Is the Obama Administration saving General Motors or is it saving auto industry jobs in the US? Is it saving GM as an American brand or GM as an American manufacturer?
These aren't academic questions. General Motors, which has been buttressed by $15.2 billion in loans from taxpayers with more to come, has been circulating a plan for its recovery which envisions it doubling the number of cars that it builds in China, Korea and Mexico and sells in the US. According to the UAW analysis, GM projects opening the equivalent of four plants abroad to build cars for the US market, while closing more than that here at home.
Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits cost about $54 an hour (before the massive concessions), a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour. This may make sense for GM's bottom line, but it makes no sense for American taxpayers.
Although GM is an American brand, it is a global manufacturer. What's good for GM is no longer necessarily good for America.
This isn't the first time the administration's efforts to rescue the US economy have run into the reality of globalization. The furor over the bonuses paid to AIG executives distracted from the real scandal: that $93 billion in taxpayer money was funneled not simply to Goldman Sachs, which is bad enough, but to a parade of Europe's leading banks -- Germany's Deutsche Bank, France's Societe Generale, UK's Barclays. No explanation was made on why US taxpayers had to pick up the entire tab.
Knowing that the US can't afford to lift the entire global economy, Obama went to the G-20 meetings intent on getting Europeans to adopt bold deficit-financed recovery plans like that of the US. But, led by the Germans, the Europeans pretty much stiffed the president they so admire. That left the US to do the lifting, and rack up the debts, dangerously weakening the recovery effort.
Saving good jobs in America can't be done simply by rescuing GM or Chrysler. The Europeans get this. The Italians provided $1.7 billion in aid to Fiat, on the condition that the plants stay open in Italy. France loaned $8.5 billion to its big three automakers, but again with pledges to retain jobs in France.
The US, however, is the champion and the protector of the global market. Americans have served as the consumers of last resort for the world. We've largely spurned industrial policy -- other than that associated with the military industrial complex, agribusiness and finance. We've followed -- from Reagan to Rubin -- a high dollar policy that made imported goods a bargain and US exports expensive. We've allowed our global corporations and banks to define our trade policy, while borrowing $2 billion a day to cover record trade deficits. As William Greider summarizes, we've assumed that aiding multinationals in the global economy served the national interest. "That is how America became a debtor nation with its steadily weakening industrial base and stagnant wages. That condition became the predicate that led to financial crisis."
Now those days are over. Our trading partners must be put on notice that the old order isn't coming back. The US can no longer afford to borrow unsustainable amounts to buy stuff made abroad with the jobs our companies have moved there. We need to lower the dollar and balance our trade. We need to build things in America once more.
Saving GM won't work without broader changes. Export-led countries like Germany and China must be challenged to generate internal demand (the Chinese have done far more of this than our European allies) to help reverse the global downturn and as a first step to a new and sustainable growth model. Taxpayer dollars should be conditioned on the maintenance of good jobs here -- rather than subsidize their export abroad. We should be leading, as Obama has done, global efforts to help developing nations recover and lift their own standards in the process.
Demanding that taxpayer dollars go to save jobs here will be denounced as protectionist. But it is squandering billions in public moneys on companies that then move jobs abroad that will fuel a protectionist fury.
Save General Motors or save an auto industry and jobs in America? The president and the Congress have to decide. It ain't necessarily the same thing.
Unless there is a populist uprising demanding or taking back our sovereignty from the Federal Reserve we will be debt slaves as will our progeny for as long as this nation endures the status quo.
Taking our sovereignty back from the Fed will allow the government to do what the Fed has done since 1913, with one exception. With a return of constitutional sovereignty the Congress and Federal Government would not charge interest on fiat money. We would have cost free money for the first time since Lincoln. Moreover, all federal, state and local public debt could be retired, debt instruments would not be rolled over, thus completly eliminating the threat of inflation, and income taxes.
A national price (GDP divided by the total hours the labor worked in a year) could be developed to determine the amount of debt free money needed to fund all public budgets. This would be the Banking systems worst nightmare. We never needed a central bank. Community banks and similar institutions would function as they do now with the exception that the fractional reserve system would be eliminated.
So you keep thinking we aren't going to keep giving our children's future away. Just keep thinking that. Our children will inheret the largest deficits the world has ever seen and all that money they will be paying back will have been used to ensure they have to struggle with infrustructure built overseas....that they paid for.
Its so beautiful.
