Detroit Auto Industry’s Plans: Survival, but No Chance of Recovery

http://www.reuters.com/article/ousiv/idUSTRE4B10C620081203?sp=true

The Detroit Big Three (General Motors, Ford and Chrysler) are set to present their “recovery” plans to Congress tomorrow.  What Congress will hear are plans to close thousands of dealerships, eliminate brands like Pontiac and Saturn, lay off tens of thousands of workers, shut more plants and make further cuts in UAW wages and benefits.  Boring stuff.  Minutae.  Not the kind of thing that impresses Congress.  What Congress wants to hear are the really important details – things that get 5-second soundbites on the evening news – things like cutting CEO salaries and selling their corporate jets.  Few of these congressmen really care whether or not the auto industry survives.  What they care about is looking tough with fat cat CEOs.  That’s the kind of thing that gets votes. 

Not one will challenge the automakers’ plans for “recovery.”  You won’t hear “explain to me how this is a recovery plan.”  “This looks more like a plan to slowly vanish.  Can’t you guys come up with a plan that would actually grow sales and employment in your industry?  Do you really call cutting more and more brands and closing more plants ‘recovery?'” 

I wish I could be the one to reply to that question.  “Congressman, how can we possibly grow our market share, much less sustain it, when we give free access to more and more foreign automakers?  Our three companies are now competing with twenty individual foreign companies, and many more brands within each company, for the U.S. market.  Given that level of competition, it’s a miracle we’ve been able to hold onto anything close to 50% of the domestic market.  To make matters worse, we don’t receive access to equivalent markets from a single country in which these foreign automakers are headquartered.  You asked us for a realistic plan.  This is reality.  Reality is that it’s impossible for three domestic automakers out of a total of two dozen global automakers to hold onto anything more than about one eighth of the market and, unless we start getting access to equivalent markets, there’s no way to avoid further cuts and downsizing.”

Unless and until this nation comes to grips with the effects of idiotic trade policy that makes the American market the “free parking” space on the global monopoly board, not only is the domestic auto industry doomed to collapse, but so too is the American economy in its entirety, just as it has begun to do.   And until economists become more open-minded about population growth, allowing them to see the effects of bloated labor forces and low per capita consumption, and until they begin to question the adequacy of economic theories that were formulated in the 18th century when the world’s population was less than one seventh of today’s and when the industrial revolution had barely begun to revolve, there’s little chance of any of them questioning their beloved free trade or their darling principle of comparative advantage upon which it’s based. 

Regardless of what happens in Washington this week, you can be sure that our economy is only going to get worse because the root cause, our $700 billion per year trade deficit (a cumulative $9.1 trillion since 1975), remains unaddressed.

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3 Responses to Detroit Auto Industry’s Plans: Survival, but No Chance of Recovery

  1. ngoldfarb says:

    Makers of the buggy whips had similar plans, but fortunately for us no government bailout. I have thought out a solution for the Big Three at http://ngoldfarb.wordpress.com the second post down

  2. Pete Murphy says:

    Goldfarb, buggy whips were obsoleted by the automobile. The domestic auto industry is not threatened with obsoletion by newer technology, they are threatened by idiotic trade policy that gives away free access to our market to 20 foreign competitors without getting access to equivalent markets in return.

  3. Anybody think about ‘giving consumers what they want’! Now there’s a plan. If those “Have we got a great product for you” short sighted idiots who run these companies take off the dark glasses they may be able to see that there’s a change in consumer demand that is sweeping the world. It’s called ‘ECONOMY WITH CLASS’.

    I use to think that the only car I would drive to impress my fellow humans was the Merky or maybe a BIG truck. Now days as a business man I’ve noticed that people ‘I want to impress’ are more impressed by a classy eco car. So that MY next car for sure. Then I went shopping and found that I HAVE NO CHOICE! PLEASE give me a choice and you’ll make it through these bad times.

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