Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Federal government, Ontario agree on $3.3B auto bailout package

with 4 comments

Federal government, Ontario agree on $3.3B auto bailout package.

I assume that everyone who saw that image I posted recently will know where I stand on this one.

Note the important qualification ” if a proposed $14-billion US aid package is approved in Washington”. Even the US senate could not bring itself to to approve the package Detroit wanted. And the Big Three (and their unions) have been paying huge sums lobbying the senators for years.

If you believe in capitalism, state support for declining industries should be anathema. Especially if the said industry has the most unionised work force. Mrs Thatcher understood that, which is why she went for the miners in Britain – and we ended up with what, at the time, seemed close to civil war. The impact on the mining industry was devastating – and many communities were only slowly recovering when hit by the latest recession.

Note that IF. I mean it. I do not happen to like capitalism very much and I think it is probably in its death throes. But I am addressing those who have, over the years, berated me for not understanding what a great thing The Market is and how infallible its decisions. Well, the market has spoken. The products the big three are turning out are obsolescent. No-one wants to buy them anymore. And getting public funds to keep turning them out makes no more sense than it would to prop up the making of Trabants.

The Big Three are the strongest advocates of “command and control” management, which is clearly incapable of seeing which way the market is going. They refused to acknowledge what everyone else could see, and they must pay the penalty. In the US, car makers costs are high – mainly because the US does not have a decent health and social security system – so the benefits the company has to pay its workers and pensioners  far exceed those paid in other places. The Senators tried hard to get the Unions to roll back these benefits – and of course there were rebuffed.  (See what Michael Moore has to say about that.)

Public funds will have to be spent. But they will be much better directed if not in the hands of the present  management. Huge changes are needed in the auto industry and the communities where their factories are located are going to need a lot of help – as are the current employees. But NOT the shareholders – and not the managers at the levels who get share options. They are the people who told us they deserved their huge rewards for the risk they were taking. Well welcome to the risk – it’s all yours now, not ours.

Canada and Ontario must help retool and reorganise the auto industry here to produce products that are needed in a post peak oil, overstressed climate and battered environment. Whatever model of organsiation is chosen must, at long last, engage the knowledge, enthusisam and skill of the people who build the vehicles. It must be a system that treats both its employees and customers fairly. But most of all it has to be an industry that’s part of the solution to our current mulitplicity of problems and not the cause of them.

Written by Stephen Rees

December 13, 2008 at 2:53 pm

Posted in cars, Economics

4 Responses

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  1. amen.

    rbo

    December 13, 2008 at 6:35 pm

  2. “In the US, car makers costs are high – mainly because the US does not have a decent health and social security system – so the benefits the company has to pay its workers and pensioners far exceed those paid in other places.”

    That is partly changing. Within a few years Canada, with public health care up the wazoo, will have substantially higher labor costs than the USA (+27$/hour). Also, the US’ wacky CAFE standards force the auto industry into rather unprofitable small cars. Germany can get away with high labor costs because there is a lot of value in a BMW, especially by comparison to a Chevy. When VW designs small cars, they are made in low cost jurisdictions like Slovenia or the Czech Republic.

    Will

    December 13, 2008 at 7:50 pm

  3. “When VW designs small cars, they are made in low cost jurisdictions like Slovenia or the Czech Republic.”

    The Golf IV R32 was moved tho Slovakia this year. Apart from that and the Polo, European-market models are largely built in Germany according to Wikipedia:

    # Wolfsburg: Golf, Golf Plus,Tiguan, 5000 GmbH: Touran, Tiguan
    # Dresden: Phaeton, Bentley Continental Flying Spur
    # Emden: VW Passat Variant und Limousine, ab 2008 auch Passat Coupé
    # Hannover: VW Transporter, (Bus, California, Caravelle, Multivan), VW LT bis 2006
    # Zwickau-Mosel: Golf, Passat

    I think the lower costs are partly because we have a different economic model with a reasonably functioning healthcare system, which peobably helps. US market cars seem to be built largely in Mexico and Brazil.

    I’m not saying any of this is good: these companies are constantly employing lobbyists as well: mostly to reduce emissions laws and anything else that they percieve as a threat.

    Andy in Germany

    December 14, 2008 at 3:53 am

  4. Oops: I missed out that Polos are made in Spain at the Seat works in Martorell.

    Andy in Germany

    December 14, 2008 at 3:55 am


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