Domestic Auto Industry

[FangKC]

J.D. Power finds that 27 percent of American new car buyers have downsized their vehicles.

The reality is that small cars are much safer, quieter and sportier than they once were. Combine that with their superior fuel economy in a time of rising gas prices and it makes perfect sense for so many people to kick big cars and SUVs to the curb.

http://autos.aol.com/gallery/trading-do ... d%3D188450

[aknowledgeableperson]

On a talking heads show there was a person talking about how Obama "saved" the domestic auto industry and how Romney would have had it go into bankruptcy. The counterpoint was the domestic auto industry wasn't in that much trouble, the automakers with union workers were the ones in trouble, the rest of the auto makers (foreign owned) were doing OK.

[chingon]

the rest of the auto makers (foreign owned) were doing OK.

Of course, most of them have received heavy government investment in their home countries...but that doesn't fit the talking point about big bad greedy unions, so you guys kind of leave that out. That and the part about how heavily unionized those auto makers are in Europe and Japan.

[grovester]

Or how heavily subsidized the plants are at the state/county/municipal level.

[FangKC]

Yeah, it's true. Almost every country that produces cars outside of the USA gets government subsidies or support of some kind. The Chinese auto industry is very much overseen by the Chinese government.

I would wager that McCain would have eventually done what Obama did had McCain been elected instead. Economists would have told McCain that allowing the domestic auto industry to go bankrupt would have probably put the economy into a freefall, affecting almost every other industry that is in the supply chain. Ford would have probably gone under as well, and even many domestic auto plants that are foreign-owned might have shut down for awhile simply because the parts chain would have been severely affected had Chrysler and GM gone under at the same time. Many of the critics of the auto industry bailout simply didn't acknowledge that fact. Many domestic and foreign-owned auto companies deal with the same parts manufacturers. The loss of GM and Chrysler production would have caused many parts manufacturers to shut down--affecting Ford.

The other issue would have been warranties on cars. I don't know how that would have been handled. Most of the GM and Chrysler auto dealers would have gone bankrupt as well, so there wouldn't have been anywhere to get work done on warranty, or in a recall. The government probably would have had to guarantee auto warranty work done by private mechanics.

It would also have severely affected the ability to get common replacement parts for many used vehicles needing repair. In time that would have been solved by overseas parts companies, so those US jobs would have probably been permanently lost as well.

Even if McCain had "let the market deal with it" in his approach, I think he would have stepped in simply based on national security reasons. You cannot have a functioning military withput domestic heavy vehicle and parts manufacturing. No world power can really let so many big factories shut down. It would affect the ability of the military to function. You cannot allow foreign countries to supply your war machine, i.e. China.

People also forget that GM shutting down would have affected auto production overseas, since GM has plants in Australia, Canada, Mexico, Germany, the United Kingdom, Spain, France, Columbia, Egypt, South Korea, Japan, Poland, Vietnam, Brazil, India, Hungary, Equador, Thailand, Argentina, Russia, South Africa, and Venezuela. GM also owns interest in Chinese factories.

GM also share parts and platforms with other brands like Isuzu and Suzuki. If GM had gone under, it is also likely that Isuzu might have had to shut down production of many lines, and revert to medium and heavy duty truck sales only.

Chrysler had plants in Canada and Mexico, and even before sale to Fiat, had ownership shares in overseas plants that produced engines and vehicles under shared agreements with Volkwagen, Nissan, Mitsubishi, etc. Chrysler also supplies parts to discontined models of Jeep brands still made in India. Jeeps, or derivatives, are assembled in Spain, India, Argentina, Myanmar (Burma), China, Egypt, Israel, South Korea and Phillipines.

Ford also has numerous auto plants overseas in Thailand, Romania, Mexico, China, Brazil, Portugal, Spain, United Kingdom, Australia, France, Venezuela, Germany, India, Taiwan, Malaysia, South Africa, Phillipines, Russia, Turkey, Belgium, Vietnam, Slovakia, and Argentina. Ford shares parts and platforms with several Mazda models.

There would have been an effect worldwide and not just in the USA.

Another side effect would have been resale value of any vehicle manufactured by domestic brands the shut down would have plummeted based on the assumption that some parts would become hard to find on some models, and there would be no dealer to service warranty repairs and recalls.

For a couple of years, new vehicles would be more expensive since three major automakers shut down, and other brands would struggle to make up the difference in manufacturing capacity. There would be less competition among brands, especially with GM and Ford out of the picture.

