The $25 billion bailout (or bridge loan) has been a hot topic lately, both here and on the blogs I read. On a gut level, I am against it, and while impassioned and very sensible arguments for propping up the beleaguered auto industry have been made on all sides--especially by those with family ties to Detroit and the auto industry--I respectfully take it all in and am left with nothing but questions.
I've been thinking about this issue a lot lately, and I think my opposition may be generational and cultural. I want to make clear that my heart goes out to every person, all 2-3 million, who are and might be affected if the auto industry collapses and I know the effects will be far-reaching beyond that. I am not being callous or cynical in the least, and I hope this post is not taken that way. This is an issue that has been weighing on my mind. I am certain I am not alone and would appreciate this post being read in the spirit of self-examination and reflection with which it is intended. It's because I care that I'm trying to figure out why it's so hard for me to support a $25 billion loan.
Like many Americans, my husband and I have discussed this issue daily for weeks, and we are in complete agreement on the matter because of the possibility that perhaps we are a generation away from feeling a connection to the "Made in the USA/American cars are the best" phenomenon. Having been raised on the west coast, we have no immediate connection to the Detroit automotive industry. Even though for years we had a Toyota factory in our back yard, we don't have union workers in our families (though I belonged to a teacher's union for three years).
It may also be cultural. Growing up my parents drove a mix of automobiles, but they were mostly European made because "they're made better." Parents say these things. Also, in my case, because my father is Italian and my mother is Korean-American and was raised in Hawaii, I've grown up with a global view. I've said before, I always felt like a citizen of the world first, American second. We make great things in this country, and great things are made in lots of other countries, too. I was never taught to believe that everything we manufactured here was the best in the world, I was taught to appreciate what the entire world had to offer. And if you know anything about Korean or Italian culture then you know that each of those countries makes the best cars in the world, at least according to my parents.
I don't say any of this to excuse my opposition to the bailout, I say it because I think that this might be why a generation of Americans (many of whom are like me--removed from the realities Detroit and Americans raised with a global perspective) finds it hard to swallow.
Last Thursday, I started my day on a bit of a twitter tear responding to MOMocrat contributing editor Queen of Spain/Erin Kotecki Vest's tweet that if we let the auto industry fail, we will be a nation that "manufactures nothing."
And so I responded:
@QueenofSpain nation that produces nothing? in what sense
This puzzles me. We are a nation that produces plenty. From where I sit in California, we are a nation that produces lots from food to films, from silicon chips to potato chips.
This exchange then led to a series of other stream of conscious tweets:
@QueenofSpain what about the people that lost jobs pensions houses etc. because other industries failed?
@QueenofSpain it is emotional issue, we all feel for those affected. what about people i know at yahoo who will lose jobs b/c of bad biz?
Said Queen: @CityMama because if yahoo goes down it doesn't take an estimated 2-3 million other jobs with it 08:06 AM November 20, 2008 from web in reply to CityMama
@QueenofSpain it still affects workers+their community in same way, but smaller scale means it's not worthy of concern and attention?
this is industry that fought against mass transit in LA, fought against fuel efficiency, had no problem outsourcing jobs to other countries
us autoworkers paid $71/hr vs. $47 at Toyota per newsweek. not arguing they dont deserve pay, but they make more than teachers. wrong.
why are these CEOs still in their jobs? what have their boards been doing? i am no economist, just concerned citizen.
i just hope that if silicon valley ever collapses people will view us thru same lens. somehow i doubt that will happen.
in silicon valley we are quick to blame exec team for company failures.
@jerseymomma i guess i'm just pissed that uaw makes $150k/yr when teachers make $100k less. we are truly a nation in trouble.
whew! now I'm awake. better than coffee. ready to face wallie's swimming lessons now.
I don't deny that there is 100-year's-worth of history at stake. I don't discount it at all. As an art history major, perhaps I look at history through a different lens--a lens where a thing created is not static, but constantly in flux as it influences and inspires others to create their own realities. It's hard to drill down to see the American perspective when I am used to looking at things with a global perspective. The "making something of worth in this country is important" argument is lost me for another reason besides the generational/cultural argument I made above: as I stated in my tweet, the auto industry had no problem outsourcing manufacturing of their cars and trucks to other countries as has been doing it for years. Where is their concern for American workers?
