Sunday, December 14, 2008

What Happened to Buy American?

I leased a new Honda Civic last weekend. That's the model in the photo below:

Honda Civic

It's a 2009 sedan, black, with a GPS navigation system. This is the fourth Honda my wife and I've either bought or leased. We also drive a Honda family van, which at the time of purchase was one of the first vehicles available with a DVD movie entertainment system, the perfect accessory for our boys when we take long family trips.

One of the things I always used to hear was "buy American." This, of course, was back in the 1980s and early-1990s, when U.S. automobile manufacturers were facing super-stiff competition from Japan. There were all kind of protectionist demands from Detroit, and Washington placed all kinds of tariffs and import quotas on Japanese vehicles to protect the American market. Japanese manufacturers imposed "voluntary export resraints" as well, which were tacit agreements not to export additional cars (and thus forestall more formal U.S. import barriers). When Washington placed limits on imports of smaller passenger cars, Japan built Lexuses and other luxury vehicles, and the Japanese eventually took over those sectors in quality and customer satisfaction. More recently, Toyota has been sellling full-size pickup trucks (after a long period of formal exclusion from the big truck sales here), which have cut into the market share of one of the last profititable product lines of American manufacturers. If I was in the market for a new truck, I'd probably get
a Tundra.

It's not that I don't like American cars. If I had the money, or the leisure time, I'd get a Corvette. Some of the U.S.-built trucks are absolutely fabulous, and I'd feel even more all-American than I already do driving one. The question for me has always been quality. In 1980, friends drove American cars - I remember Camaros, especially - and they were always breaking down or being recalled for manufacturing defects. When dealing with the distributors, customer satisfaction took a back seat. A buddy's car was in the shop a number of times on warranty, and he had to practically bleed Chevy to pay for the repairs.

This is all off of memory, but I think those early experiences shaped my car-buying habits. I want a dependable vehicle that's not going to break down; a vehicle that gets good mielage, and a car that's hip, frankly. Hondas are cool. Lots of people drive them, and along with the Scion brand, the import sports-market and Friday-night cruising scene is dominated by them.

Perhaps this is why I haven't blogged too much about the Detroit bailout. Actually, I'm tired of bailout politics. I supported the administration's first $700 billion Wall Street bailout in September, and what did it do? Markets kept dropping and more firms and industries stuck out their hands for help from government. Unlike free-market purists, I see a real public interest in preventing a full-blown market crash. It's unknown what might have happened to the economy in the absence of government support, but the corruption we're seeing from top bailout executives, in slush funds, golden parachutes, travel expenses, etc., doesn't engender a lot of confidence that taxpayer money is being well invested. Maybe we need some genuine creative destruction in housing, finance, insurance, and other sectors of the economy before we really know what's to become of American capitalism (if we can really call it that anymore).

In any case, that brings me back to cars. The GM bailout last week collapsed over union issues, for the most part. What's fascinating is how the debate over GM has generated the classic partisan debate between Democrats and Republicans over support for the middle- and working-classes, as well as the question of whether the auto sector is as deserving of a bailout as Wall Street.

The Wall Street Journal, in fact, puts its finger on this moment in the "Crash of '08" as a chance for the GOP to stand up for its values:
Thursday's showdown marked an important political moment for the Republican Party. By refusing to write a blank check to Detroit, Senate Republicans have started to reclaim some credibility on fiscal policy and the role of government in the economy. They did so standing up to a Republican President who doesn't want any more bad headlines, as well as to Democrats who will blame the GOP if the auto makers collapse.

