Posts Tagged ‘auto industry’

The car czar and why it won’t happen

Tuesday, February 17th, 2009

UPDATE: More from Mickey Kausabout the bailout situation. This may not fly as the public is wise to it. At least 64% of them are.

There was considerable discussion about Obama appointing a “car czar” to solve the problems of the Big Three auto makers. That has now been cancelled. Why ? This might explain it.

President Barack Obama announced Monday that he will appoint, not a “car czar,” but a “Presidential Task Force for Autos” to “fix” the Detroit Three. The task force will headed by Treasury Secretary Tim Geithner, but it is the first name appointed by Geithner — “Senior Advisor” Ron Bloom — is of real interest for a number of reasons.

Ron Bloom is the UAW’s man in the administration. The only chance to solve the Big Three’s problems is bankruptcy. Not only are their union contracts too expensive, the work rules and other adversarial factors in the relationship will prevent the auto makers from restructuring and becoming competitive once again.

Bloom (and Keilin) made their reputation battling steel companies which, burdened by excessive union costs, suffered through a very similar experience to the Detroit Three thirty years ago. In fact, as the New York Times’s David Streitfeld points out in this superb article, five U.S. steel companies received over $300 million in bailout loans from the Carter Administration in the 1970s.

They still ended up in bankruptcy but, in the meantime, the unions had extracted millions in additional money from the taxpayer. Mickey Kaus knows what the problem is but Obama isn’t interested. This will be another boondoggle and will cost millions, if not billions.

But what’s a billion between friends ?

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Posted in financial, politics | 4 Comments »

The Bailout

Sunday, December 14th, 2008

UPDATE: The UAW has been putting out talking points. Here is a rebuttal of them

This morning the talk shows focused on the failed bailout proposal and, of course, the UAW and the Democrats are blaming “Republican hatred of unions.” I have previously posted my opinion about who is at fault and Megan McArdle seems to agree with me.

I’m hearing the truly bizarre argument that the UAW didn’t scuttle the negotiations; it was the Republicans unreasonable insistence that they cut their wages to levels comparable to that of their competition. After all, the UAW was perfectly willing to negotiate their compensation package–in 2011, when their current contract expires.

And I think that’s perfectly reasonable. We’ll just wait until 2011 to give them the money, then.

I couldn’t have put it better myself. Of course, the Democrats and their allies are lying about the opponents of the bailout.

On ABC’s “This Week” this morning, Paul Krugman repeats the left talking point that Senator Bob Corker led the opposition to the auto bailout because he’s the “Senator from Nissan.”

I saw Senator Levin say on Face the Nation that Senator Corker was OK but “The Republican Leadership” refused to compromise. The compromise was to allow the UAW to continue business-as-usual until 2011. There would either be no GM by 2011 or there would be another 200 billion in federal subsidies already paid out by then. GM has 52 billion in current debt obligations and is losing money every week. The UAW wants the British Leyland solution.

British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.

One word of warning for Obama and the Democrats: The British Leyland fiasco was nearly the last straw for the British people with the Labour Party. Two years later, they elected Margaret Thatcher’s Conservatives.

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Posted in Europe, financial, politics | 1 Comment »

The US auto industry

Wednesday, November 26th, 2008

We have been reading about the trials of the Big Three auto makers for weeks now. Last week, Fox News had a retired General Motors VP on complaining that GM won the Second World War and so we should be happy to bail them out now. We owe them.

I see almost no mention of the other car makers in the US, like Toyota, Honda, BMW and Mercedes Benz. I guess they don’t need a bailout. The fact remans that hundreds of thousands of cars are made in the US by other companies. What is the big difference between them and the Big Three ?

The United Auto Workers Union.

I was also reading, for the fourth or fifth time, Max Hasting’s history of Overlord, the D-Day invasion. In it, he has a section on the weapons and material of the Allies, compared to the Germans. At one point, he makes a statement that, in every instance, the Allies’ infantry and armor weapons were inferior to the Germans’. The only exception was the Garand rifle, invented by a US Army civilian. The most egregious example was the Sherman tank. I have a book written by a former engineer officer who was assigned to a tank recovery battalion in Normandy in WWII. The title of the book is Deathtrap, the name given to the Sherman by many of its crews. During his service in France and Germany, from the invasion to the end of the war, US armored units suffered 600% losses in Sherman tanks. That is, they lost their entire force of tanks six times over before they were done. The US built 88,000 Sherman tanks (not 40,000 as in that link), of which 40,000 were handed over to the British. Finally, the British equipped the Sherman with a more powerful gun and called those tanks the “Firefly.” The British Sherman crews called the tank “Tommy cookers” and “Ronsons.” Both names referred to the tendency of the tank to catch fire easily when hit.

My point in relating this bit of military history (although it may be news to some) is to make a point. After the war, US auto makers quickly resumed civilian production and were unsurpassed in the auto business until the 1970s when German and Japanese auto makers had recovered from war damage and had caught up with superior designs. The US auto makers excelled in making large numbers of mediocre cars and tanks. They were not innovative. The Germans designed and built the Tiger tank, whose proper name was panzerkampfwagen VI, in three years, the same time frame in which the Sherman was designed and built.

What we have now is an industry that is second generation Industrial Age, heavily burdened with old union contracts and pension obligations, trying to compete with fourth generation industries. It excelled in building large numbers on long, fixed assembly lines. Henry Ford established that pattern in the 1920s. They have not improved upon his work since. A bailout will begin the socialization of American industry with five year plans and all the accoutrements of a planned economy.

UPDATE: Here is more on the rest of the auto industry, which has been very much ignored by Washington. I’m sure they hope it continues.

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Posted in financial, History, military | 11 Comments »