As someone immersed in Silicon Valley culture--one of the most technologically innovative communities on earth--companies start and fail here almost daily, and when they do, blame is placed firmly on those who deserve it: on the executives. They are fired or removed from their positions. Just look at Jerry Yang. Look at Carly Fiorina. Did HP "fail" as badly as the Big Three while she was at the helm? I'd venture to say not even close, but nevertheless she was gone. Why are the Big Three CEOs still in their jobs?
My parents also own a company which manufactures equipment right here in the US of A (and they are super-proud of that fact). They have a factory assembly line full of employees soldering and screwing...They've could have transferred their operations over to China but have have worked hard to keep making their products here, and made lots of personal and financial sacrifices to keep it that way (including moving from one state to another). I look to them as example of how to run a company right. They have never had a layoff even in down economic times. I saw them struggle to meet their employees needs when gas was over $4/gallon. Should they adopt a 4 day work week, a carpool program, give out gas supplements? They heard their employees and responded quickly. They have never asked for bailout even when my parents were working seven days week and pouring all their money back into making their company successful. They are my example so I have to think there is a way to do it right. Somewhere in there is a healthy mix of sensible management plus the ability to really listening to employees to find out their needs because you genuinely care.
In Detroit's case, the unions are going to have to make some concessions for me to be able to support anything near a bailout or bridge loan, and so far they have been unwilling to do that. I think I may be the only progressive who has a problem with unions, or maybe it's just this union. What is the UAW willing to sacrifice?
It is very hard for me, as a citizen of this country, to listen to CEOs ask for money who flew private jets to Washington DC. I understand that Fortune 100 CEOs need corporate jets, but don't use them to fly to DC to ask for money. Forgive me, that looks bad. Their employees are sacrificing. Where is their sacrifice? I want to know what was being done in the interim to take care of employees. I want to know what was being done to care for workers all along? How easy was it to maintain their insurance coverage when they got laid off? Were they able to get retrained if they lost jobs? Did they receive help in finding new jobs? How did they plan for innovation? Why weren't their hybrids brought to market sooner? I also think the Big Three are going to have to clear out their bloated matrix middle manager system.
It's because I care that I have so many questions. I think as citizens, we deserve some answers before the first dollar bill is peeled off the stack. I have stated previously, I very much resent the notion that those of us who are liberal (proudly in my case) and/or who live outside Detroit lack compassion for the auto industry workers and/or are being shortsighted about the future of manufacturing in this country. I really feel for the people affected, but I also feel that this country has proud history of making lots of things, still does, and I have to believe we still will.
--stefania pomponi butler
It is safe to assume that only people who think they have any stake in the auto industry's success will favor a government bailout for it. That is why there is a huge pr campaign happening that is trying to convince as many people as possible that they will go down with the auto industry. But even if everyone has a stake in that industry, it needs to go down.
The American auto industry has failed America. There are too many things wrong with it to bother bringing up here. Bailing that industry out will only delay the inevitable. It would be good money after bad...
If we are compelled to bail out those dinosaurs, then I would feel better about it if we force each of the companies that are bailed out to break up into smaller companies that actually compete with each other. Maybe then we will have a free market again. Free markets cannot exist if they are being dominated by any company; especially companies that are too large to fail!
The only thing that has kept these companies alive since the 70's is misplaced patriotism. Instead of protecting bad companies, patriots should be trying to use this situation as an opportunity to bring up new and better companies to replace the ones that have been suffocating the American automobile industry. We need to concentrate on creating good quality domestic markets; not on keeping dying ones on life support.
Obviously I am against the bailout too.
Bryant Arms
Posted by: Bryant Arms | November 22, 2008 at 06:13 PM
Stefania - I'm another progressive who feels conflicted in the same way. My biggest problem with doing nothing is the 2-3 million people who will go down with the big 3 and the pensions of all those who used to work for the big 3. But my community went through a lot of sacrifice when Ford closed their F-150 plant here last year.
