PJ: A look back at how the 2008 GOP White House contenders saw the auto-industry bailout:
John McCain in 2008: "A bailout in the classic terms, No." "I don't think bailouts work." (1) Then in 2009 he said: “We should have let them go into bankruptcy."
Sarah Palin 2008: While not specific to the auto-industry bailout, her answer about the first bailout was made into comic gold on Saturday Night Live: "Ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up the economy– Oh, it’s got to be about job creation too. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions." (2)
And this is how the current crop of republican presidential contenders see the bailout:
Mitt Romney 2012: U.S. autos bailout 'was crony capitalism on a grand scale' (3)
This is what he had to say in 2008:
“If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.” (4)
Rick Santorum 2012: “My feeling was that we should not support — the government should not be involved in bailouts, period. (5)
Newt Gingrich 2012: "follows the same destructive political model that destroyed the city of Detroit. … The Obama system's going to lead us down the path to Detroit and destruction." (6)
Ron Paul 2008: "Although I was not in Congress when either the Lockheed or the New York City bailouts were enacted, I would have opposed both of those actions, as well as the proposed action regarding Chrysler, for many of the same reasons." (7)
(1) http://www.youtube.com/watch?v=R_uQ-jkE1tE
(2) http://www.youtube.com/watch?v=txfqWzGMgmY
(3) http://www.detroitnews.com/article/20120214/OPINION01/202140336/1008/opinion01/Romney-op-ed-U-S-autos-bailout-crony-capitalism-grand-scale
(4) http://libertymaven.com/2008/11/19/mitt-romney-agrees-with-ron-paul-on-auto-bailout/3362/
(5) http://www.nytimes.com/2012/02/17/us/politics/in-detroit-santorum-defends-opposition-to-auto-bailout.html?ref=autoindustry
(6) http://www.detroitnews.com/article/20120211/POLITICS01/202110355/Gingrich-not-afraid-criticize-Detroit-auto-bailouts
(7) http://www.lewrockwell.com/paul/paul492.html
The Guardian
GM leads the US auto industry on road to success
GM's 2011 record profit is the latest sign that Detroit's Big Three have made a remarkable recovery. But still expect a bumpy ride
By Michelle Krebs
Exactly three years ago, the just-inaugurated President Barack Obama was confronted with what to do about the US auto industry. No option looked good: either make the unpopular decision to bail out failing General Motors and Chrysler, or allow the pair to fall and risk taking down the entire auto industry and pushing the US economy from recession into depression.
During the ensuing months, experts on both sides ferociously weighed in, but the most compelling argument turned out to be the damage not bailing out GM and Chrysler would inflict on the entire economy. The demise of GM and Chrysler would decimate the supplier network, which, in turn, would destroy Ford and cripple foreign automakers operating in the United States, some of whom were already having second thoughts about the country at all. Ultimately, the US economy would be in shambles worse than it was, the thinking went.
Heeding warnings that if GM and Chrysler went into bankruptcy, they might never come out, the Obama administration chose a hybrid solution. GM and Chrysler were forced to file for Chapter 11 reorganization under US bankruptcy laws, and undergo a painful restructuring, but they would merge from the process in short order, funded by loans from US and Canadian taxpayers.
Fast forward three years and the investment to save GM and Chrysler, the full amount of which may never be recovered, continues to be debated. But what can't be argued is that US auto sales are recovering and so, too, are Detroit automakers. When the books closed on 2011, US vehicle sales had risen for the third consecutive year to 12.8m vehicles – from 11.6m in 2010, and 10.4m in 2009, the lowest in 27 years.
In 2011, GM, Chrysler and Ford combined grabbed 47.1% of the American vehicle market, up 1.7 percentage points in a market where tenths of a point are significant. Last year marked the highest combined market share for the Detroit three since 2008, when it was 48.3%.
