General Motors emerged from bankruptcy on Friday promising more nimbleness, better products, more customer focus and a return to profitability. Freed of all its crushing debt, it certainly should find it much easier to make money. And its image of poor quality and boring cars is largely a hangover from the ’70s and ’80s. They already have a nice line-up of vehicle offerings with quality on a par with anyone in the world, a line-up that is promised to only get better.
But so what? The federal government went to extraordinary lengths to salvage both Chrysler and GM, not primarily to return them to profitability, but to salvage the last vestige of the manufacturing sector of our economy and the jobs that go along with it. What’s important is not so much a return to profitability for GM, but the restoration of the job-creating sales volume that GM, Ford and Chrysler once enjoyed.
Unfortunately, the new GM and Chrysler emerge to rejoin Ford in the same marketing environment from whence they came. GM and Ford build outstanding vehicles (hopefully, Chyrsler will soon join them), but that’s not going to make a bit of difference. Neither will reduced labor costs or lower debt overhead. The problem is that Toyota builds great vehicles too. So does Honda. And Nissan. And Subaru, Suzuki, Mazda, Kia, Hyundai, Volkswagen, Mercedes, Audi, Porsche, BMW, Jaguar, Land Rover, Saab, Volvo, … The list can go on and on. Soon, Chinese manufacturers will be joining the fray. How can anyone honestly expect that the market share of GM, Ford and Chrysler will do anything but decline as more and more foreign manufacturers get free access to the U.S. market?
It wouldn’t be a problem if American manufacturers were getting access to equivalent foreign markets. The problem is that there are no equivalent markets. Most of these foreign brands emanate from countries that are so badly over-populated that their car markets are a mere shell of what we have in America. In Japan, even the Japanese auto manufacturers have difficulty selling cars because so few people buy them, not because they can’t afford them but because owning a car there is impractical. There’s no place to park them and the roads are far too congested. That’s why Japan is famous for its badly overcrowded mass transit system. It’s the same in Korea. Germany isn’t much better. American exports of vehicles to these countries is virtually non-existant, while they export hundreds of thousands of cars to the U.S. every month.
With all the celebration of GM’s return, there was little notice of the fact that GM plans to lay off another 20,000 workers. And there will be nothing but more job losses in auto manufacturing as the ever-growing onslaught of foreign manufacturers erodes market share for the domestics. Nothing will change until the time (if ever) that our nation’s leadership wakes up to the real underlying problems with our trade policy that make our huge trade deficit and the accompanying loss of jobs unavoidable. Only when they come to the realization that the experiment in unfettered free trade begun in 1947 with the signing of GATT (the Global Agreement on Tariffs and Trade) has been an abysmal failure for the American economy, wiping out in six decades all the wealth created over the previous 171 years, will there be any chance of putting this economy back on a sound footing.
The new GM has emerged, but into the same old world of dumb U.S. trade policy based on half-baked 18th century theories and politicians lacking the wisdom, will or intestinal fortitude to do anything about it.