They also stood up for the right reasons. No bailout will ever restore the car companies to profitability without a restructuring. Yet an explicit UAW goal is to use the bailout to avoid any such thing. The union and their Democratic protectors want to avoid the discipline that a bankruptcy could impose under Chapter 11. A government-directed salvation would also give environmentalists huge leverage over the cars Detroit builds, a power they and Democrats have wanted for decades.
That does really get to the political nub of it. But if you look around the leftosphere, conservatives and the GOP are being tarred as the new "Hooverites." Chris Bowers attacks conservative ideology directly, arguing that conservatives don't care about "workplace democracy" and the concerns of "the middle-class":

The Senate Republicans who voted against the bridge loan are not acting as ideologues. Instead, they are acting rationally according to the dictates of their values system, aka ideology. They want to destroy the Great Lakes. They want to destroy the UAW. They don't care how many people get hurt or lose their jobs in bringing about those goals. They do not view these outcomes as catastrophic, and they know this will happen if the bridge loan fails. They are aware of these outcomes, and view them as desirable.
Read the whole thing to get the context (basically, leftist ideology is benevolent and conservative ideology is evil, blah, blah...).

I'm not an expert on the whole union-management debate. The big auto companies, in my opinion, have failed for a long time to offer a product that people woudn't hesitate to buy. Big labor, on the other hand, has been like a cancer on the car companies.

A couple of years back I was shaking my head when I read a story in the Wall Street Journal, "
Idle Hands: Detroit's Symbol of Dysfunction: Paying Employees Not to Work." At the time, the big auto companies were paying about $2 billion a year for laid off workers to sit around all day - that is, the car companies, at union demand, paid people not to work. The piece demonstrates how UAW was essentially helped to kill its own companies.

So for me, it's both sides: The corporate bosses have failed to adapt to a changing American car culture and business environment (see, for example, "
GM: Death of An American Dream"), and the unions have failed to develop a spirit of cooperation that puts company viability ahead of worker entitlement.

Meanwhile, across the American south,
foreign automobile manufacturers are thriving, with higher productivity, lower costs, and greater consumer satisfaction. Look to Dixie for the future of the car business in the United States.


JoeBama "Truth 101" Kelly said...

AS usual, you run with the conservative lie about Unions and the bailout being their fault Professor.

I don't know how many negotiations you,ve been involved in that involved hundreds or thousands of people. One of the first rules is don't negotiate before negotiations begin. It would have been a disservice to the UAW to conede on wages and benefits BEFORE going back to the table which is what Gettlefinger and the UAW were willing to do. And most likely they would have come out with serious concessions. But they also would ahve had the opportunity to negotiate for job security and other items that were just as important to the workers. No doubt Big Three management needed to shore this up before asking for the loans or bailout. Whatever you want to call it. Republicans seized on this as a chance to break the UAW. Looks like GM and Chrysler are going down soon. The fault lies not with Unions or Republicans. Republicans are anti Union. What do you expect from them other than try and bust them. The Union wants to protect the livelyhoods of it's members. The blame falls squarely on the management of GM and Chrysler for their woes. The cars that were inferior quality to the Japanese models were not built because Republicans or Unions told management to build them. When faced with contracts demands that were unreasonable to sustain, management could have said here's the last best and final offer. Take it or we go to Alabama. The Unions would have taken it.

Anonymous said...

Congessional Republicans to American auto industry: Drop Dead!

Norm said...

Look, it is a simple fact that if the UAW wishes the big 3 go stay labor concessions must be made. Republicans are not saying "drop dead" or trying to bust anyone. Republicans are trying to make everyone face reality and that makes them the bad guys. Of course, the Democrats who will do anything the labor unions wish come out as the good guys. But, if labor sticks with the good guys, then the industry will totally fail.

Meanwhile, there are thousands of bankruptcy attorneys who are wishing and hoping; and somewhere there is a bankruptcy judge dreaming about getting the national spotlight.

I think labor has a better shot dealing with Republican realists.

Gayle said...

The labor unions were a good idea that went bad - sort of like our government.

Regarding cars, I'm not fussy. My one big demand is that my car gets me where I want it to go and brings me back home again. :)

Laura Lee - Grace Explosion said...
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Laura Lee - Grace Explosion said...
This comment has been removed by the author.
JBW said...