Then there would have been the affect on local municalities that rely heavily on auto manufacturing, and even more, the high-paid auto related employees spending money in their local economies. In some places, unemployment would be much higher than the national average. Cities, states and counties would lose untold revenue. Services would be drastically cut, and taxes raised in many places just to provide bare minimum services.

I would have not wanted to be a sitting US president presiding over the complete shutdown of the US auto industry, especially if my politics would direct me to dig in and let the market sort it out. You think the economy is bad now, imagine it after the chain reaction of losing this much manufacturing at one time, the high unemployment, foreclosures, and cuts to services in many states and cities. On top of this, fighting two wars overseas with parts shortages. No thanks.

It would not only have been parts to assemble cars, the chain reaction would have included:

after-market parts
tire companies
battery manufacturers
textiles
electronics
steel manufacturers
glass manufacturers
plastic parts manufacturers
newspaper advertising (car ads are big sources of revenue)
magazine advertising
TV and radio ads

[aknowledgeableperson]

Of course, most of them have received heavy government investment in their home countries...but that doesn't fit the talking point about big bad greedy unions, so you guys kind of leave that out. That and the part about how heavily unionized those auto makers are in Europe and Japan.

There is more to the domestic auto industry than GM and Chrysler. Ford didn't need help nor any other auto maker (outside of electric, etc) that makes cars in the good old USA like Toyota, Nissan, Honda, etc.

Just curious, GM and Chrysler still make cars in Canada and Mexico?

Anyway, with the labor agreements and plant shutdowns of GM and Chrysler isn't that what Romney did with Bain? Guess it is OK if the government does it. And why not have those two automakers shut down those foreign plants and move those jobs to the USA?

[FangKC]

Of course, most of them have received heavy government investment in their home countries...but that doesn't fit the talking point about big bad greedy unions, so you guys kind of leave that out. That and the part about how heavily unionized those auto makers are in Europe and Japan.

There is more to the domestic auto industry than GM and Chrysler. Ford didn't need help nor any other auto maker (outside of electric, etc) that makes cars in the good old USA like Toyota, Nissan, Honda, etc.

Just curious, GM and Chrysler still make cars in Canada and Mexico?

Anyway, with the labor agreements and plant shutdowns of GM and Chrysler isn't that what Romney did with Bain? Guess it is OK if the government does it. And why not have those two automakers shut down those foreign plants and move those jobs to the USA?

Toyota's financial unit has asked for an emergency loan from a state-backed lender on March 16, 2009, with reports putting the figure at more than US$3 billion. It says the international financial situation is squeezing its business, forcing it to ask for an emergency loan from the Japan Bank for International Cooperation. It is the first time the state-backed bank has been asked to lend to a Japanese car manufacturer.[22]

http://en.wikipedia.org/wiki/Toyota

On another note, Suzuki Motor Corp. was founded after the Japanese government granted its' founder a government subsidy to engineer motorcycles.

With Ford, timing was a factor. Ford almost went bankrupt, but it reorganized and got financing, labor, and benefit deals in place before the fiscal crisis of 2008. Ford had resized the company, planned to shut down Mercury, and sold off Hertz Rent-A-Car, Volvo, Jaguar, Aston Martin, and Land Rover, and its' controlling stake in Mazda. By that time, Ford had recovered enough to not need bailing out. Chrysler was weakened partially because of its' merger with Daimler, which was a disaster.

GM and Chrysler were also unprepared for the tightening of the credit markets, higher gas prices, and large drops in sales because car buyers couldn't get credit. Chrysler's alliance and divorce with Daimler has also left it without new model designs.

Auto companies like GM and Chrysler build cars in foreign countries for a variety of reasons. Some of it has to do with currency exchange. For many years, the Yen/Dollar exhange rate affected Japan's export costs, so it was cheaper to produce cars in the USA than import them.

Labor costs of are often lower in Mexico, and since they sell vehicles in Mexico as well, it makes their product more affordable to Mexicans. Local in-country production also reduces the costs of shipping vehicles long distances. In some cases, I'm sure there are trade reasons like tariffs or value-added taxes. Some countries simply require manufacturers to build certain percentages in-country (like China).