There was a good LTE in the paper here today talking about how we need to something in the way of innovation of basic business model changes from the Big 3 and we just haven't seen that, despite their ongoing economic woes. It's written by an ex-Ford plant employee:
http://hamptonroads.com/2008/11/big-3-big-mistakes
Posted by: Lawyer Mama (Stephanie Himel-Nelson) | November 22, 2008 at 06:20 PM
I don't know if I'm for it or against it. The thing is that there's a whole network of supply chain behind the auto industry that would be knocked over like dominoes if the Big 3 fail. It's not just the UAW and the managers and the board of teh Big 3; it's the truckers who drive the supplies from factory A to factory B, it's the steel manufacturers who supply the raw resources, it's the designers and manufacturers of widgets that go into the automatic window opener/closer, it's the plastics manufacturers who will suddenly see the demand for their product tank, it's the fabric manufacturers who will see the demand for their product tank, and on and on and on.
They'll cut back. They'll set their workers to shorter hours or half-shifts or lay them off. Those workers won't buy things in their local economies. We're talking local economies across the country.
It's a *very* big ripple effect.
If Yahoo failed--there's none of that knock-on. Yes, the folks who work there will see the same problems, but it's limited in impact to one region. The network of supplies used in auto manufacturing is much wider, much more spread out.
So, saying "Go suck an egg" to the Big 3 is much more dangerous to the economy of the country as a whole.
(I'd much rather have seen the Congress saying "go suck an egg" to the financial services industry, frankly.)
For what it's worth...
Posted by: OmegaMom | November 22, 2008 at 06:57 PM
The Big 3 need to CHANGE...
Throwing money at them might just produce more of the same.
They need to find their sea legs on their own!
Posted by: TINYMARIE | November 22, 2008 at 09:13 PM
Ok here goes.
I think there is, clearly, a lot of reasons to be against any help given to the auto industry due to it's past. But I don't think anyone gives them any credit for what they've done and have been doing to turn it around.
Yes, I emotionally attached to this issue. But I do try to separate what is good for people I know and what is good for the country as a whole. Let me try and take some of these issues one by one.
The first and biggest thing I don't think anyone understands is the Big 3 have been attempting to turn things around on their own for several years now. Yes, it was too late. But they have made significant progress. The UAW has done so as well. This bridge loan will only take automakers to 2010, where the UAW's concessions kick in and you will see pay drop to competitive rates to foreign automakers.
That's part of why this loan is so necessary. Just as they were getting back on their feet, innovating, coming close to breaking even or profit the economic crisis hit. And as I said, the loan will take them to the time frame where the UAW's new contract kicks in. No body seems to talk about that though.
As for 'a nation that produces nothing'- we need to come to terms with what it is we do in this country to sustain ourselves. I'm not saying that in a 'we care about america and only america' kind of way, I'm saying that in a 'we don't want to RELY on other nations for things like innovation' kinda of way. And while we may rail against the 'industrial complex' and all it's ills, we also want a country that does exactly what your parents do on a GRAND scale.
And while I think it's fair to talk about feeling bad for any and every company that would have to lay off workers, the SCALE alone of this could really, truly F up our economy on a HUGE scale.
What baffles me in all of this is the lack of wanting to give the auto industry any credit at all for anything it's done. Soybean seats at Ford. The Volt at GM. The cuts and plant closings and the lay offs and the UAW concessions that have been going on for years and years while they restructure and try to catch up go totally unmentioned. And if it's mentioned, it's mentioned in a 'oh well, they tried too late, so screw 'em, they deserve what they get' kinda way.
No one is sitting around saying this industry has been perfect, but EVERYONE is nearly rolling their eyes at any innovation and any re-tooling any of them have done.
and that's the other thing. This isn't just a few companies or some store or some chain. Its an entire INDUSTRY. Imagine saying 'well, Silicon Valley has just been f'ing up and wasting our money with this web 2.0 shit for too long, sorry but the whole industry needs to just fall into bankruptcy so they can learn a lesson' - and suddenly the ONLY people doing ANYTHING in web 2.0 were nonAmerican
Think it can't happen? Try and find an American made TV.
