October 5, 2009
The Looming Challenge for the Advancement of Euro-Style Soft-Socialism in America…
…is most likely to come from the automobile industry. Did anyone else note the statistics related to automobile sales released at the end of last week (via Reuters, in the excerpt below)…
U.S. auto sales tumbled by 23 percent in September as showrooms emptied after the government-funded boom from the "cash for clunkers" program, with General Motors Co and Chrysler hardest-hit.Assuming that Reuters is presenting an apples-to-apples comparison with Ford, the GM and Chrysler percentages would be one-month totals compared to the prior year.Sales for General Motors Co and Chrysler -- the two U.S. automakers struggling to regain momentum after emerging from bankruptcy -- dropped by 45 percent and 42 percent, respectively.
Ford -- the only U.S. automaker to have avoided bankruptcy -- managed to hold its sales decline to 5 percent from a year earlier despite low inventories and reduced incentives for car shoppers.
General Motors and Chrysler, you may recall took copious amounts of bailout money from the government -- along with copious government conditions attached -- as part of the Obama administration's economic program, which is premised largely on the idea that businesses run better when they are more aggressively regulated or directly managed by the government.
So what will be the response, if government-ownership fails in a major industry? Will advocates of government planning of the economy begin to accept that government ownership of something doesn't provide an exemption from the laws of economics, and actually look for the underlying sources of GM's troubles, instead of blithely assuming that government ownership solves them whatever they are? Will they double-down and say the problem with the auto bailout was that the amount of taxpayer money was too small and that more bailout money is needed?
Or will they say that looking that GM and Chrysler's success in conventional business terms (was more taken in than was spent) is just a distraction, and the important thing is that government has more control than it did before?
I don't know if there was ever a willingness to direct auto policy beyond what had already been established between the big three and government. The Obama administration treated the auto industry like the failing banking industry. You can argue that both bailouts are mistakes. But I do wonder if the critical potshot takers don't prefer the present path- no responsibility and all the Glenn Beck you can stomach.
During the 70's,80's and 90's the big three have gone to the federal government seeking money, protection and exemptions. They got their deal with the devil- years of no competition in the truck business, exemptions from safety and fuel efficiency standards, limited imports.
Why is Ford doing better than GM and Chrysler? Because they have better products. More fuel efficient models that consumers could choose. Ford has a better global sales position than the other two. The Obama administration acted out of the belief that the US would be hurt if we lost our auto industry. I don't know if I agree with that but I will admit to not wanting to find out.
Fiarness requires that you include the info that "cash for clunkers" brought forward a lot of purchases that would have been deferred. Naturally, September sales fell off.
I expect that Americans are concerned with inital cost, but I don't receive the impression that many are overly concerned with fuel economy. For me, it is a consideration, but not an overriding one. I just don't drive that many miles. A greater concern is frequency, and cost, of repairs. One good $1200 repair knocks the socks off a good fuel economy record.
Posted by: Warrington Faust at October 5, 2009 10:53 PM"So what will be the response, if government-ownership fails in a major industry?"
I suppose that question was answered in Brtain during the 70's, or 80's. The government took over about all of the British manufacturers and formed BMC (British Motor Corporation). The first lesson learned was that the government cannot withstand a strike.
I think British car production is gone now.
Many brands MG, Triumph, etc are just gone. Bentley is VW, RR is BMW. Don't know about Rover. BMW bought it, but since it hadn't made a profit in 30 years the BMW chairman was fired. I think someone else bought it. Who owns Jaguar now? Quality went way up during Ford's ownership, but I think they sold it. Basicly, these are all "halo cars" supported by other "profit centers" of the companies that own them. They are not expected to be profitable, or self sustaining.
Posted by: Warrington Faust at October 5, 2009 11:05 PMWarrington,
The Ford data that is presented refutes the claim that the GM and Chrysler fall-offs are entirely the result of cash-for-clunkers.
Also, I wasn't aware of that piece of British manufacturing history. The lesson seems to be not only is government not suited for managing actual industry, but also that some of the damage might not be easily reversed.
David,
The Obama administration, acting out the motives you've described, also acted out of a belief that a little bit of high-level government planning and a one-time big infusion of cash would somehow transform GM and Chrysler. What exactly was the problem that the government conditions on the bailout money (plus the money itself) was expected to fix?