Tag Archives: Ford

Trump’s China Fallacy


One aspect of Trump’s victory was his campaign of economic nationalism – that China was stealing our jobs and he was going to bring them back.  Of course, China wasn’t alone in his analysis – Mexico and Ford played a part as well.

The fact is, labor is a commodity and purchasers of labor will buy it at its cheapest.

If we want people to purchase American labor inn greater quantities, we have to make our labor cheaper.

Coyote lists but a few of the ways that we increase, needlessly, that price:

  • minimum wage laws, rising to $15 an hour in many parts of the country, and increasingly draconian overtime rules, both of which substantially raise the cost of hiring someone.
  • minimum benefit laws, including expensive health care requirements in Obamacare and a myriad of other state-level requirements such as mandatory paid sick leave or family leave
  • payroll taxes that act as sales taxes on labor  — we understand that cigarette taxes are supposed to reduce cigarette purchases but don’t understand that payroll taxes reduce purchases of labor?
  • employment regulations, such as chair laws and break laws in California, that make employing people more expensive and risky
  • employer liability laws, that make employers financially responsible for any knuckleheaded thing their employees do, even when these actions violate company policy (e.g. making racist or sexist statements)**
  • laws that make hiring far more risk, including those that limit the ability to do due diligence on potential employees (e.g. ban the box) and those that limit the ability of employers to fire poor performing employees.

We have yet to see how a President Trump will work to try and make the cost of American labor more equitable.

The Slow Decline Of GM

The whole of the rust belt went for Obama.  The auto states have long been democratic strong holds and no matter what happened to GM they likely would have supported Obama.  However, Ohio has a history of swinging and was in play November 5th, 2008.

And Obama knew this.

So, when faced with the dilemma that was the failing corporations, GM and Chrysler, he made the political play to bail the companies out with government money giving a huge gift to his political allies; the auto unions.

After this move, the companies failed anyway and they both went through bankruptcy where Obama continued his assault of reasonableness and simply ignored well established bankruptcy law.  He paid the unsecured creditors first which benefited the very voters he would need later in 2012.

It paid off.

But Romney, back in 2008, wrote an Op Ed for the NY Times where he called for the managed bankruptcy of the two companies , not a bailout.  Here’s what he said:

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.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

Fast forward to today:

(Reuters) – Ford Motor Co, which clung to the road with a timely swerve before the 2009 crisis that bankrupted General Motors Co, may now be pulling a similar stunt in Europe.

The Dearborn, Michigan-based automaker is scrapping three European plants and thousands of jobs while its rival appears to be stuck on the starting grid. The speed of Ford’s restructuring plan – and the comparatively slow pace of GM’s – has become more important during a protracted slump in Europe’s auto market, with sales down another 7.2 percent so far this year.

Both companies unveiled hefty third-quarter losses in the region and warned they could lose a combined $6 billion or more in Europe in 2012-13.

The bad news weighs heavily on GM’s troubled Opel unit, which has lost billions of dollars over the past decade, has a long history of ill will with its labor unions, has seen its products and brand image pummeled in the media and has shown the door to all but a handful of its top executives.

More than anything, however, the cost of making cars is simply too high, with too many workers still on the payroll given sagging demand in most of western Europe.

Ford, quick and nimble – able to respond to changing needs – is outpacing the “saved” company that Obama “saved.”

Ford adjust.  GM didn’t.  And they’re paying.

By 2009, the company was solid enough to stay afloat as GM took a government bailout and Chrysler was sold to Fiat – both through Chapter 11 bankruptcy proceedings.

Beyond the disposals, Ford seeks more gains by building future cars and trucks from just five basic platforms, compared with nine distinct vehicle architectures currently deployed.

The push to consolidate underlying technologies – led by rivals VW and Hyundai – is already lifting earnings at home. Ford’s North American operating profit amounted to 12 percent of third-quarter sales, pulling further ahead of GM’s 7.8 percent margin.

“We track how we’re performing versus Ford very closely and we’ve got a good understanding of the gap,” GM’s U.S. finance chief Chuck Stephens told reporters and analysts this week. “Obviously it’s widened thus far this year. Ford is about two years ahead of us (in) getting scale on global architectures.”

Ford’s lead over GM is closer to four years in the European restructuring stakes. And even then, Bochum’s 2017 closure should not be taken for granted, some observers warn.



So Much For The GM Love

So the other day I gushed about my man crush with GM.  I love Chevy and have always rooted against Ford.  But with the government bailout of GM and the destruction of 100 year old bankruptcy law by the administration, I left my love on the side of the road and embraced Ford.

I was only too happy to have GM pay back their money.

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