Where’s The Outrage Over GM & Chrysler?

Closer than you think...

Closer than you think…

In my latest post at BloombergView, I look at Donald Trump and Hillary Clinton’s attempts to tap into the populist anger over the auto industry and am left wondering why neither is willing to attack the automakers who actually received bailout money. Trump has taken on Ford’s decision to double production capacity in Mexico and Clinton has attacked the supplier Johnson Controls for relocating to the UK in an “inversion” deal with Tyco, yet neither of these alleged automotive evildoers come close to matching the perfidy of the two bailed-out automakers. To wit:

General Motors, which received a $50 billion bailout, has received a net federal tax advantage of $52 million over the last three years in spite of billion-dollar profits, thanks to a controversial government decision allowing it to carry tens of billions of dollars in operating-loss credits through bankruptcy. GM is also leading the way on importing vehicles from China, and has focused its global export and R&D strategies around that huge potential market in the years since taxpayers bailed it out. Just like Ford, GM is doubling its Mexican production capacity, spending $5 billion on new assembly jobs south of the border.

Meanwhile, FCA isn’t even based in the U.S., having fled to a U.K. tax domicile after receiving more than $10 billion in bailout funds. Putting Fiat’s Italian plants in front of the line for new production, FCA anticipates that its North American production will remain flat through 2018 while imports from outside North America will expand to more than 10 times 2013 levels

This is at the heart of populist anger over the auto industry: Even if the bailout was necessary as an emergency measure, it’s failed to change the behavior of the firms who benefited from it or to deliver any reversal in the fortune for U.S. workers. Fiat-Chrysler survived to become a foreign firm by every possible metric, and GM became a tax-dodging Trojan horse for Chinese cars. And yet no American politician — Democrat or Republican, establishment or renegade — seems able to even identify these real culprits.

Not convinced that the automakers we bailed out are bad corporate citizens of the US? Read on…

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Does Beijing-Shanghai Tension Spell Trouble For GM and VW?

Jiang Zemin and the Communist Youth League, in happier times.

Jiang Zemin and the Communist Youth League, in happier times.

 

Ever since the dramatic 2012 downfall of the colorful Chongqing party leader Bo Xilai, the Western press has been fascinated with China’s “princeling” plutocrats and the Central Government’s efforts to restrain them. No wonder: the battle is China’s basic political division, pitting the bureaucratic and ideological power of the Beijing Central government against the economic power of Southern Chinese entrepreneurs centered around Shanghai. Under former Shanghai mayor Jiang Zemin, China opened rapidly to the foreign investment that spurred decades of florid economic expansion… and sowed the seeds of China’s major political problems, corruption, inequality and environmental ruin. The downfall of Bo Xilai, a protege of Jiang Zemin’s Shanghai clique and member of its successor “Princeling” clique, was taken as a sign that Xi Jinping is serious about continuing Hu Jintao’s campaign against the ill-gotten gains of the Shanghai boom… a signal that is growing louder as the investigations widen.

Why the ten-cent lecture on Chinese politics? Shanghai’s automotive star rose alongside Jiang Zemin’s, and the city with which the he is synonymous has become one of China’s biggest automotive players and partner to the two biggest foreign presences in China, Volkswagen and GM. If Xi Jinping’s reform movement continues to target Shanghai and  its Princelings, and especially if the investigations draw closer to Zemin himself, automakers could find themselves on awkward ground. Caught between the guanxi (connections) culture of the world’s new largest market for cars and the Foreign Corrupt Practices Act of what is still the most profitable market for cars, automakers with Shanghai exposure have reason for concern.

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