The word "Wow" is quickly becoming inadequate to describe these little rants of yours, Grace. Yes, all of Michigan's problems have arisen because of their failure to vote for Palin, entirely independent of economics and the current recession; did an accountant that goes to your church tell you that?

Does anybody here know: what should we call the right-wing opposite of the Palin Derangement Syndrome supposedly found on the left? In this case, I think the word "Derangement" just about covers it by itself.

On the subject of her church being set ablaze, I think it was a horrible and cowardly thing for someone to have done and should be roundly condemned regardless of one's political leanings, but to assume that it was done by someone on the left for political reasons without a shred of proof is as antithetical to what America stands for as saying we shouldn't "buy American" to spite unions or endorsing secession because you can't stand the people who disagree with you.

The Vegas Art Guy said...

Michigan's problems can be traced to the tax policies voted in by the current government, which is mostly from the democratic party, including the governor.

When the labor costs are $30/hr higher than the competition, something has to give. Either the costs come down or the company goes belly up. Which one is it going to be?

JBW said...

VAG, my point was that Michigan's problems, and by extension those of our economy, have been caused by a myriad of events due to many different interrelated factors, not just their failure to vote for Grace's bestest new girl friend.

Personally, I think the unions need to make more concessions than they have so far but that's only part of the larger problem; and I'm still pretty much against a tax-payer subsidized bailout of the Big 3 automakers unless they can come up with one hell of a plan, and even then I'm still pretty leery of the entire enterprise.

However I also think that it's the height of hypocrisy and somewhat akin to class warfare to make companies that employ mostly blue-collar workers jump through all of these hoops for what is a pittance compared to what the mostly white-collar financial industry was given with basically no strings attached.

But as I've written on my site before, I'm no economist and I really don't know what needs to be done to extract ourselves from this whole mess; there are a lot of theories from the left and the right being floated out there right now but making any of them work effectively in the real world is going to be another matter. I just hope Obama does a better job than the last guy.

Van Zan said...

a/ the companies have not adapted to the changing market
b/ business and government have not worked together to encourage public awareness that buying American is good for America
and now
c/ business, unions and government (either party) aren't prepared to work together to revitalize the American auto industry, and everyone is running around pointing fingers and saying someone else isn't being reasonable
d/ we don't see exactly what we will get long term for our taxes bailing out these companies anyway

which adds up to:
a/ no progress
b/ no pride
c/ no leadership
d/ no plan

It's not anyone's fault. It's everyone's fault. What the heck have we been doing all these years? Why is our best response to a dawning realization that we have a problem to just stand around in a circular firing squad?

As a side note: burning down Palin's church...
Infantile thing to do.
Stupid. I'm outraged. And what's more... now she can play victim about something else.

infocyde said...

I almost agree with all your points here, except you neglect to mention that U.S. automakers often do not have access to foreign markets like foreign firms have access to U.S. markets. I think the U.S. can only import like 5000 vehicles a year to Japan, hardly fair. Also Japanese trucks do not have to meet the same standards as U.S. trucks in order to be considered a "truck". There are other examples of how the U.S. auto industry isn't always allowed to play fairly with the competition. That being said, I would agree that the U.S. auto industry's execs and unions should share a lot of the blame for failure, but it is intellectually lazy to just take a cursory look at the problem and immediately blame unions and execs because it is ideologically convenient to do so. I expect more from your blog. The world we operate in is merchantalistic, not pure market capitalist, and until we have the courage to face that fact, and present a more united front to enhancing and protecting our national wealth, long term players will always beat all you market purist out there I would like to remind you that you can't eat ideology or live under a thought.

PRH said...

I do some spreadsheet work on contract for a Honda contractor...BOTTOM LINE IS....Honda is hurting too, but with no UAW they will survive much better than the little 3. And the workers are not complaining.