Archive for the ‘Auto Industry’ Category


Cartoon: Economy Ready to Go?!

September 16, 2009

Obama seemed to agree…..BUT….

America’s Tired Protectionism


Trade: President Obama has fired the opening salvo in a trade war with China by slapping 35% tariffs on its tires. But besides giving China a kick, this protectionism will harm Americans across the economy.

Read More: Business & Regulation

Sen. Reed Smoot and Rep. Willis Hawley, the two protectionists who deepened the Depression and fueled the rise of militarism ahead of World War II, would have liked the move to keep Chinese tire exports out of the U.S. through tariffs.

There’s no dumping going on — just China’s success in the U.S. market, which has raised its share to 17%.

We can’t blame the president for sneaking in the tariffs late Friday. Raising tariffs is nothing to be proud about. In this case, tariffs jumped from 4% to 35% on Chinese tire imports under Sec. 421 of the 1974 Trade Act, intended to control surges in imports.

But the markets paid attention. Global stock futures tumbled over the weekend. Asian markets dropped sharply Monday, fearing a wave of U.S. protectionism.

China called the U.S. move “rampant protectionism” and vowed to investigate dumping charges against U.S. auto parts and chicken, two industries that have made inroads into the China market. The Asian giant also vowed to challenge the U.S. at the World Trade Organization.

Why should we care? This protectionist move, meant to please a single labor union, takes a big bite out of our global trade credibility, making us look like a country that can’t compete in global markets.

Earlier this year, Obama seemed to agree when the leaders of the Group of 20 declared they wouldn’t worsen the global financial crisis by enacting protectionist measures.

But by mid-year, that strong free-trade declaration was already fraying badly from indirect protectionism in Europe, along with the U.S.’ “Buy-American” provisions in the $787 billion stimulus package. Even so, the tire tariffs this week mark a new low.

“Economically, the idea is ominous,” said Thomas Pruse, an economist at Rutgers University and an expert on trade protectionism. “Not a single tire company thinks it will change the dynamics of the tire industry.” And none supported the tariffs.

Now, we can expect other countries to hike tariffs, going after the U.S., the world’s third biggest exporter, hard. Worse still, expect more requests for tariffs as U.S. special interests line up for their cut of the protectionist pie.

Who pays? On tires, don’t assume for a minute the Chinese will.

The tariff costs will go straight to American consumers who will, as of Sept. 24, pay higher tire prices. First casualty: those who buy low-cost tires, the market where Chinese tires dominate. Big U.S. companies ignore this market because it’s not profitable enough.

Amid a slowdown of tires and an inventory buildup, “I estimate there will be 8 million fewer tires consumed in the first 12 months,” said Pruse. “These are 8 million tires that need to be replaced, and there’s plenty of evidence people are delaying the replacement of their tires, creating safety risks. If (poorer people) can’t replace tires at $120, how can they do it at $200?”

So brace for an upsurge in tire-related crashes on U.S. highways.

But aside from what amounts to a tax on the poor, industry will be hurt, too, and quite a bit of it downstream from mere tires.

Tariffs will add $100 to the price of a new car, cutting into U.S. auto sales, Pruse noted. It will also harm much of the tire installation industry, all of which is U.S.-based. Some 15,000 U.S. workers will lose their jobs from this tire tariff, he said.

The auto industry will get a double-whammy if the Chinese retaliate on auto parts coming into the Chinese market, cutting into sales on that front too. Sales of auto parts in the booming Asian market are critical to the U.S. auto industry’s recovery strategy.

Meanwhile, the United Steelworkers Union, which brought the Sec. 421 complaint, is hurting its own members. No new jobs will be created by this, said Pruse.

The Chinese imports may be replaced by imports from other countries, like India — meaning the U.S. jobs aren’t coming back.

Other unions will take hits too. Longshoremen who unload tires from ships and Teamsters who transport them to tire shops will lose jobs and maybe members. So much for union brotherhood.

It all amounts to the loudest signal yet from this administration that we’re moving toward a level of protectionism not seen since the days of Herbert Hoover and FDR.

This will cost us more than China, with the consequences ricocheting across the globe. Has nothing been learned from history?


More Bloomin’ Czars

August 24, 2009

More Bloomin’ Czars


Big Government: Ron Bloom, who heads the government’s auto task force, may soon have a new job. As Bloomberg reports, the White House wants him to become a new de facto manufacturing czar. What next?

Read More: Business & Regulation

Once in power, Democrats love nothing more than finding a problem so they can create a new level of government to deal with it. Even if there’s no problem, they will — pardon the phrase — manufacture one.

So it is with the possible appointment of Bloom, a former United Steelworkers union adviser who now heads the U.S. auto task force, to be a kind of national industrial policy czar.

