Re[2]: [A-List] The US Auto Industry Crisis

[Bill Totten <shimogamo@xxxxxxxxxxxxx>]

Thanks, Dale, please do whatever you please with it. I've forwarded a lot of
your great stuff to many friends; sorry I didn't ask in advance. Bill	

On Mon, 12 Dec 2005 06:19:31 -0800 (PST)
Dale Allen Pfeiffer <daleallen0416@xxxxxxxxx> wrote:

> 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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Bill Totten     http://billtotten.blogspot.com/