Domestic Auto-Makers Gain Market Share

May 2, 2009

The biggest news about domestic auto sales for the month of April (released on Friday, May 1st) was not the year-to-year declines for each brand – no surprise given the depth of the reception – but the fact that domestic auto-makers regained significant share of the domestic market in April. 

While sales of domestically-made autos held steady at 6.9 million units, matching sales in March, sales of imports fell from 2.9 to 2.5 million units.  So domestic auto-makers regained 3% of the market share, rising from 70.4% to 73.4%.  That’s a huge gain for one month!  Another way of looking at this is that the jobs required to build 400,000 vehicles – roughly 135,000 jobs – were maintained while the same number of workers in Japan, Korea, Mexico and Germany got laid off. 

Another way to look at it is that our trade deficit for the month of April will be $10 billion lower than it would have been otherwise if it were the sales of American cars that took the hit.  It’s impossible to overstate the significance of this for the American economy.  It’s this kind of thing and not so much any government stimulus plan that’s going to produce a real economic rebound. 

The question is why.  Why are people beginning to shun imports in favor of American cars?  There’s been no change in pricing.  The imports are cutting profit margin to the bone just like the domestics to prop up sales.  The only real explanation is that Americans may be starting to see the light – the connection between domestic manufacturing and the stability of their own jobs; the connection between our trade imbalance and the collapse of our economy. 

It’s too early to say this is a trend as opposed to a one-month blip.   But I’ll take good news anywhere I can find it these days.

Obama: “Buy American”

May 2, 2009

I don’t know how widely or in how much detail Obama’s remarks about Chrysler’s bankruptcy were reported in the national media but, here in Southeast Michigan, people hang on his every word.  So this may come as news to you. 

In his remarks, aimed at shoring up confidence in Chrysler’s ability to emerge from bankruptcy, President Obama included the following statement:

If you are considering buying a car, I hope it will be an American car.

I just about fell over when I heard him say this!  It’s about time!  It seems that Obama is someone who’s willing to lay down his free trade pompons and start cheering for American workers.  Much has been made of the fact that the federal government has made itself a majority shareholder in two of our domestic auto manufacturers (not to mention most of our major financial institutions).  There’s justifiable concern that corporate decsisions will be politically motivated instead of directed by market forces.  But maybe we’re seeing a little of the “up-side” here.  With the federal government a major shareholder, it now sees the need for shifting consumers’ buying decisions toward American brands.  Can revisions to trade policy to accelerate that process be far behind? 

Until that happens, heed the president’s advice, especially if you’re someone concerned about your job.  Even if you’re not an employee of one of the Big Three, it doesn’t help your prospects any to have millions of former auto employees out there getting retraining to take your job away.  Buy American and put them and all of us back to work!

Immigrant Killed in Gas Station Explosion

May 1, 2009

As I was driving to Lowe’s yesterday, I passed this Sunoco station where lots of emergency vehicles filled the lot.  I could see that some excavation had taken place, but couldn’t make out what was going on.  On the way home again, I could see the news vans from the local TV stations with cameras rolling and news reports in progress. 

It wasn’t until the local news came on at 5 PM that I found out what had happened.  It seems that a crew of four workers had been hired to work on an old underground tank.  A worker down in a ten-foot hole apparently struck a spark that caused an explosion, blowing him twenty feet into the air and killing him. 

When police and the fire department arrived on the scene, their investigation had to be delayed while finding an English-Arab interpreter, because not a single one of the four-worker crew spoke a word of English.  (Some of this is detail that came out during the television broadcast, and isn’t included in the web site report of incident.) 

It’s highly likely that the company that hired this crew did a poor job of providing safety training and proper safety procedures when none of the workers could understand English.  And how in the world could these people have possibly communicated with the gas station personnel to verify whether the tank had been cleared and properly isolated?  It’s outrageous that this kind of thing goes on, putting the public safety at risk by allowing immigrants to take jobs for which they’re clearly not qualified.  This particular gas station is on a very busy intersection and the station is situated very close to the street.  It’s fortunate that innocent passers-by weren’t also killed. 

I’ll keep you posted if details emerge about the legality of these immigrants and the culpability of the company who hired them.

Requiem for Chrysler

May 1, 2009

After 84 years, Chrysler, once one of America’s largest corporations, an automaker with a long history of innovation and iconic brands and models,  filed for bankruptcy yesterday.  Like a zombie, Chrysler will seem to live on for a while, propped up by the federal government and Fiat.  But it’s a dead company walking. 

I give the Obama administration credit for trying to salvage it for the benefit of the employees, but both the Bush and Obama administrations, and many administrations before them, are culpable for its demise in that they’ve done nothing to fix the broken trade policy that grants free access to the American auto market to any foreign maker who wants it, while getting nothing in return. 

But Chrysler is unlikely to survive for long.  Regardless of whether or not, with Fiat’s help, they start marketing small, fuel-efficient cars, few will buy them.  Chrysler has two strikes against it:  a lot of Americans won’t buy American-made vehicles because it’s not consistent with the “hip” image they want to project.  And now they have a “bankrupt/loser” image to go with it. 

Their plants are already shut down as suppliers, many on the verge of bankruptcy themselves, are refusing to provide parts with no hope of being paid.  Dealerships are putting on a brave face, but know that many will be closing their doors as well.  Bond-holders are mounting a legal challenge to government’s quick, “pre-packaged” bankruptcy plan, threatening to drag it out for months. 

The net impact of all of this will be that the American auto market will be diluted even further with the entry of yet another foreign auto-maker  – Fiat.  Market share for all auto makers, foreign and domestic, will decline slightly.  Has Italy promised Chrysler, or GM or Ford for that matter, a corresponding number of sales in Italy?  Of course not.  Because of their extreme population density and over-crowding (Italy is six times as densely populated as the U.S.), many Italians don’t even own cars.  Italy is one of the parasitic economies of the world dependent on exports to the U.S. to keep their labor force employed.

What’s happening to the domestic auto industry and the U.S. economy as a whole is no different than what happens to any host organism that becomes infested with parasites – a slow, agonizing death as it bravely soldiers on but becomes more sickly with each passing day.  As overpopulated nations feed on our market, slowly draining us of jobs and wealth and giving nothing back in return, we try to pretend that nothing is wrong, even as our economy has been brought to its knees.  And, just as in the case of a parasitic infestation, where the parasites begin to feed even more ravenously as the host is dying, oblivious to the fact that the host’s death portends their own fate as well, foreign manufacturers like Fiat are swarming to the American market.  Soon will come a flood of auto-makers from China.  All will be chanting the benefits of free trade and snarling at the host in defiance of any moves to swat away the invading horde with moves toward protectionism.   

It’s time to start taking swats.  Just as a horse is blessed with a tail to keep the hordes of flies at bay, we have at our disposal a whole array of trade policy tools to maintain balance.  Yet, inexplicably, we’ve settled on a policy at the extreme end of the spectrum, giving free access to our markets to everyone while demanding nothing in return, and disavowing other policies that offer some hope of restoring balance. 

We’d better awaken from this zombie-like trance soon, or the same fate that has befallen Chrysler awaits our entire economy.