Free Markets, Free People


Obama’s UAW speech fantasy, Kaus’s auto industry reality

Trying to justify the unjustifiable with a pep-rally like political speech to the UAW, Obama points to what he contends are the favorable results of his decision to intrude into the auto market and rearrange the bankruptcy process to favor his cronies.

I know our bet was a good one because I had seen it pay off firsthand.  But here’s the thing.  You don’t have to take my word for it.  Ask the Chrysler workers near Kokomo — (applause) — who were brought on to make sure the newest high-tech transmissions and fuel-efficient engines are made in America.  Or ask the GM workers in Spring Hill, Tennessee, whose jobs were saved from being sent abroad.  (Applause.)  Ask the Ford workers in Kansas City coming on to make the F-150 — America’s best-selling truck, a more fuel-efficient truck.  (Applause.)  And you ask all the suppliers who are expanding and hiring, and the communities that rely on them, if America’s investment in you was a good bet.  They’ll tell you the right answer. 

Of course Chrysler is now owned by a foreign auto company, courtesy of the Obama administration, Ford took no federal money and, had normal bankruptcy proceeded, taxpayers wouldn’t be out $80 billion dollars (still unpaid despite claims to the contrary) and a leaner, more competitive GM would be in existence.   Those suppliers would still be supplying and after the shakeout a more viable corporation would have come into existence.

uaw-gmInstead, the same GM is in existence boosted by taxpayer money.  As Micky Kaus points out, “You’d be successful in the short run too if the government gave you $80 billion dollars.”

Speaking of those GM workers in Spring Hill, TN, Kaus lays out another reality that the president doesn’t present:

Toyota and Honda are coming back online after the tsunami and Southeast Asia floods crippled production. VW is building roomy American-style cars in Tennessee using $14.50/hour non-union workers instead of $28/hour UAW workers. Hyundai is expanding rapidly. Competition is going to be vicious–it’s widely believed there’s still overcapacity in the industry. A new oil price spike could crimp sales of high-profit trucks. Will GM still be making money in 5 years? Or, I should say, will GM still be making money building cars in the U.S. (as opposed to importing them from China) in 5 years? I’m skeptical. I don’t think deficient corporate cultures change that easily. Normally we rely on the market to simply kill them off.

The two points to be made here are important.   One, GM’s current “success” is a result of huge infusion of taxpayer money.  Its problem was/is its corporate culture and its unions.  Neither problem have been addressed or fixed.  Instead, like Solyndra, they’ve simply been given an extension via the taxpayer that will eventually run out.  Secondly, as competing auto companies  using non-union labor continue to locate in right to work states and pay a competitive wage (but not the high end union wage), they will continue to take market share from GM, who is still stuck with that toxic corporate culture and grasping unions.

But, of course, Obama won’t care because he’ll be out of office.  This is the usual short term vote buying, just on a grander scale than we’ve ever seen it before.  Crony capitalism at its worst.

Long term viability?

Who cares?  Certainly not President Obama.

~McQ

Twitter: @McQandO

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