Seems like this would be a scary question to ask for obvious reasons...Many would be left jobless, yet at the same time bailouts are a waste when america is essentially in a DEPRESSION so even if the auto industry is saved...WHO CAN BUY A CAR WHEN THEY ARE EITHER WITHOUT A JOB OR THEIR COMPANY IS IN A PRECARIOUS CONDITION???
Does the U.S. Need an Auto Industry?
By The Editors
(Photo: Jeff Haynes/Agence France-Presse — Getty Images)
With Chrysler filing for bankruptcy today, President Obama expressed confidence that the automaker will emerge stronger. But, of course, it will be vastly changed, as will General Motors, which may face the same difficult decision come June 1, when it must complete its own restructuring. Under the administration’s plan, Chrysler will receive upward of $8 billion in government support to get it through bankruptcy and to restart its operations.
With its survival, at least in the short term, so dependent on public assistance, it seems fair to ask, do we need a domestic auto industry? Many American manufacturing industries, like textiles and electronics, long ago moved to other producing countries. Why is the auto industry different?
Robert Reich, former secretary of labor
Robert Lawrence, economist, Harvard University
Tyler Cowen, economist, George Mason University
Mark Thoma, economist, University of Oregon
The Jobs Come First
Robert Reich, a professor at the Goldman School of Public Policy at the University of California at Berkeley, was secretary of labor in the Clinton administration. He is the author, most recently, of “Supercapitalism,” and he blogs at Robert Reich’s Blog.
The United States needs an auto industry because automobile jobs are good ones. They pay higher than average and provide good benefits. But that doesn’t necessarily mean we need General Motors, Ford and Chrysler. The American auto industry is not the Big Three. It’s Americans who make automobiles.
Foreign-owned automakers, producing cars here in the United States, now employ — directly or indirectly — hundreds of thousands of Americans. And at the rate the Big Three are shrinking, even as they’re bailed out, foreign automakers may soon employ more Americans than the Big Three do.
Meanwhile, the Big Three have gone global. A Pontiac G8 shipped by G.M. from Australia contains far less American labor than a BMW X5 assembled in the United States. General Motors’ European subsidiaries include Opel and Saab. Ford also has operations around the world. It even owns Volvo.
We’re paying G.M. and Chrysler billions of taxpayer dollars to keep them afloat, while they cut tens of thousands of American jobs and slash wages.
I’m not arguing against an auto bailout. But its purpose ought to be to help American auto workers keep their jobs, regardless of whether they work for G.M. or Toyota or anyone else. Or if they lose their jobs, help them get new ones that pay almost as well.
Yet we’re doing exactly the opposite: paying G.M. and Chrysler billions of taxpayer dollars to keep them afloat, while they cut tens of thousands of American jobs and slash wages. We’re transferring money from taxpayers to Big Three shareholders for no apparent reason other than the Big Three are headquartered in America. Why should taxpayers foot any of this bill unless the Big Three agree to keep their workers employed while they try to turn themselves around?
It’s Not Competitiveness, It’s Management
Robert Lawrence is the Albert L. Williams Professor of International Trade and Investment at Harvard Kennedy School of Government and a senior fellow at the Peterson Institute for International Economics.
We ignore market signals at our peril. We should only produce domestically those goods and services that are globally competitive and import the goods and services that foreigners can produce better and more cheaply. The U.S. has lost its comparative advantage in large segments of electronics, apparel and footwear, and we are better off buying such products from foreigners rather than producing them at home at higher cost. This frees up domestic labor and capital to be put to more productive uses.
Foreign firms have shown that cars can be built profitably in the United States.
But this is not actually the case with automobiles. Foreign firms have shown that cars can actually be built profitably in the United States. So the key problem is not the competitiveness of the American economy in autos but rather the competitiveness of the Big Three. Poor management is the core weakness. The policy question is not whether to have domestic auto production but rather whether our policies should ensure that we have a certain amount of that production undertaken by automakers with U.S. headquarters.
To be sure, everything else being equal, we would be better off if the firms can be restructured and reoriented with minimum dislocation. Having U.S.-owned automakers is beneficial because the profits stay here and because headquartered firms confer additional benefits to their communities. But the policy cannot be to preserve domestic firms no matter what the costs. Such an approach could be costly to taxpayers and counterproductive by providing the Big Three with incentives to continue to look to Washington to solve their problems rather than changing their behavior.
In the current crisis, given the costs of dislocation for which the government is already committed to pay (unemployment insurance, pension guarantees, local government support) there may be a case for providing the automakers some transitory financial adjustment assistance. But over the long run, we should allow our production structure to respond to international market signals.
We Don’t Care
Tyler Cowen is a professor of economics at George Mason University. His blog, Marginal Revolution, covers economic affairs.
I’m an economist, not a business forecaster, so I don’t have any particular predictions about Chrysler and G.M. We do know that Ford is likely to survive.
More important, there are some very efficient Toyota plants in the United States. That too is part of our domestic automobile industry and those plants employ a large number of American workers.
You might think that Toyota is different because it is a Japanese company rather than an American one. But in fact Toyota is a publicly traded company, as are most of the other major automobile makers. That means any American can, any time he or she wants, buy some Toyota shares and make Toyota more of an “American company” and less of a “Japanese company.”
Have you gone out and bought those shares? Maybe not. Maybe that means you don’t really care about whether Toyota is a Japanese or an American company. If you have bought Toyota shares, maybe it is simply because you thought that the company was a good investment. That’s O.K., there is nothing wrong with those attitudes. In fact those attitudes are a sign of your rationality.
Our automobile industry could be much more “American” if we really cared to make it so. But we don’t. Our behavior as investors and consumers is usually more rational than the claims we offer up in politics and in public discourse.
National Defense Interests
Mark Thoma is an economics professor at the University of Oregon and blogs at Economist’s View.
Does America need an auto industry? I believe that specialization and trade generally makes us all better off, so there is no reason to oppose industry moving outside our borders. But the costs and benefits of specialization sometimes hit different groups of people, so there can be winners and losers. People losing jobs in the auto industry generally do worse when they find new jobs, and that has been a big reason for the opposition to letting manufacturing of autos and other goods go into decline.
But there is another rationale for policies preserving certain kinds of production: protecting industries vital to national defense. If you are an island nation vulnerable to blockades or trade embargoes intended to prevent food and other goods from being imported, it may be in your interest to protect domestic agriculture, for example.
Automobile assembly lines cannot be constructed in an instant, so losing this industry would make us more vulnerable.
The question is the degree to which a country can outsource the manufacturing of goods needed for national defense. If we do not have the capacity to produce engines, cars, tractors, and other goods that can be quickly converted to building military vehicles and aircraft, and war breaks out and those supplies are cut off, where does that leave us?
Some goods can be safely outsourced since they aren’t vital to national defense, or because the barriers to restarting production are small. But assembly lines used to produce automobiles cannot be constructed in an instant, so losing this industry would make us more vulnerable. (Foreign ownership of factories located here is not a problem, since we could easily take those over if necessary, so we should be happy with the announcement of the alliance of Chrysler with Fiat.)
Of course, a counterargument is that “vital for national defense” can be used as a cover for broad protectionist policies. Every supplier to the auto industry, for example, could claim that they are just as essential as the factory itself. Still, I think it’s important to ask if eliminating domestic auto production crosses the safety line, and I worry that it would.
