates of “free” trade are short sighted and naive at best. But, as a point of fact, our manufacturing output has increased over the past few decades.

By: PLB

PLB — Sun, 05 Apr 2009 09:50:04 +0000

I don’t think the three goals listed: national pride (perhaps better stated as retention of manufacturing capacity), jobs and environmental protection are incompatible with recognition that long-term government intrusion is unsustainable in the US as it would be under a more planned or regulated economy. And it does not follow that Obama should be “frank with the population”. There will always be some tension between public good and private enterprises. Current economic events have brought those tensions to the fore.

Part of the reason the big three are in such difficulties now is that they abandoned the future (R & D, clean small cars, advanced technology, etc.) to concentrate on SUVs while the getting was good. Obama knows that he must reduce government intrusion over time, but sees an opportunity to simultaneously advance his social agenda and set the companies on a long-term path to profitability.

I think the interesting question arising out of this mess is whether we are entering a different era where private markets will no longer be fully trusted to efficiently allocate resources. Not only do we have the economic crisis but consider environmental deterioration. If global warming and other problems are severe enough, externalities will become so significant that the classic economic free rider problem will have to be addressed head-on.
Sorry… forgot to say great post – can’t wait to read your next one!

By: PLB

PLB — Sun, 05 Apr 2009 05:41:24 +0000

By: adios amigos

adios amigos — Sun, 05 Apr 2009 05:40:03 +0000

Soy,
But for how long are you willing to hold up these failed manufacturers? People are NOT buying cars at the moment, and even when it does resume (which it must, eventually), what will demand be in your new economy? No one knows. Certainly, it won’t go back up to previous levels for quite some time. GM was underwater even before the bomb went off in your economy. They had been pulling forward sales for years. They have been doing it lately with the lease deals. They were setting the residual values WAY to high, to make the payments very low in an effort to get the people to buy the cars. They were then stuck will millions of off-lease vehicles that were returned, but had WAY to much owed on the residual. BOOM. Their suppliers are going down the drain already. Plants are closing all over America. Get it over with now, rinse the debt. If you don’t you are just prolonging the pain until the inevitable happens. There are no magic pills to swallow that make 2+2=5….none.

By: btraven

btraven — Sun, 05 Apr 2009 04:03:16 +0000

How about exploring “outside the box” ideas for the auto industry. How about transitioning them from public corps into multiple worker cooperatives? I’m sure there are plenty of “desk level” and “factory level” people who have great ideas – for vehicles, efficiencies, etc. Turn the hierarchy upside down and give the employees a stake in the business (profit sharing), AND, effectively, hiring and firing power of management.

There is a whole network of businesses run like this: Mondragon.

http://www.mcc.es/ing/index.asp

By: adios amigos

adios amigos — Sun, 05 Apr 2009 00:50:16 +0000

Wondering,
You make very little, manufacturing-wise, that is of any substantial value in America. Gone to Wal-Mart lately? Losing the car biz, while catastrophic, would be an example to the unions as to why, exactly, you can’t pay a guy $60 per hour to bolt a fender on a Chevy. It didn’t work, and won’t in the future. Let them re-organize, and begin again. Perhaps is the big three go bankrupt, more efficient manufacturing entrepreneurs will enter the market, occupy their existing factories, and go forward SENSIBLY. Do you know that NOT ONE television set is produced in America anymore? You invented TV, now you don’t make even one there.

By: adios amigos

adios amigos — Sun, 05 Apr 2009 00:43:23 +0000

Raven,
Actually, Chrysler’s trucks are poorly rated by Consumer Reports.
AA

By: soylent green is sheeple

soylent green is sheeple — Sun, 05 Apr 2009 00:29:59 +0000

“Job preservation: No explanation necessary, though the jobs in question are localized. No one has made the argument that the collapse of GM or Chrysler would pose a systemic risk to the national economy as whole. ”

really?

well, i suppose it matters how you define “whole”, but a GM bankruptcy certainly threatens ALL North American auto manufacturing as a “whole”.

If GM goes bankrupt, Ford and Chrysler likely do as well, since they rely on the same downstream suppliers. So do any foreign manufacturers with plants on US soil.

It’s serious and it’s systemic.

By: wondering

wondering — Sun, 05 Apr 2009 00:28:30 +0000

>> No one has made the argument that the collapse of GM or Chrysler would pose a systemic risk to the national economy as whole

If “systemic risk” is defined in terms of financial paper, perhaps. If systemic risk is defined in terms of the economy’s actual capability to manufacture things, the collapse of the auto industry is an enormous risk. What do we make in this county any more besides automobiles? How many little metalworking shops, which we will need for the future manufacturing of rail vehicles, will go out of business if GM & Chrysler disappear?