The manufacturing sector has indeed been hit hard by the downturn. But so has the rest of U.S. industry. The only real growth sector, as the Rockefeller Institute reported Thursday, is government. While private jobs have shrunk 6.9 million since the start of the recession, state and local governments have added 110,000 positions.

Problem is, President Obama signed a $787 billion stimulus bill in February and vowed to create 3.5 million jobs over the next two years. And a major part of his support comes from unions.

His “stimulus” isn’t working, and he must be seen as “doing something.” Thus, Bloom gets named factory czar.

The question naturally arises: Do we really need a factory guru, especially one whose expertise is in advising labor unions — the cause of much of the U.S. steel and car industries’ woes?

The obvious answer is no. This is just another attempt to revive the long-discredited idea of industrial policy — the notion that markets are inefficient and unfair, and the economy can best be managed by government “experts.”

In the case of manufacturing, it isn’t as sick as we’ve been led to believe. In fact, total value added by the nation’s factories in 2008 hit a record $1.64 trillion for a gain of 21% since 2003.

And despite talk of the U.S. losing its industrial might, we still make up 25% of the world’s manufacturing value added — nearly 2 1/2 times China’s output, U.N. data show.

True enough, manufacturing has lost jobs in recent years. But most of the decline is due to rising productivity. Since 1990, factory output has soared 44%, while the number of factory jobs has fallen 32%. This may be the greatest productivity boom since the Industrial Revolution — an economic triumph rather than a tragedy.

Do manufacturers need a bureaucrat as boss? Or even as their advocate? Of course not. They need what the rest of us need — a healthy private economy. Create conditions for that — with lower taxes, fewer regulations and freer trade — and factories will flourish. And Obama’s 3.5 million jobs might not be such a pipe dream.


Auto Industry: Something’s Smelly At GM

July 28, 2009

Something’s Smelly At GM

IBD: 24 July 2009

Bailouts: You’re a once-mighty auto company that’s been bailed out by taxpayers, taken over by government and just posted a 22% sales drop. What’s your next move? Why, unveil a new men’s fragrance, of course!

It got little attention, but GM’s decision to launch its new fragrance line in honor of Cadillac’s 100th anniversary may go down as one of the most absurd moves by a troubled corporation ever. No doubt they kept a team of highly paid MBAs busy for months with the project, while the car end of their business was imploding faster than a black hole.

Is this what we get for our money — the $51 billion we taxpayers have ponied up to bail GM out of its self-inflicted woes?

“Cadillac, the new fragrance for men,” doesn’t seem like much to start the “New” General Motors Corp. on. Likewise, it’s never good to see that, amid all the cutbacks, GM’s lobbying budget remains virtually untouched. We guess the new “Government Motors” needs the political clout.

Disappointing? You bet. The White House created a so-called “Car Czar” to oversee the auto industry. The Big Three, we were told, had been totally irresponsible and needed the government’s help and the taxpayers’ cash.

Well, so far, not so good. Just one month after the government took a 60% stake in GM, it reported its first half sales fell 22%.

Worse, its global market share fell to 12% — down from 12.3% a year ago and 14.1% in 2005. Last year, Toyota took over from GM as the world’s largest automaker, and this year GM will lose its Hummer, Saab, Saturn and Pontiac lines, becoming even smaller.

We didn’t expect an instant turnaround. But then again, we also didn’t expect to find out that men’s cologne would be part of their new product lineup.

And no, we’re not just picking on the auto industry here.

At least one major American automaker seems to be getting its act together. Ford rejected a big government bailout. How’s it doing? It posted a $2.3 billion quarterly profit in the second quarter, confounding analysts and critics alike.

“We strengthened our balance sheet, reduced cash outflows and improved our year-over-year financial results despite sharply-lower industry volumes,” said Ford Chief Financial Officer Lewis Booth.

And it’s not as if GM has nothing going for it. Quite the contrary.

For one, GM’s newly reissued Camaro is a big hit.

Orders are literally running faster than production right now, forcing those who want a Camaro right away to pay more than the sticker price to get one.

And sales are booming — overseas. GM recently announced that its sales rose 38% in China in the first half, while setting sales records in seven Latin American countries during the same time. GM in the first half sold almost as many cars in China (814,442) as it did in the U.S. ( 947,518). Its share of Europe’s market is growing.

This underscores why GM should have been allowed to undergo a normal bankruptcy — not the politically rigged one that the government forced down all of our throats.

Today, GM might not exist, it’s true, if forced into a regular bankruptcy court. Its assets would have been sliced and diced to pay off its creditors. But those assets would live on. What automaker wouldn’t want to have the Camaro in its stable right now?

A regular bankruptcy would have given GM bondholders first call on its assets. Instead, they literally had money stolen from them.