President Obama made a joke at the correspondent's dinner the other night about being named Car and Driver's auto executive of the year, but that is, at least in part, what he has signed up to be. How he does remains to be seen, but someone needs to be looking closely at what the executives in Detroit are doing to turn things around. GM's new CEO, Fritz Henderson was on Meet the Press, and in answer to a question about what exactly GM was planning to do to set things right, Fritz came up with something along the lines of "we're going to produce exciting vehicles that people want to buy". What was their plan the last several decades?
So how does one company come up with consistently more salable product than another? By seek ing honest answers to honest questions and making sure those answers are reflected in the products they produce. My concern is that the administration and Congress will accept the restructuring plans of the auto industry in concept without examining the execution of those plans. The devil is in the details, and I just hope someone is looking beyond the sound bites while keeping and eye on our investment.
As it is and has been for half my life, you can depend on any other make to give you twice the servicable life in a comparable model. I've had 3 GMs and at 100K each has been less reliable than my 250K Toyotas or Volvos.
I work at GM and I very clearly understand the frustration being expressed here. Speaking for myself, my family, and my colleagues (i.e., in no official capacity for the company here), I would ask you to please understand that there is a lot of misinformation being sown as various political footballs are being thrown around (organized labor is clearly a big political football).
The intentionally inflammatory and catchy soundbite on the increased number of cars imported for sale into the US intentionally leaves out the key fact that this increase is primarily related to the expected recovery in the US auto market and that the total number of cars built will nearly double as. The increase is NOT due to a major shift in manufacturing locations, although the statement seems to have been deliberately developed and spread to create that misinterpretation. Vehicles produced at U.S. assembly plants ALSO increases correspondingly, not only those abroad. There is not a meaningful shift going forward in the proportion of vehicles that we are importing vs. building right here in the U.S.
I would ask you to give GM's vehicles a fair shake and not prejudge or rule them out based on politically inflammatory comments in the press! Put the Chevy Malibu up against Accord or Camry, and I like the Malibu's chances. And don't buy it because it is "made in America" (though it is... and will be), buy it because it is the better vehicle.
Take the Camero...its designed in Australia and built in Canada. Not an American car but advertised as if it is. So where is the mis-information buddy!?
Point remains the same: GM is not abandoning the US as a manufacturing base. Yes, Camaro is indeed built in Canada.... at the same plant that built the last generation Camaro 15 years ago.
Small cars cannot be produced cost competitively in the US. Are you proposing a tariff on small cars? Are you proposing that the UAW lower its rates?
So basically you are advocating communism and the loss of democracy so that you can have cheap cars. Awesome!
Many of us do remember years ago (I am in my late 30's) when people saved up for years to buy things.....cars, furniture, etc. They did this because they avoided buying "cheap" things and had these purchases for years. I remember the same living room furniture and carpet in my parents house for close to 20 years. They saved and bought quality and kept it, versus the mass consumption of inexpensive things.
It is a different mindset. Clothing is the greatest example, although not a big ticket item like a car. But who doesn't remember their grandmother wearing the same winter coat forever? Now, we think nothing of buying new stuff every year or two and pay little for it. I think that this is a huge problem in the country and is a vicious circle of cause and effect that needs to be thought about with these types of discussions.
But great article.
To allow GM, Ford, and Chrysler to take our money, to bail out their stupidity is foolish at best, and catastrophic at the worst. How much stuff do we need to be happy?
"NCRO President Chuck Austin of Lake Orion said he has met with the government's auto task force and that members were sympathetic but blunt in saying the company has a legal contract to protect union retirees but only a moral one to take care of salaried retirees."
http://www.detroitnews.com/article/20090513/AUTO01/905130381/1148/Expecting-cuts--Chrysler-retirees--dealers-get-legal-help
"The (GM) bondholders are protesting the terms of the offer under which they would swap their $27bn claim for a 10 per cent equity stake, while the union, with a $10bn claim, would end up with 39 per cent."
http://www.ft.com/cms/s/0/f39b6ca6-3f57-11de-ae4f-00144feabdc0.html
Notice that the financial companies are not being forced into bankruptcy or having their creditors threatened. I'm somewhat perplexed why the Obama administration maintains such an inconsistent approach. I though they were a little smarter than that.
You can defend an interventionist approach, or a hands off approach. But the argument that AIG, Citicorp, GM, Chrysler situations are totally different rings hollow to me.
I have many friends who did not have kids. I don't blame them at all. Between how the world is and how hard a job child rearing is, I don't consider it a necessity for everyone.