Simple. It's a 2 part plan.

1) Eliminate Tarrifs. That's right, let's go full on free trade.

2) Require that any company that is interested in doing business here must manufacture the products it sells in our market here, and source all resources for the manufacturing from our market also. This will eliminate the shipping of our labor overseas, let more companies get a foot in the door, and allow us a better standard of living. If a company is unsure of whether or not to do business here, they can apply for a one year importation certificate to test market response to the product. If it's favorable, they build a plant here and keep on selling imported goods untill the plant opens, and then they build here. If they close up shop and leave, then they are put on a 10 year waiting list to re-apply for a certificate.

 

That in reality is no different than tariffs in fact it is worse. Thinking about it a little more it is unworkable. Countries would in return do the same thing. Many countries don't have any resources at all. The infrastructure cost alone would never allow a business case to be made.

 

tmyers I disagree with this statement. The biggest inflationary factor today and for the last ten years has been energy cost. This is up by well over 100% in this time. This also has a ripple effect as everything that is produced must be transported.

The second largest is the cost of medical care. Double digit increase for probably the last 6 years. Add to this more and more employers are passing this cost on to the workers eating up all if not more than any pay raise they may see. In the worst cases you have companies like Wal-mart that don't offer coverage at all and tell workers to get state insurnace that is paid for by tax payers.


Inflation has been below 3% for awhile now when you subtract energy and housing. I think that is what the government subtracts. I don't see the american working causing big inflationary swings in that figure.

This economy today is driven by the consumer. Non discretionary cost like transpotation, food, housing and the associated costs of lights and heating, medical care do nothing to help the economy but this does eat into discretionary spending and this does help the economy by putting more people to work.

Nice post Terry. I think you guys might have stumbled into my sandbox, though If you ran the numbers, subtracted energy, healthcare, and real estate, you'd discover mild deflation, not inflation. In natural resources, it's been quite dramatic over the last twenty years- the trend just reversed in late 2000.

Phydeaux88 The tax breaks pale in comparison to the labor cost difference.

Really? Let's consider what it costs to move a production facility. Outside of the obvious (new plant and equipment), we need some really expensive stuff.
1) Basic Infrastructure. Simple things like a reliable source of clean water and electricity. If it doesn't exist (and it usually doesn't), you'll have to build it.
2) Technological infrastructure. Fiber optic cables, high speed communication channels, people trained in these areas. Again, build it, educate them, or import them.
3) People- not a yak farmer, but an educated, trainable workforce.

If this was all that simple- or inexpensive, Toyota would have built their new truck plant in China, not Texas. And Boeing would have moved to Shanghai, not Chicago. The equalizer for US Companies is the ability to write off existing plants being moved, then take innumerable tax credits and benefits by building new plant, equipment, and infrastructure- somewhere else! If you're faced with a $5 billion bill to move, and lose the $2.4 billion tax reduction (not deduction) resulting from the move, how attractive is it?

The most surprising trend, in the last ten years, is in how many European and Asian Companies are setting up shop here...just as our companies are looking towards their borders. Who's right?

 

Not really a surprise. This is the direct results of tariffs. They just need to move final assembly here to get out of them.

 

OK...they could just import the truck and the box, like they do on the Japanese Tacomas. But they didn't. Honda's exporting Ohio-built Accords to Europe, Hyundai's shopping for a plant here, VW's shopping for a plant here, and GM's downsizing their Mexican Operation and moving it to Texas and Georgia. The overall picture is a lot more complicated than cheap labor and tariffs- those are only pieces of a mosaic.

 

I don't believe that it is going to do the American economy a whole lot of good forcing companies to make cars there.

I personally believe that the best way to do it is to have a free trade agreement with China, or whoever, and keep the American workforce skilled.

I don't believe that having people building cars is going to improve the economy at all in the US, it might do in CHina/India, but not in the US.

The economy is directly related to the amount of the average wage.
I will use a scale:
Self sustaining farmer (provides no benefit to the economy, merely sustains his own and his families existence) - 0
CEO of a major company (provides huge benefit to the economy, makes a significant wage, and invests or spends a lot of it) - 100

I would imagine a line worker of an automotive manufacturer would be somewhere around 50 on this scale.

