Friday, October 10, 2008

Have the GOP & George W. Bush killed the US auto Industry?

An article in the Washington Post examines just how dire the economic situation has become for the U.S. Auto industry:

GM's market capitalization now stands at $2.69 billion. The day after the 1929 stock market crash, the company was worth seven times as much in inflation-adjusted dollars, according to market historian Bryan Taylor of Global Financial Data.
And consider this: Ford Motor Company, whose stock symbol is "F," (yes, just "F"... gives you an idea of the company's centrality to U.S. manufacturing history) is trading at about $2.25 a share right now.

There are many reasons for the decline of the U.S. auto sector. As usual conservatives seek to lay all the blame on the Unions, as if the U.S. auto industry is the only one in the world that has to take into account the wage and benefits demands of a trade union. But, of course, the reality is not nearly as simple as that. One of the major hindrances to the industry is the cost of providing health benefits to workers and retirees. This is a cost that is borne by the government and paid through taxes in Europe and through the government and individuals in Japan's highly regulated, cost-controlled quasi-private health insurance model. As a result, the cost of producing a car in America rises by several thousand dollars due to these obligations. Imagine what an extra $1000 could do in terms of livening up and improving the interior of you average American car. It's almost embarrassing to compare the space-aged, curvy interior of a late model Honda Civic with the rather pedestrian interior of a Chevy Cobalt or Ford Focus, for instance.

Another problem, of course, is that the U.S. auto industry has been slow to respond to the realities of the petroleum market and rising prices. For years Detroit has fought fuel economy standards that might have forced the auto makers to produce vehicles that would fare better in the current reality of $4.00 a gallon gasoline. Instead, U.S. auto makers kept churning out fuel hungry (but very profitable) SUVs. You can blame the system of legalized bribery known as lobbying as well as the short-sightedness of auto executives for this one.

So tack on a collapsing economy and decades of neglect when it comes to our non-existent industrial policy and you've got a recipe for the annihiliation of the U.S. auto industry.

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