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

[Dale Allen Pfeiffer <daleallen0416@xxxxxxxxx>]

Don't worry about it. Anything on my blog is free.

Dale

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

> 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,
>
=== message truncated ===


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