In the past month, the Detroit Three have reported significant profits. Ford earned $20.2bn, its best earnings since 1998 and its second-biggest annual profit in its 109-year history. After losing $652m in 2010, Chrysler made $183m last year, its first full year of positive earnings since 2005 – and that was despite paying off loans to the US and Canadian governments. Of all major automakers selling vehicles in the United States, Chrysler experienced the largest sales increase at 26% from 2010, prompting a gain in market share to 10.5%, from 9.2%. GM, which last year returned to its perch as world's biggest volume automaker, has posted a record 2011 profit of $7.6bn, Thursday.
The inevitable question for the Detroit three is: will it last?
A year from now, the US auto industry likely will have reported the fourth consecutive year of sales increases, making the US a bright spot in the global economy especially compared with Europe. Analysts put 2012 US vehicle sales at between 13.5m and 14m vehicles; analysts at car-shopping website Edmunds.com (of which this author is one) is forecasting 13.6m vehicles will be sold.
The slowly improving economy will give vehicle sales a boost, as will increasingly available credit for car loans. Pent-up demand will be another driver, as the American vehicle fleet achieves a record in terms of age: the typical vehicle on US roads today is nearly 11 years old. Also driving new-car sales is the lack of used cars for consumers to buy. Low new-car sales and a plummet in the number of new cars that were leased and returned to be sold as used cars has caused a dearth of used vehicles; those on dealer lots carry record-high prices.
Detroit automakers specifically are in better shape than they have ever been. They have whipped their costs into shape by closing operations, eliminating employees and negotiating with the United Auto Workers union a two-tier wage structure that allows them to pay new workers about half what they do existing ones.
Still, despite favorable factors, Detroit automakers will face increased competitive challenges in 2012. Last year, the trio benefitted from the inability of Toyota and Honda to regain traction quickly after the 11 March earthquake and tsunami in Japan that drastically cut their production. Both Toyota and Honda are back in full force in 2012.
And they aren't the only hungry competitors. Korean automakers Hyundai and Kia continue to gain in the United States. Volkswagen, which opened a Chattanooga, Tennessee plant last year, is making a big push to substantially increase sales in the US. Gas prices are another wild card. Though the Detroit three are far better-positioned than before, with a bevy of cars from tiny to large, they still remain heavily dependent on trucks for sales and profits. Truck sales, in turn, are reliant on the housing industry, which is showing little sign of life. They also depend on low, or at least, stable gas prices; troubles in the Middle East are threatening to trigger high gas prices in 2012.
Beyond 2012, all automakers doing business in the United States face the challenge of meeting more stringent fuel economy standards in 2016 and even tougher ones by 2025. The challenge is only partly technical. Convincing American consumers to buy the advanced technology vehicles – hybrids, plug-in hybrids, electric vehicles – is another issue. These high-tech vehicles have never accounted for more than 3% of the US market – they were only 2.2% of sales in 2011. Consumers are put off by the premium price – and slow payback of that premium – on high-tech vehicles.
At present, hybrids are pricier as they inherently cost automakers more to make because they have two powertrains instead of one, and have expensive batteries. Likewise, electric vehicles are expensive due to the batteries and the immense amount of research and development that went into them. On top of the price issue, electric vehicles have to overcome the issue of "range anxiety" by owners who have a rather limited amount of miles to travel, compared with a gas-powered car, before charging up. And they can't just gas up or top off somewhere but, instead, have to find a charging station for a rather lengthy time. The infrastructure for charging stations is growing, but still, such stations are not ubiquitous.
The percentage of alternative fuel vehicles most certainly will rise. Because of a host of new entries, Edmunds.com predicts their sales could account for 7% of all vehicle sales in 2017, a year after the next round of fuel-economy standards go into effect. Still, these vehicles require massive amounts of not only research and development dollars, but also marketing funds especially to educate the public. The meager profit margin on these models – if there is any at all – doesn't come close to the profits automakers earn on trucks and other larger vehicles.
So, in the words of actor Clint Eastwood in Chrysler's highly-publicized and controversial Super Bowl ad, this is only half-time. The rest of the game has yet to be played, and it'll be a tough one.
http://www.guardian.co.uk/commentisfree/cifamerica/2012/feb/16/gm-leads-us-auto-industry
No comments:
Post a Comment