It's not that I think 'buy american' is important, it's that I think we need to manufacture and produce goods to stay relevant and push innovation. The market is forcing the Big 3 to innovate. And they are. They really, really are.
Do we need to make sure they don't f'up any money give to them. Totally. A lot of those CEOs are still shmucks and need the oversight.
Also remember the government would take on those pensions. they don't just go away. And the government would take on all those unemployed workers. And so on. and so forth.
There really are good things happening. They were on the cusp after YEARS of horrible plant closings and layoffs and cut backs.
I would invite you to watch this too.
http://tinyurl.com/5vyskm
...and with that I'll stop because I could go on for days. I understand the confusion, I really do. But please understand the scale is not small. and EITHER way, there will be ramifications.
Posted by: Queen of Spain | November 22, 2008 at 09:45 PM
ok a few more thoughts and I swear I'm done.
Is it me, or is there a bias against industry? I mean, is there anything the Big 3 CAN do that anyone would like or praise? Because they've been doing stuff, but everyone still pans it.
Ok also, this is a good read at Talking Points Memo
http://tpmcafe.talkingpointsmemo.com/2008/11/22/why_were_rescuing_wall_street/
Done. Is swear. For real.
Maybe
Posted by: Queen of Spain | November 22, 2008 at 09:57 PM
Personally, I am for a well structured loan modeled on the Chrysler deal of 1979. There are a number of good arguments on both sides though, so we need to take an honest, not emotional or punitive look at our options.
First, what is likely to happen if we don't offer these companies a loan? First, Chrysler is almost guaranteed to go into bankruptcy, followed quickly by GM. Initially, this should just be a chapter 11 filing, which means the companies will try to restructure and be able to offload a number of it's current obligations. During this time, as Kady explained in her recent interview with Julie, they will also attempt to get DIP loans to do the restructuring. This doesn't sound too bad, until we realize that the only organization capable of providing that DIP financing is the US government since the credit markets are still frozen. Then, the question still be, do we want to bail these companies out with a (roughly) $25 billion loan or let them go into chapter 7. Also, one of those outstanding obligations that these companies would be able to offload is their pension payments. This debt would be shifted to a (already cash strapped) government agency and at the same time reduce the pension benefits. Even with the DIP loan, these companies could still go into chapter 7 and we would be out at least part of the $25 billion.
Now what if we offered them a program similar to the 1979 plan. The companies would be forced to restructure however Congress sees fit (in ways a bankruptcy judge couldn't). We would only be insuring loans provided by other banks, rather than being the direct lender so the loan would not be tied up unable to be used for other purposes. The companies would become viable, at least for the next 6-10 months (GM has said it has until about January, and burns through $1-2 billion a month currently). Even should they go into chapter 11, by then hopefully they would have started on the road to improvement and credit markets would hopefully have opened up slightly so that DIP financing would be available on the commercial market. The companies would also still retain responsibility for their current obligations and not be able to offload them to the government.
In either scenario, the government could be out millions, if not billions if things go wrong. In the no bail out scenario, the government would also likely be immediately responsible for an extra several million for employee pensions. Both scenarios also lead to a greatly reduced tax base, both for the local municipalities/states and for the federal government. Not knowing how bankruptcy affects a company's tax status, I can't say how immediate that effect would play out in the two options. Jobs also will be impacted under both options.
As I said at the beginning, I personally find the bail out proposal to have a better chance of success. It will allow greater leeway in the types of reforms that can be enforced (Congress will be writing the law, and so only restrained by the Constitution; a bankruptcy judge would have to work within the confines of already established laws). It will also keep options open for the future, since chapter 11 would still be an option before liquidation. And it would protect people who have already paid their dues and are living on a fixed income.
Addressing some of your arguments in the post: The $71 to $47 pay is somewhat misleading. Part of that is pensions, part of that benefits. I also wasn't able to find direct info on those numbers in my search, but did find that for at least part of last year, Toyota workers made more than GM workers, due to profit sharing and Toyota had no problems growing. Payroll is also, according to statistics I found, only 5-10% of operating costs.