If the majority of your workforce consists of self sustaining farmers, then becoming a automotive line worker is good for the economy, as you are now making money, paying tax etc.

If a large portion of your population is above the 50 rating (like America) it is actually benefitial to allow these industries to move off-shore, as it is holding the economy back.
These people are essentially holding back the national average.
If they were to gain further skills, and apply themselves to a different, higher paying role THAT would benefit the economy.

Americas future is NOT in making cars.
If America is to improve its economic standing from an automotive stand point it has to be running, and owning the companies, not making their cars.
Have all of the management, engineering etc. posistions within America, and that is where you will make more money...

America is not in a posistion where it can compete with the likes of China, Korea etc. on a price point, it needs to make its domestic cars into a niche.
Germany and Japan have done this on a quality, luxury standpoint, and therefore can charge more for the vehicles built within these countries.
Australia has built itself into a niche, in that they are the only makers of large cars RWD on a big scale.
This has enabled significant export oppurtunities, not only of cars, but of our interlectual knowledge in making these vehicles.

America needs to do something similar, downsize its domestic operations, and move into niche (higher revenue) products.
The trucks are a unique niche, but beyond Australia, South Africa, certain parts of Southern America, they are not marketable on worldwide scale.

If the US can build a car that the world would like, and willing to pay $$$ for it, then the economy would improve...

 

Its not just building cars though, its most types of manufacturing, be it steel, train's boats, etc. In aerospace we have lost over 2 million jobs in the last few years. Its these jobs in general that provide good wages not only for the people doing the job but for the people they employee to do other jobs. It has been figured that a manufacturing job will supports at least 3 additional jobs outside the company. When a factory shuts down its not just the the people at the factory that loss work but all the supporting infrastucture that also suffers.

Remember also its just not the blue collar jobs that get axed but also the higher paying white collar jobs. We have already off load some of our engineering work to other countries because the pay there engineers less. What use is 5 years of college and 50k if companies outsorce this work. The education is the same and in many cases there's was payed for by the state.


Again there is no easy answer to the problem. All I know is for us that are working in good jobs are supporting more and more people that are not working or working in low paying jobs. Remember that the unemployement figure only shows people who are actively looking for work.

 

Almost everything is imported to Europe.

I remember back in the early 70's when I first became aware of this problem. Some of the first vehicles to get tariffed on a large scale where motorcycles. This was a move to protect Harley. Anything over 750cc was subject to it. Over the course of a year motorcycles almost double in price. When Honda brought out the Goldwing there was no way it could sell it here and make it there. So they built the factory here.

The big 3 at the time didn't care because they had there big cars and where sure that the american people would never like the little econo boxes out of Japan. Then when the oil crises hit they shift gears to build them. But the cars they built where throw away items, little better than the Yugo IMO. That left a very sour taste in my mouth and I did not buy an american car for a long time after.

European cars were for people with money. Better quality sure but the american buyer liked a new car every 4 or 5 years so quality never really comes into play, its all about price and for the price a one MB and can have 2 american models.

 

I respectfully DISAGREE!!!!!!!!!!!

How long have they had and HOW MANY chances do they need to get it right???

Why should I spend my VERY HARD EARNED $$ on "great strides to improve them" when I can go buy a new Honda and be more sure that I'm getting my money's worth.

My next vehicle will most likely be a Honda civic - for my loooooong commute.

By now...the "BIG THREE" should have it down to a meticulous science!!!!

I've spent well over $100k on Fords since I've been driving (27 years) and may buy a new Mustang in a year or two (it's just SO irresistable!), but personally, I don't feel like I "owe" them my loyalty - "what have they done for ME lately???"

 

A few comments:

Unions.. I'm not a big defender of unions, however when the topic comes up I see people quote wages. Some union wages are excessive. Some aren't. I don't think $20 an hour for skilled labor is unreasonable by today's cost of living. People living in the cities along both coasts will tell you $20 an hour ($41,600 a year) is just where people can start to be comfortable with their living expenses. At $8 an hour you wouldn't have the money to fix that Ranger of yours after paying for living expenses. $20 for auto assembly is reasonable. $75 an hour to work at the port in Oakland, CA...totally insane, even for Oakland/San Francisco.