More importantly, GM could have dumped its most onerous labor contracts with the United Auto Workers, while focusing on truly profitable cars. As it is, the UAW ended up with a major ownership stake in GM at the expense of its creditors and taxpayers.

GM exited bankruptcy on July 10. Today, what’s left after that politicized union-friendly travesty is two GMs.

One is the sickly domestic GM, which still has enormously costly labor contracts that give it roughly a $2,000 per car disadvantage when competing against the 12 foreign companies that make cars here. This GM can’t make money — especially now that government bureaucrats and union leaders are, in part, calling the shots.

Then there’s the other GM, the viable one. It posted big sales gains in foreign markets in the second half, and is the one part of GM that could not only survive, but thrive.

If GM manages to make it, it won’t be because of the taxpayer bailout. It will be because people elsewhere still want to buy its cars.

We hope GM can survive in the U.S. But we rather doubt it can with a management that thinks that perfume will cover up the stink of political meddling and the lingering bad odor of its ruinous retirement and health care costs.


Car and Driver: David E. Davis (Ann Arbor)

July 16, 2009

David E. Davis Jr. is an automotive icon – a genius – an old friend – and a long time tenant of Hogback Officenter.  I loved the many times that I had the opportunity to talk with him.

He and his staff were our first tenants at Hogback Officenter ( our little office park here in Ann Arbor – shown below.


David came to Ann Arbor from New York City – and he loved the ‘Hogback’ name – originally a road only a quarter of a mile long – (from the name of it’s one time shape) .  He got a kick out of moving Car and Driver’s magazine from it’s New York City address on Broadway to Car and Driver’s Ann Arbor address on Hogback Road.

[After 30+ years the new parent company (Hachette Filipacchi) of the magazine moved the local offices to Eisenhower Parkway, Ann Arbor.  David would have said no ‘class’ at all.]

David founded Automobile Magazine and moved the staff and operation to another building we owned in downtown Ann Arbor – which had been for many years the famous Pretzel Bell (often called The P Bell).

I still make a point to read everything that David writes.  So we are including one of his latest articles.






Shopping For A New Car?

June 30, 2009

Options that will be available to drive quite soon.

But look at all of the ‘great new choices’

we will have from ‘The SMART Car’….

The Smorvette!

The Smaudi A3 AWD!

The Smamborghini!


Foreign Car Makers Seen Passing Detroit in North America Capacity

June 24, 2009

Wall Street Journal 23 June 2009


The Big Three auto makers soon won’t be so big.

Even though they have been losing market share for decades, General Motors Corp., Ford Motor Co. and Chrysler Group LLC have continued to produce many more vehicles in North America than their foreign-owned rivals.

But production cuts as part of Detroit’s restructuring have put the Big Three on the verge of losing that distinction, according to a study by Grant Thornton LLP.

The auditing firm expects the Detroit car makers to cut capacity 36% from 2008 levels, to 7.5 million vehicles a year, as they work to more closely align capacity with smaller market share. It says European and Asian manufacturers will raise their capacity by a combined 23% to meet rebounding U.S. demand. That would leave them with the ability to make 8.1 million vehicles a year, surpassing the Big Three’s capacity by 2012.

The shift would mark a dramatic reversal of fortune. Until the 1980s, almost all vehicles made in North America were products of GM, Ford and Chrysler plants. Foreign rivals gained market share by importing vehicles made overseas.

But in the 1980s, first Honda Motor Co., then other Japanese car makers, started building plants in North America. Asian and European makers have built most of their North American plants in the South. If that trend continues, more suppliers will likely follow them there.

GM’s capacity use fell to 64% in 2008 from 88% in 2002, according to forecasting firm CSM Worldwide. Ford and Chrysler had similar drops. Honda’s North American capacity use was 94% in 2008. Toyota’s was 80%, CSM said.

Grant Thornton expects industrywide North American capacity use to hit 90% by 2012. That number has been closer to 75% historically. That would come in large part from a predicted 14% drop in overall capacity.


Hydrogen Powered Car | Riversimple

June 19, 2009

Britain-based Riversimple, a company founded by former race car driver Hugo Spowers and backed by Porsche scion Sebastian Piech, Tuesday unveiled the prototype for a two-seat, hydrogen powered car promising fuel consumption equivalent to 360 miles per gallon (106 kilometers/liter).

Riversimple bills itself as a company dedicated to making highly energy efficient vehicles using a “radical new approach to personal mobility.”

Instead of selling the car, touted as the world’s first low-cost and practical hydrogen vehicle, Riversimple says it plans to lease it, for about 200 British pounds ($315) per month — for the car’s expected 20-year lifetime. Leases would include refueling.

{That’s $325 x 12 x 20 = $78,000 plus interest. And imagine driving? this for 20 years?!  – Picture Obama and Michelle and the two girls?}

Production may begin by 2013, it said.

The Riversimple prototype with its doors open