There are also models made in those countries that are only sold there, and not in the USA: Chevrolet Astra, Chevrolet Corsa, Chevrolet Celta, Chevrolet Prisma, Chevrolet Meriva, Chevrolet Zafira (made in Brazil). These models are usually smaller, cheaper vehicles that wouldn't appeal to the US market. They can also be discontinued older US models rebadged in other countries (like the Chevy Cavalier/Cobalt) These models can also have lower horsepower 3-cylinder diesel engines--sometimes as low as 57 horsepower.

Engines made in foreign countries for GM brands also have to meet different emissions specific to that market.

GM Plants

Ingersoll, Ontario -- Canada --Chevrolet Equinox/ GMC Terrain (plant opened 1988)
London, Ontario -- Canada -- Chevrolet Impala (plant closed in Feb, 2012 due to new plant opening in Muncie, IN, USA)
Oshawa, Ontario -- Canada -- Impala/Camaro/ Equinox (plant opened 1953, closing announced)
St. Catharines, Ontario -- Canada -- Engine plant (plant opened in 1954)
Saint-Eustache, Quebec -- Canada -- Chevrolet Equinox

Ramos Arizpe -- Mexico -- Chevrolet C2/Chevrolet HHR/Cadillac SRX (plant opened 1981)
San Luis Potosí -- Mexico --Chevrolet Aveo/Pontiac G3/Pontiac Wave (plant opened 2008)
Silao -- Mexico -- Escalade ESV/Escalade EXT/Avalanche/Suburban/Yukon XL (plant opened in 1994)

Chrysler Plants

Brampton, Ontario -- Canada -- Chrysler 300/ Dodge Challenger/Dodge Charger (plant opened in 1986)
Toronto, Ontario -- Canada -- Aluminum Die Castings, Pistons (plant opened in 1942)
Windsor, Ontario -- Canada -- Dodge Grand Caravan/Chrysler Town & Country/Volkswagen Routan (based on Chrysler van platform) (planted opened 1928)

Saltillo, Coahuila -- Mexico -- Dodge Ram 2500 & 3500 (plant opened 1995)
Toluca, Mexico -- Dodge Journey/Fiat Freemont/Fiat Nuova 500 (planted opened 1978)

[brewcrew1000]

J.D. Power finds that 27 percent of American new car buyers have downsized their vehicles.

The reality is that small cars are much safer, quieter and sportier than they once were. Combine that with their superior fuel economy in a time of rising gas prices and it makes perfect sense for so many people to kick big cars and SUVs to the curb.

http://autos.aol.com/gallery/trading-do ... d%3D188450

I view a car as nothing but a Utility now. The lower my utility bill, the happier I am.

[chrizow]

J.D. Power finds that 27 percent of American new car buyers have downsized their vehicles.

The reality is that small cars are much safer, quieter and sportier than they once were. Combine that with their superior fuel economy in a time of rising gas prices and it makes perfect sense for so many people to kick big cars and SUVs to the curb.

http://autos.aol.com/gallery/trading-do ... d%3D188450

I view a car as nothing but a Utility now. The lower my utility bill, the happier I am.

exactly. i was just thinking this today. i just don't think having a "cool" car means as much to younger folks these days, and the "milennials" or whatever are even more disconnected from cars. there was a story recently in the NYT about how young folks are putting off buying a car (either by choice or necessity) and basically the demand for cars among the younger cohort is declining, which is scaring automakers. right now we are a 2-car household, and we have one nice, newer car and one 10+ year old car that is still going but will need to be retired probably in the next 2 years. we're thinking of downsizing to a 1-car household since we both live and work in the "urban core" and basically never go outside a 4-mile radius of our house.

[smh]

exactly. i was just thinking this today. i just don't think having a "cool" car means as much to younger folks these days, and the "milennials" or whatever are even more disconnected from cars. there was a story recently in the NYT about how young folks are putting off buying a car (either by choice or necessity) and basically the demand for cars among the younger cohort is declining, which is scaring automakers. right now we are a 2-car household, and we have one nice, newer car and one 10+ year old car that is still going but will need to be retired probably in the next 2 years. we're thinking of downsizing to a 1-car household since we both live and work in the "urban core" and basically never go outside a 4-mile radius of our house.

We're similar except for the fact that I LOVE CARS! But, as much as I'd like to have some awesomely designed car, it isn't worth it because I have no plans to drive anywhere too often and it would be foolish to spend good money on a machine that is just going to sit on the street and lose value. Once my car gives out, which it is showing no indication of, we'll probably move to being a 1 car household. At this point there isn't really a reason to get rid of our older car because it isn't worth anything and costs very little to insure and maintain. In the future it just won't be necessary to own two, and if we ever were in a pinch we could probably borrow or rent a car.