Free trade.. I'm all for free trade, if it is in fact free trade. This crap with China's dumping imports on world markets is not free trade. China has kept an unwritten policy of prohibiting imports unless absolutely necessary, which is limited to oil and other natural resources. As a foreigner you will not be eligible for employment in India unless you are there to train their citizens in the outsourcing of jobs. Once your assignment is done they want you on the next westbound flight out of the country. Cost of our good in those countries is irrelevent. The problem is their protectionist policies. The reason they do it is for economic growth. The ultimate goal is a money grab. The more money they have, the less we have. Products imported to this country and jobs outsourced equates to less money here. Cheap socks from China doesn't mean a higher standard of living in the US if the income of the average American drops. Most of the junk from China doesn't profit American companies anymore. The crap is made by communists. I'm not making an attempt to be funny here. Those Chinese companies are owned by the government. Their government determines how much employees are paid in China. There aren't any negotiations. The government decides what those people are going to make, how they are going to make it, and how much they are going to be paid, and that is what people are supporting when they buy Chinese products. American companies that are having their products made in China are on the losing end of the deal. The Chinese take their product and effectively duplicate it, then sell it for less than what the American company would sell it for. It is quite a one-sided deal.

Someone also mentioned something that we would be better off is most jobs were outsourced. Umm, what would most people do to find employment if most of the jobs were outsourced?

Anyway, the outsourcing/insourcing, import/export part of economics is only of benefit if there is some kind of balance. Waiting around for the next big economic wave to employ everyone may not happen. Big companies with CEOs that earn $500 million a year aren't going to want to pay Americans that enormous sum of $40 thousand a year, or even minimum wage for that matter.

Asian vs US Autos... this is a reflection of the MBA and American business mentality in general. American companies give consumers what the manufacturer wants to give them, not what the consumer wants. Over here in California there are a lot of complaints about American autos and their gas mileage. $2.00+ for a gallon of gas is forcing some people to look for fuel efficient vehicles. What do you get in a fuel efficent vehicle from the big 3? An attitude that you should spend more for something else with a 4.0L engine and a selection of tin cans on wheels that doesn't have enough power to accelerate fast enough to merge into freeway traffic, and an uncomfortably bumpy ride thereafter. . Some of the Asian built cars are very nice, have a smooth ride, and handle well. The big 3 also do annoying things like intentionally designing things to make repairs difficult and expensive. Their thought is you will go out an buy a new car. The Big 3 have also got building the life of components down to a science. Once the vehicle ages past federally mandated emissions warranty things mysteriously start going bad. Asians do their best to make things last. The Big 3 also resist change. The shortage of good fuel efficient vehicles is a good example. The price of gas has been on a rapid increase for about four years now, yet they refuse to acknowledge the issue of fuel efficiency. Why are the Big 3 having such a hard time building hybrid cars and trucks while the Asians appear to be having little difficulty? Hybrid vehicles have been around since the 20's for rail and industrial use. GM has been in the hybrid vehicle business in both industrial and locomotive production for years. I have a feeling the Asians will have them fine-tuned before the big 3 are finished rebelling against the idea.

 

The shortage of good fuel efficient vehicles is a good example.

This probably isn't a good venue to say this, but my Impala LS consistently knocks down 22 mpg in town (per little trip computer thingie). Quiet, comfortable, roomy, handles well, built like a Rolex. Our Grand Marquis has knocked down 85K trouble-free miles, and gets about 3-4 mpg less than the Impala. Not bad, considering it's a big car with a V8. Both cars will get in the high 20's to 30ish on the highway.

The problem isn't fuel efficiency, the problem is the American consumer wants a 5000 lb SUV that gets 25 mpg, and nobody makes it.

 

CEO salaries are absurd! My fiance works in telecom here in Tulsa. The CEO of here company makes well over $1 million/yr and his bonus can be as much as 50% of his salary. The people who are really responsible for company performance are gettin laid off left and right and their bonus can only be 7% of their salary. The previous CEO made right at $1M/yr and stated many times that "he just wants what's best for the company". Then he accepted a huge raise. His salary alone could save dozens of jobs. The modern CEO often times is nothing more than the Queen of England: a power figure that is in place to put on a good show, absorb large quantities of other people's money, and have no real duties or power.