The biggest argument against letting these companies fail, in my mind, is not some blind loyalty to "American made" or patriotism. It is the simple fact that almost 3% of employed Americans are employed directly or indirectly by these manufacturers. We already have an unemployment rate of 6% heading for 7, seeing that skyrocket to 9 or 10% would be devastating for the entire economy. No other three companies could say they have this reach, which is what makes them so critical.
Once the dust settles (or even as part of the bail out agreement) I am all for punishing the executives that have led us to this problem. I also believe that any company that can claim to be "too big to fail" is one that should be broken up. But the sad truth is that our economy is too fragile right now to take the kind of hit a failure on this level could bring.
(And just as a side note, since I have personal issues with Fiorina because of this: she wasn't fired because HP was failing; she was fired because she illegally wiretapped her employees. She is lucky she didn't go to jail.)
Posted by: John J. | November 22, 2008 at 10:42 PM
I've had a hard time voicing my opposition to this bailout, because I feel like I'm voicing my opposition to the American worker, when I know that is not true.
Thank you for finally putting into words what was bugging me about the whole private jet fiasco. WHY spend $20,000 on a trip to beg the government for a handout, when you could be saving a hard working employee instead? Do you really think your ONE TRIP on a private jet is more important than an employee?
Let me get this straight: an employee produces something for you, a jet? Well, what does it do for you other than make you appear important and decrease the bottom line?
American automakers have been entirely too focused on making small people look big for too many years. Foreign automakers, while still producing the optional gas guzzler, have (wisely) made more economical cars the core of their business.
I own a 15 year old car right now, so when my son starts KG and I start looking for another car, who do you think I'm going to turn to? I absolutely believe there needs to be a solid business plan approved by congress before we ever give these yahoo's an ounce of our hard-earned money. THEY ignored the trends, and THEY need to prove that they are not going to ignore the market anymore before they are given an ounce of government funding. Otherwise, our children are going to deal with these issues all over again.
Posted by: Natalie | November 22, 2008 at 11:02 PM
Oh, and I think the Queen of Spain makes a lot of valid points, and I get it. But to watch these men flaunt their wealth and (supposed) success like that? It makes no sense. I want to believe the best in people, but seriously...WHAT WERE THEY THINKING??!!! I think the current leadership is entirely too detached and that instead of joe the factory worker worrying about his job, joe the private jet flier should be worrying about his.
Posted by: Natalie | November 22, 2008 at 11:12 PM
I'm listening, really, but those of you who are pro-bailout/loan still haven't addressed the
issue that i have the biggest problem with: how did the Big Three get into this mess? Is it all as a result of bottom dropping out of SUV market+credit crunch? Why can't the execs be held accountable now? What will the union concede? I'm not saying "suck eggs, auto industry" or anything close to that. I understand how far-reaching this failure could be--the domino effect is truly frightening. It seems like when you look at all those factors anyone would say, "Yes, let's give them the money!" So why are so many of us still resistant?
And note about Carly Fiorina, she was not fired for wiretapping, that was Patricia Dunn (was on HP board). Fiorina was forced out for making bad business decisions before the wiretapping incident went down.
Posted by: Stefania/CityMama | November 22, 2008 at 11:18 PM
I don't know how the Big Three got into this mess, and I believe the execs should be accountable, but I also have family working for the automotive industry, family with kids and grandkids who could lose their jobs, health insurance, pensions, not because of anything they did but because the execs F'ed up. Yes, I am biased, but who can blame me and others like me for not wanting to see our families and communities losing what they have? I feel less sorry for people working in the financial sector who frankly can probably better afford the lay-offs and the like. I think there is a definite class issue here that deeply saddens me--let the blue collar workers go under, let them be the scapegoats for their bosses. The execs won't suffer too badly if the Big Three go under. My uncles, my cousins, their friends and neighbors, they will. And then what will happen? Who's going to be paying for their unemployment, welfare, food stamps, Medicare?
It just seems too cruel to let it all go down the drain.