[chrizow]

We're similar except for the fact that I LOVE CARS!

i do too (or did), until i strapped myself with a $600 a month car payment for 5 years. i had a '99 civic with 35K miles (bought from my grandma who rarely drove it) but, in '07, i got the "itch" and sold it and got a new, "cooler" car. worst decision ever. i could still have that civic now and it would be just at 100K miles and probably still going strong, and i'd also have about 40K more in the bank (or at least 40K of cool shit sitting around).

[chingon]

I drive a cheap, 12-year-old, reliable, gas-efficient Ford Focus wagon. When it shits out I'm sure I will buy another economy-sized domestic hatchback. I view my car primarily as means to get to remote places conveniently. I will own a car as long as I can afford to, because the idea of living in a city with no access to the country is a non-starter to me. Other than that, I view my car as a burden and an imposition.

That said, there's a part of me which would in no way regret owning --- and driving everydamnwhere I could in -- a totally cherry, black-like-a-million-midnights, 1965 Lincoln Continental with suicide doors and a wonderfully loud stereo.

[aknowledgeableperson]

That said, there's a part of me which would in no way regret owning --- and driving everydamnwhere I could in -- a totally cherry, black-like-a-million-midnights, 1965 Lincoln Continental with suicide doors and a wonderfully loud stereo.

Although it was suppose to be in 1962, not 1965, sounds like you might want to take an Animal House roadtrip.

[chaglang]

Of course, most of them have received heavy government investment in their home countries...but that doesn't fit the talking point about big bad greedy unions, so you guys kind of leave that out. That and the part about how heavily unionized those auto makers are in Europe and Japan.

There is more to the domestic auto industry than GM and Chrysler. Ford didn't need help nor any other auto maker (outside of electric, etc) that makes cars in the good old USA like Toyota, Nissan, Honda, etc.

Ford received a $5.9b loan from the Feds in 2009 to make their model line more fuel efficient.

[FangKC]

Ford's CEO Alan Mulally says basically the same thing I have been saying--that Ford would have gone under as well without the auto industry rescue, and also states that the auto industry collapse would have thrown the US into an economic tailspin and left us in a full-scale Depression.

Ford Motor Co. (F), the only large U.S. automaker that didn’t receive a U.S. government bailout, would’ve failed along with General Motors Corp. and Chrysler LLC if President Barack Obama’s administration hadn’t rescued the industry, said Steven Rattner, who headed Obama’s auto task force.

...

Ford Chief Executive Officer Alan Mulally last month made similar comments, saying he doesn’t regret testifying before Congress in support of taxpayer support for his competitors.

“We think about that a lot, should we have gone back and testified on behalf of our competitors who were bankrupt,” Mulally told reporters Sept. 18 in New York. “I would do the same thing again today.”

Mulally said he agreed with the assessment of “the economic advisers of the Bush administration and the Obama administration that if GM and Chrysler had gone into free fall, they could have taken the United States from a recession into a depression.”

The U.S. government was the only entity that could save the domestic automakers because no one, including banks that were dealing with their own financial crises, was willing to put private capital into GM and Chrysler at the beginning of 2009, Rattner said.

http://www.businessweek.com/news/2012-1 ... ttner-says

[pash]

.

[FangKC]

Riverside lands 267 jobs, yet another auto-related manufacturer

Nice to see new jobs being lured to Missouri from an expansion of an out-of-state manufacturer instead of the border war job-transfer back and forth.

http://tinyurl.com/lxekybb

[normalthings]

Ford adding 1,100 new positions at ClayCoMo and investing $95 million.

[dukuboy1]

Is that NET 1100 new positions or filling some of the ones that were furloughed and or downsized these past 2 years? I know the auto industry had to pivot a lot in their manufacturing with the supply chain crunch on microchips and other materials.

Either way it is great news and good to see the USA embrace manufacturing. I foresee an uptick in this section of jobs to be better prepared to handle supply chain and logistics and better manage a global economy. Just makes sense for countries to get back to being a bit for self sufficient and having more stable Western Democratic countries partner deeper with trade to allow for less disruption in dealing with countries that may be prone to periods of "uncertainty" and less than ideal leadership.

[SingleMalt12]

Mo didn't get much in terms of investment. $90M.
Michigan-$2B 2000 jobs
Ohio-$1.5B 1800 jobs.