Truer words were never spoken. The Big 3 give us exactly what we want, and that's big vehicles with bigger engines. Fuel economy be damned. Trucks aren't popular because the Big 3 decided they would be, they are popular because that's what consumers want. We are collectively addicted to rear wheel drive V8 powered vehicles. Trucks got popular because they were the only thing available that fit that description for a few years. Chrysler figured this out and released the 300/Magnum or whatever it's called. Those thing are selling like hotcakes here. The technology is available to build a good handling rear drive V8 car that has good performance, gets 30+mpg, and costs under $30k, but nobody is interested in building that.

 

22 mpg in town isn't all that great. The Grand Marquis is rated 22-26 mph on the freeway. Sadly, that is the upper end for fuel effieciency in the large majority of American vehicles. Those that get better gas mileage are simply tokens to get around the average fuel efficiency requirements. US auto companies don't want to build them, so they make them as crappy and uncomfortable as they can so they don't sell them, and so they can say nobody wants them.

Saying American consumers want a large vehicle with poor gas milage is a gross generalization. I think the attraction to SUVs has a lot to do with room to haul groceries and other items. People in general like a vehicle that accelerates reasonably well. American auto makers see this as a situation they can take advantage of. Huge vehicle gives a perception of more space and they use the larger engines as a tool to jack up the price. There are plenty of us that would like a smaller vehicle that isn't a piece of junk, and that is what is available in smaller vehicles from US auto manufacturers. A 2.2 liter 4cyl gave people reasonable performance and gas mileage in the small trucks. When I was looking around to replace the Mazda B2200 a few years back my choices in the small trucks was limited to one foreign brand owned by GM, and only in a base model. This kind of marketing is done to persuade people into something else that GM can make more profit on. Ford's response to this was discontinuing the smaller B-series trucks and selling Rangers branded as Mazda. A 2.3L in a Ranger is underpowered, they know it, so they make the option of larger engines available. This is what I meant when I said US companies give consumers what the manufacturers want to give them. I like my Ranger, but I would really prefer something like the Mazda trucks made in the early 90's.

As for the percentage of people that want gas guzzlers, or good gas mileage, that is hard to say. Auto manufacturers pull tricks to persuade people to buy what makes them more profit. You could cite people buying large SUVs to support the argument that people don't mind poor gas mileage, but that doesn't explain why the sales for these vehicles have dropped and import sales have increased. On top of all this, Americans are just strange consumers. They will buy 50 99¢ screwdrivers made in China that break every time they use them before they will go out and spend $2.99 for a Craftsman screwdriver that is fairly good quality, and can be exchange for a new one if it does break. Ask the American consumer why they do this and you will get an explanation something to the liking of "nobody should be charging $2.99 for a screwdriver." Yeah, it makes more sense to a lot of them tospend $50 on screwdrivers because $2.99 for a quality product is too much.

CEO's and salaries....This is a large part of the problems with business and jobs in this country. CEO salary used to be tied to company performance. If the economy was bad, well, the CEO didn't make much. Now CEO's get outrageous salary increases and bonuses on top of their salary when the companies they run are losing money. Some of them are so arrogant it make my head spin. That crazy woman that was the CEO of HP, 15 years ago she would have been thrown out her position for saying some of the things she has said. Really, it is quite arrogant to tell Americans that they are expecting too much by asking for a living wage, or even $60K a year when you are making $100's of million a year, plus bonuses, options and all the other goodies they get.

You know what else amazes me? The CEO's that have driven several companies into the ground, but other companies can't wait to have them as their next CEO. What is the motivation behind that?

 

22 mpg in town isn't all that great. The Grand Marquis is rated 22-26 mph on the freeway. Sadly, that is the upper end for fuel effieciency in the large majority of American vehicles. Those that get better gas mileage are simply tokens to get around the average fuel efficiency requirements. US auto companies don't want to build them, so they make them as crappy and uncomfortable as they can so they don't sell them, and so they can say nobody wants them.

