Re: [A-List] The US Auto Industry Crisis

[Dale Allen Pfeiffer <daleallen0416@xxxxxxxxx>]

Excellent, Bill. I may forward this to friends in
Michigan who work with Michael Moore.

Dale

--- Bill Totten <shimogamo@xxxxxxxxxxxxx> wrote:

> by Bill Totten
>
> Nihonkai Shimbun and Osaka Nichinichi Shimbun
> (November 10 2005)
>
> I've written a weekly column for two Japanese
> newspapers for the past several
> years. Patrick Heaton prepared this English version
> from the Japanese original.)
>
>
> General Motors (GM), the corporation that came to
> symbolize the United States in
> the 1950s, is teetering on the brink of bankruptcy.
> Delphi Corporation, an auto
> parts manufacturer that GM spun off a few years ago,
> declared bankruptcy at the
> beginning of October, making it the biggest
> bankruptcy in the history of the
> auto industry. Ford is in similar straits; slumping
> sales in North America have
> forced it to announce plans to close plants and lay
> off thousands of employees.
>
>
> Mortgage Debts
>
> In the era of cheap and abundant oil GM and Ford
> dominated the top industries in
> both the US and the world. There are various reasons
> why these two companies are
> now in crisis, but here I will focus on how
> difficult it will be for them to
> recover.
>
> First, over half of the automobiles sold recently in
> America have been SUVs.
> These vehicles guzzle gasoline and pollute the
> environment horribly. Yet for
> several years both Ford and GM have focused on
> manufacturing these automobiles
> because they could sell them at high prices and reap
> huge profit margins. It
> will not be easy for these companies to adjust to
> high oil prices by converting
> their manufacturing facilities to produce less
> expensive cars yielding much
> thinner profit margins. If oil prices continue to
> remain high, consumers will
> continue to turn away in increasing numbers from
> SUVs, leaving GM and Ford the
> last players in a rapidly shrinking market.
>
> Last year 77% of US consumption was financed by
> borrowing as spendthrift
> Americans mortgaged their homes to pay for consumer
> goods and services.
> Both the Federal Reserve and Freddie Mac say that
> nearly one-third of
> American consumption has been financed by such
> borrowing over the past decade.
>
> What made this possible is the housing bubble in the
> US, which was underwritten
> by the low interest policy of the Federal Reserve
> Board along with large-scale
> borrowing of funds from Japan and China. Low
> interest rates stimulated demand
> for expensive housing. Rising demand caused prices
> to rise, and rising prices
> raised expectations for even higher prices,
> stimulating still greater demand
> and higher prices. This spiral has allowed Americans
> to borrow greater and
> greater amounts of money against the apparent values
> of their homes to finance
> much greater consumption than they could afford from
> their own real incomes.
> (Perhaps "lured" is more apt than "allowed" here.)
>
>
> A Decline in Consumption is Inevitable
>
> Many analysts are predicting an end to this housing
> bubble. When the bubble
> bursts, housing prices may fall dramatically,
> forcing homeowners to curtail
> consumption in order to pay off their mortgages more
> quickly to avoid
> foreclosure. This cycle would have a huge impact not
> only on GM, Ford, and other
> auto makers, but also on all Japanese corporations
> addicted to the US market.
>
> Many US mortgages are based on adjustable rather
> than fixed interest rates,
> meaning that borrowers must pay more just to service
> their borrowings when
> interest rates rise. This will exacerbate, in both
> speed and magnitude, the
> impact on consumption of a deflation (not to mention
> a sudden bursting) of
> the US housing bubble.
>
>
> Laying off workers is not a method unique to the
> management of GM and Ford.
> The first things US corporations do when faced with
> straitened finances is to
> lay off workers and reduce wages and benefits to
> those workers they cannot lay
> off. GM has already announced it will be cutting
> fifteen billion dollars in
> insurance and health care fees it was obligated to
> pay to retirees who had
> worked many years for the company. If GM, like
> Delphi, files for bankruptcy,
> under provisions of Chapter 11 of the US Bankruptcy
> Law, it will be possible for
> GM also to reduce a variety of benefits to current
> workers. A vicious cycle may
> well result: reduced employment and income for US
> workers (along with shinking
> home values) reducing the buying power of American
> consumers, making the auto
> industry shrink even further.
>
> Moreover, one would not expect US consumers to buy
> very many cars from companies
> tottering at the brink of bankruptcy.
>
> High energy costs are affecting not only the
> inefficient auto and airline
> industries, but also have begun having an impact
> even on moderately efficient
> rail and large-scale distribution systems. As the
> brief (150 year) period that
> depended heavily on abundance of cheap fossil fuel
> ends, many aspects of our
> economy and our very lives inevitably will be
> affected by high and rising energy
> costs.
>
>
> Influence of American Capitalist Diehards
>
> As is clear from looking at GM and Ford, the most
> important objective of private
> industry in the US is maximization of profit,
> immediate profit, for stockholders
> and for executives charged with achieving that
> objective. This is the ideology
> of America's capitalist diehards. When costs rise,
> the first steps taken by US
> capitalists is to reduce expenses by cutting wages
> and benefits, and to transfer
> the costs to consumers through higher prices while,
> of course, shirking their
> own share of society's tax burden off on those same
> workers and consumers.
>
> The crisis facing the American auto industry -
> alongside war and prison, the
> very symbol of the United States - has profound
> significance for Japanese, both
> as workers and consumers of corporations addicted to
> the shaky US market and as
> subjects of an oligarchy whose only policies seem to
> be meekly obeying American
> commands and blindly aping American ways.
>
>
> Bill Totten     http://billtotten.blogspot.com/
>
>
>
>


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