Monday, November 17, 2008

What do we do about American cars?

Welcome to post number 172 (JOSH!!!) of The Way by WiredForStereo. Here's another post about EV's and Politics (JOSH!!!).

As you may have heard, American car companies are not doing well. GM is asking for a bailout because they say they may not have enough cash to last the year. Obama wants to help, Bush does not.

This is a transcendent problem and one years in the making and multi-causal. Let's start with some of the causes. First, American cars are widely considered to be crap. While this is likely not so true now as it has been in the past, it's something to be taken into consideration as a function of name recognition and reputation. Number two, and I think very important is that our tax and tariff policy makes it favorable for an American company to ship it's manufacturing overseas. Consider this: Japan has made special considerations for its car manufacturers. Japan has high import tariffs which essentially protect its car makers. If it costs you 20% to ship a car into Japan, then you probably won't be shipping many cars into Japan will you? Also, Japan requires that the materials incorporated in such cars be produced in-country, protecting again, not only the car companies, but also other related industries.

The US? We only have a 3% import tariff. That means it has been literally encouraged for many years now that for profitability, you should ship your manufacturing to another country where labor is cheap and then ship your products back, nearly free of charge. Meanwhile, this leaves us high and dry, and strangely enough, the Ford Fusion is made in Mexico while the best selling Toyota Camry is made in Kentucky. Where does Toyota not have a plant? That's right, Mexico.

Another problem. GM has been squandering its time and money getting people to love huge inefficient SUV's and trucks while expending a modicum of effort to develop the kinds of cars any dense prophet (profit?) can see will be needed as the gas goes away. Now when they have one car that may actually change things, they are on the edge of bankruptcy and if things don't go right, that car may not even see the road. Ford on the other hand while not doing well is still doing better than GM and that is due in part to Ford licensing Toyota's hybrid system to put in the Escapes. At the final NASCAR race this season, Ford actually debuted the first hybrid pace car, a Fusion, ever to pace a NASCAR event. In a related note team owner Rick Hendrick begged the politicians to do the right thing for GM in an interview before the race.

What shall we do? This is not about a simple bailout. We've already seen the gross failure of the bailouts already put forth. What needs to be done is a restructuring of the way we think about business in America. We need to think like every other country in the world and that's US (pun intended) first. That's not to say us first in the current "we own the world" way, but in the way that we need not to bleed money because our business leaders are greedy. They get rich while the workers get kissed on the neck and then violated. The first thing that can be done is to raise tariffs to levels that are realistic. If Japan charges us a 20% tariff then we need to do the same. They protect their automotive industry, we must do the same. China too. This won't get rid of Japanese cars, they are already built here, but it will level the playing field. This is should not be a system where we are the consumers and the rest of the world are producers. Eventually the consumers will run out of cash.

Secondly and emphatically, the bleeding must stop. We cannot expect cheap "Made in China" products if we want long term health of our economy. If our workers don't have money because the jobs aren't here anymore, then they won't buy stuff, and we'll live in a perpetual depression while the rich get richer and the poor get poorer. Believe me, there will be more of one group than the other, and you aren't going to be in the group you want to be in.

This bailout possibility reminds me of the Chrysler bailout in 1979-80. It was a successful one. This one could be successful too if a few guidelines are followed. First, if the government is going to be loaning the taxpayers money, they should expect some stuff in return. The expectations should be a decent interest rate, and most importantly, cars people will want to buy and keep for a long time (read cars that get good mileage, and last long, specifically EV's and series hybrids.) But again, the most important factor is the US protecting its industry by raising tariffs. If everything is on an equal playing field and they still fail, then let them fail. We don't need them. I don't think however that a good solution is to hobble them and then let them fail, which is what has been happening for, oh let's say 28 years now.

Reaganomics needs to die.

1 comment:

Josh Wilson said...

your the John Eldridge of the Bloggesphere... no matter how many books he writes he always says the same thing... by the way, John Eldridge is one of my favorite authors...