I dunno- the Marquis replaced a '99 Honda Accord EX 4 cyl/Auto that got...20-23 in town, nicked 30 on the road. Sold it because the compromise in room and comfort isn't paid back with stellar gas mileage. Then there's the small-car segment, which is a pretty thin piece of the market-share pie. the four largest selling passenger cars in the US are 1)Toyota Camry 2) Honda Accord 3) Chevy Impala 4) Chevy Malibu. None of them are really known for outstanding gas mileage.

Saying American consumers want a large vehicle with poor gas milage is a gross generalization. I think the attraction to SUVs has a lot to do with room to haul groceries and other items. People in general like a vehicle that accelerates reasonably well. American auto makers see this as a situation they can take advantage of. Huge vehicle gives a perception of more space and they use the larger engines as a tool to jack up the price. There are plenty of us that would like a smaller vehicle that isn't a piece of junk, and that is what is available in smaller vehicles from US auto manufacturers. A 2.2 liter 4cyl gave people reasonable performance and gas mileage in the small trucks. When I was looking around to replace the Mazda B2200 a few years back my choices in the small trucks was limited to one foreign brand owned by GM, and only in a base model. This kind of marketing is done to persuade people into something else that GM can make more profit on. Ford's response to this was discontinuing the smaller B-series trucks and selling Rangers branded as Mazda. A 2.3L in a Ranger is underpowered, they know it, so they make the option of larger engines available. This is what I meant when I said US companies give consumers what the manufacturers want to give them. I like my Ranger, but I would really prefer something like the Mazda trucks made in the early 90's.

Let's look at that for a minute. Largest selling anything in the US last year was a Ford F-series, with about a million and change. Chevy and GMC sold about the same number of Silverados, and Dodge came in with, what, 600,000 Rams? 16.8 million vehicles sold in 2004, and almost 3,000,000 were full size pickups- not counting SUV's and all the other stuff manufacturers call trucks. Sooo...almost 20% of the entire US car/truck market is made up of full-size pickups. Put another way, either the F-Series or the Silverado/Sierra outsold the Camry and the Accord combined. What kind of statement is that? All the while, the compact truck segment is shrinking in total sales.

As for the percentage of people that want gas guzzlers, or good gas mileage, that is hard to say. Auto manufacturers pull tricks to persuade people to buy what makes them more profit. You could cite people buying large SUVs to support the argument that people don't mind poor gas mileage, but that doesn't explain why the sales for these vehicles have dropped and import sales have increased. On top of all this, Americans are just strange consumers. They will buy 50 99¢ screwdrivers made in China that break every time they use them before they will go out and spend $2.99 for a Craftsman screwdriver that is fairly good quality, and can be exchange for a new one if it does break. Ask the American consumer why they do this and you will get an explanation something to the liking of "nobody should be charging $2.99 for a screwdriver." Yeah, it makes more sense to a lot of them tospend $50 on screwdrivers because $2.99 for a quality product is too much.

I would argue that car buyers aren't very brand loyal- and I'd include SUV buyers in that group, since most of them really wind up to be kid-haulers. Truck buyers, on the other hand, are a whole 'nuther story.

CEO's and salaries....This is a large part of the problems with business and jobs in this country. CEO salary used to be tied to company performance. If the economy was bad, well, the CEO didn't make much. Now CEO's get outrageous salary increases and bonuses on top of their salary when the companies they run are losing money. Some of them are so arrogant it make my head spin. That crazy woman that was the CEO of HP, 15 years ago she would have been thrown out her position for saying some of the things she has said. Really, it is quite arrogant to tell Americans that they are expecting too much by asking for a living wage, or even $60K a year when you are making $100's of million a year, plus bonuses, options and all the other goodies they get.

You know what else amazes me? The CEO's that have driven several companies into the ground, but other companies can't wait to have them as their next CEO. What is the motivation behind that?

That's a different issue- but I couldn't agree with you more.

 

Spot on...
These kind of vehicles are available elsewhere though.
A friend who has a Mitsubishi Pajero DI-D (3.2l Turbo Diesel) gets 27mpg on the highway, the thing weighs in at 4600lbs without passengers.
The thing goes darn well to...

I think a Liberty CRD would have to be getting close to those figures, surely?