Posted by: zoe | November 23, 2008 at 11:16 AM
There's a misconception out there that unions don't make concessions and that the UAW hasn't. Unions frequently do make concessions and the UAW has. Also instead of viewing autoworkers negatively because they make 150,000 a year (is that really true anyway?), why not work to make sure that teachers make just as much? They are all organized workers and there is no reason to pit them against each other. That's what corporations and opponents of unions want you to do.
Posted by: Myrna the Minx | November 23, 2008 at 12:38 PM
I guess my sentiment that we need to help the US auto industry make the jump into producing 21st century products is partly due to my advanced age. It pains me to see our economy centered so much on service industries -- in addition to Erin's assertion that we need to be innovators again, I think a service-oriented economy is too fragile to survive the normal ups and downs of the business cycle.
That does not mean I do not recognize or am not angry at the Big Three for the many mistakes they have made over the decades. It pisses me off that they did everything they could to fight fuel economy standards, that they lobbied for tax exclusions (so that SUV's would be classified as trucks and therefore not be subject to the same fuel economy - or that the government allowed big tax writeoffs on big SUV's, encouraging their purchase). And no one wants to buy a shoddy vehicle that doesn't last, doesn't perform and pollutes the environment.
But, as Erin also pointed out, the industry has belated been trying to get their act together. As you know, GM has been actively courting environmental and mom bloggers, and I recently got to test one of their new model crossover vehicles for a week. Disregarding the fact that it's a large vehicle that uses up too much gas (17/24 mpg) -- I have to say how surprised I was at its quality -- something I talked up to the disbelieving BMW-owning friends who accompanied us to the LA Auto Show last night.
But when we got to the GM exhibit, even the Beemer people were impressed at the styling and value of the vehicles on display. I was even more impressed by the number of models that are EPA-rated at 30 mpg or more. No, they're not even close to Toyota's low mileage offerings in terms of efficiency, but the point is that they got a late start (yes, due to dunderheaded decisions at the top) and they are now belatedly trying.
I would be in favor of government assistance to reorganizing the auto makers and new faces at the helm. But I am very afraid of what would happen to the economy right now if we allow the Big Three to fail.
Posted by: Donna | November 23, 2008 at 02:29 PM
Only a couple thoughts to add.
The best suggestion I've heard was the suggestion that the oil companies bail out the car companies. If Exxon is making $11 BILLION in profit in Q2 2008, how about loaning some of that to the Big 3 - if it's a good deal, they ought to jump on it, since the healthy car business moves more oil. And if it's not a good deal, why should we sign up for it?
The other 2 complications:
One which I don't completely understand in full, but I'm sure is significant, is the anti-union aspects of letting these companies fail (something the Republicans would delight in seeing).
The other is the under-mentioned issue of universal health care - the Big 3 costs are so high in part because US companies are on the hook for medical payments for employees and retirees. Japan, with universal care, doesn't have to cover these costs in the same way. It's a built in competitive advantage. I believe it was Toyota who sited a new plant in Ontario instead of the US primarily because of the health care advantage. These Big 3 CEOs should be asking for Congress to pass Universal Health Care ASAP, not begging for handouts.
Just my 2 cents worth... It may all be covered in the comments above, but I thought I'd chime in.
Posted by: Frank S. | November 23, 2008 at 05:22 PM
Frank S., I know oil cos. seem to be one narrow sector of the economy that keep touting their "record billion dollar profits," and they could actually have the wherewithal to loan $ to the Big 3.
But do we really want any more coziness/collusion between car companies and Big Oil? Just when said car companies are trying to turn it around with raised mpg and emissions standards?
The idea makes me scared to think of how quickly meager gains might erode.
Posted by: cynematic | November 23, 2008 at 06:46 PM
Cynematic:
I both agree and disagree.
Obviously, US oil and US autos have been symbiotic for a long time. So, more coziness could be more trouble (but really - how much worse than it has been?)
But more to the point, they are symbiotic - so if Big Oil has the cash, and the car companies need it, and it's a "good" investment, why wouldn't they do it? Why knock us up for it?
And if Oil, whose interests are clearly at stake, won't invest, why is it a good deal for us?
Note that China's MPG standards are now quite a bit higher than ours; if the Big Three want to compete worldwide, these guys will have to change.
