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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Behind The Volkswagen Scandal, A “Car Cold War” Simmers

The still-unfolding Volkswagen diesel emissions scandal has earned the largest German automaker more than a week of public opprobrium in the US media, as American owners, regulators and commentators rush to condemn the most blatant case of regulatory evasion in recent automotive history. In Europe, however, the outrage at VW’s emissions manipulation is tempered by a certain amount of realpolitik. French Economy Minister Emmanuel Macron has given voice to European suspicions by suggesting that American automakers are fueling the scandal for competitive purposes, and German officials have made it clear that they intend to “contain” the scandal. Grievances over auto industry issues have long been a source of friction between President Obama and German Chancellor Angela Merkel, and the Volkswagen scandal has brought tensions old and new spilling out into the open.

 

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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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What’s Good For General Motors

Are the results of the elections unclear?

Are the results of the elections unclear?

When I first started writing about cars, it was for someone else’s brand. I didn’t have final cut over my work, I didn’t get to pick my own topics, and the result was that a lot of my work read a lot like it was written by my editor. At the time this was exactly what I needed: my first six months or so of blogging were basically an intensive self-education, guided by a firm mentor with a clear vision. But as I began writing more about the burgeoning auto bailout, I found myself being given more freedom to write the worlds of the car business and politics collided. Having studied Political Science in school, this created the perfect opportunity for me to study the sudden collision of politics and cars, which in turn opened my eyes to the countless ways in which cars shape our world.

My piece in today’s Bloomberg View goes back to my original take on the topic that first pulled me into the world of cars, the basis from which all my bailout-critical writing has stemmed: bailing out automakers prevents creative destruction, and robs consumers of the right to reject businesses that are unresponsive to them. One need not be a free-market fundamentalist to defend this basic function of the market system, just as one does not need to be a political hack to oppose the bailout of GM and Chrysler. Government with pretensions to democratic representation should think hard before ignoring decades of votes its constituents have cast with their wallets… after all, turnout is much higher in the marketplace than the ballot box. If they do not, they risk complicity in such tragedies as we now face with GM: young, promising lives cut down due to defects that executives appear have ignored or covered up. This would be bad enough, were GM alone responsible for this mess…  but because of our fear of the basic tradeoff of the system that affords us such wealth, that failing companies must fail, we are all in some small way party to it.

There is no going back in time…. but by noting the consequences of our political actions, as a nation we can perhaps still avoid the fate that almost certainly awaits GM.

Tesla Fights The Good Fight

 

Forget the electric thing... this is a better future we can achieve now.

Forget the electric thing… this is a better future we can achieve now.

Regular readers of my work probably consider me something of a Tesla skeptic, and the record doesn’t exactly dispute the charge. But as I’ve maintained throughout my criticisms of other automakers, criticism is hardly a sign of disrespect or antagonism. In fact, as a lifelong resident of the West Coast of the USA, Tesla represents the closest thing I have to a hometown team in the auto industry. Perhaps I’m out of touch with the self-esteem-centric values of our times, but I firmly believe that critical analysis is the most constructive contribution the media can make to the health of a company or industry. Certainly the history of the US auto industry confirms the fact that companies can drift dangerously and self-destructively out of touch with reality in the absence of regular gut checks from an independent media. [Continue Reading]

Is Private Surveillance Behind Crazy Car Loans?

Big Brother Is Repossessing You (Courtesy: Boston Globe/BostonBeta.com)

Big Brother Is Repossessing You (Courtesy: Boston Globe/BostonBeta.com)

There’s been a lot of news about the explosion in auto credit in the US, which now exceeds credit card debt and ranks second only to student debt in non-mortgage consumer credit. Every aspect of auto-backed debt -amount, term length, securitization, subprime availability- has hit new highs recently… except repossessions, which remain relatively low.  And that, say the issuers, bundlers and sellers of auto debt, is what makes the credit class so safe relative to mortgage debt. Because repossessing a car is relatively easier than repossessing a house, bad debts are easier to collect. [Continue Reading]

Government Motors 2.0: The Re-Politicization Of GM (From The Left)

 

Once more... with progress!

Once more… with progress!

To hear any General Motors exec since bankruptcy explain it, the post-bailout politicization of “Government  Motors” was the worst thing to happen to the firm since the Pontiac Aztek. After all, the post-rescue  partisan point-scoring was more than just bad PR: it threatened to undercut support with the conservative-leaning truck buyers who are the source of a huge percentage of GM’s global profits. And with the US Treasury selling the last of its GM stock in December, officially bringing the auto bailout to a final close,  GM finally had the opportunity to leave the “Government Motors” era behind and become just another automaker.  2014 was shaping up to be the year GM became just another car company.

Instead, GM opened 2014 with its freshly-appointed first female CEO enjoying a shout-out from the President at the State of the Union… followed by a wave of stories questioning whether said female CEO’s pay was on par with her predecessor Dan Akerson’s. GM has since “corrected misperceptions” about Barra’s total compensation ($14.4m, more than Akerson), but the wave of feminist blowback had already turned GM’s PR slam-dunk into an extended faceplant. Long used to playing the victim of partisan attacks, GM and the auto media establishment clucked at the “irresponsible” and “premature” “speculation” about Barra’s pay, blowing off left-wing concerns just as brusquely as they’d blown off perceived right-wing complaints about bailout policy for years. Just when it had a chance to truly start fresh, GM’s PR ineptitude and ingrained victim mentality seem bent on keeping  “Government Motors” on the political football field… this time, being tackled by the left.

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World War Car: Send In The Hedge Funds

Masters of the Universe tend to leave a lot of fingerprints...

Masters of the Universe tend to leave a lot of fingerprints…

As information technology made global markets a reality in the 1990s, a wave of thought espousing a liberal-democratic “end of history” became widely popular. Thanks to markets and democracy, it was believed, the patterns of the preceding centuries would be replaced with a new global peace, maintained by transnational business bonds whose mutual benefits would prevent democracies from pursuing antagonistic agendas. In certain ways, the theory has proven more than mere wishful thinking: one can imagine far more friction occurring between China and the US, were these two largest economies in the world not woven so tightly together. And yet, in the auto industry, where the line between free market multinational and “national champion” has often been a thin one, the subtext of geostrategic competition seems to be seeping through more and more of the news.

Bertel’s report on the lawsuit against Ferdinand Piëch and Wolfgang Porsche is a prime example of the suspicion, if nothing else, that the US government’s involvement in the auto industry has aroused. Naturally Der Spiegel, the original reporter on the lawsuit, didn’t assert the involvement of the NSA… but in the post-Snowden and post-bailout world, German commentators can’t help but wonder where Singer’s information comes from. Basic logic suggests precisely what can not be reported: How do you know that Piech and Porsche used hardened cell-phones and unbreakable codes, if you haven’t tried breaking in? Though a vocal proponent of free markets, Singer is no longer living in the 1990s; thanks to an arms race in government support for auto industries, his lawsuit’s implication of secret information about Germany’s national champion automaker forces it into the wider context of  US “geonomic” tactics that appears to  include sending Goldman Sachs into Libya instead of the Marines.

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