Posted by: Frank S. | November 23, 2008 at 09:05 PM
Stefania,
Re your question about this mess. If you mean why the sudden desperation, it is two things: (1) when oil prices skyrocketed this past summer, it really made the ownership of large vehicles (SUVs, trucks, etc...) untenable. I know lots of people rag on the big cars from an environmental perspective, but from a free market perspective, they were just dandy until gas prices went up. Without the big cars (which has been a huge growth market for the past decade, and with nice margins), the big3 may not have ever survived this long. And (2) the credit crunch meant that only top of the line buyers could be approved to buy cars (with financing). Between these two events, there basically isn't enough demand for the the big3's cars.
The reason I've been in despair over all the govt bailouts is because they have all focused on primarily one thing: getting demand to return to pre-recession levels. But if you, like me, believe that we Americans were buying way too much crap with way too much debt, then this is not a solution, merely a band-aid (and a pretty lousy one at that). Automakers should fail because Americans do not need to own 3+ cars per household nor buy a new car every 5 years; those have been the purchasing demographics that have been sustaining the car companies.
And don't argue for 3rd world country demand. If it is up to the Chinese gov't, they're not going to let it happen: for the near future, it would be catastrophic for the Chinese to allow us to import more to them than they import to us.
Posted by: Kady | November 23, 2008 at 11:06 PM
Kady, maybe that's the nut of the problem--the marketing-driven hot air of U. S. demand has inflated the elastic capacity of the credit-bounded U.S. consumer balloon to bursting point, and we'll never be able to re-create demand like that again.
And worldwide there's no one market that'll be able to take the place of credit-enabled American consumers.
If it were up to me, people in China would be riding their glorious bicycles from 1981 and not buying cars. (And we would be doing the same in that absolutist environmentalist universe.) Or, in the present day reality, if China wanted to buy a car manufacturer, they would buy Tesla Motors (not one of the Big 3, but on just as fragile footing) and blow us out of the water on style, speed, and environmental sustainability in one fell swoop.
But it isn't up to me, and in fact whatever rising middle classes there are in China, India, or Russia, they seem to disappointingly want the same old combustion engine model that we've been happy enough to drive for decades until we hit the walls of Peak Oil or Peak Credit or both.
Which is why, in looking at demand for cars, it seems like there's undeniably an international component in terms of the ability of overseas markets to absorb current and future inventory, a globalization of labor/scary union-busting component, and an enviromental sustainability dimension to the problem.
Thing is, with China they'll want to keep a lock on their domestic manufacture and purchase of cars because it's how they'll grow their economy/middle class. U. S. carmakers, having tapped out consumer demand at home, are probably hoping that emerging economies can take up the slack. To my mind, the few advantages the Big 3 have lie in their recent development of sustainable materials and flex-fuel and other attempts to green the internal combustion engine. Even so, these advantages are weak because of their belated development.
If China, India, and Russia represent new markets for cars, I'd rather that they drove more fuel-efficient ones that could use biofuels. I mean, can you imagine the environmental devastastion if all these emerging economies had to repeat the Industrial Revolution all over again?
So, question is, can we come out on the upside on access to new markets, unions/American jobs, and sustainability given that all three tie into the fate of U. S. car companies? I have no idea. But man, do I hope so.
Just musing aloud here...I think that's why we've all been responding with such passion to the Big 3 bailout/bankruptcy scenarios--it's easier for everyday peeps to sink their teeth into as nearly everyone has bought a car, whereas not everyone has followed intricacies of the movements of exotic Wall Street paper.
Posted by: cynematic | November 24, 2008 at 03:12 AM
Unfortunately, Cyn, the advantages that the Big3 have on green developments are not weak (w/r developing markets) because of their belatedness. They are weak because they are price-busters.
The avg American branded car is 4x more expensive than Chinese branded car. And the Chinese are coming out w/ their own hybrids. Chinese cars are pretty crappy and don't last long, but in China, price is king.
http://www.treehugger.com/files/2008/04/chinas_new_hybrid_electric_cars.php
Posted by: kady | November 24, 2008 at 08:40 AM