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Chadwick: So What IS An American Car?

With Chrysler and General Motors in bankruptcyand under the ‘de facto’ if not ‘de jure’ management of the U.S. Government, the hue and cry emanating from the pundits and politicians and television journalists and on and on wails, “What is left of the American auto industry?”

Well, plenty is left of the American auto industry if one simply looks at all the auto industry jobs in this country. Honda first built an assembly plan in Ohio in 1982 and is going strong today. That’s a full generation of auto workers under Honda employment. The same can be said for Toyota and more recently BMW and Hyundai and others. Thousands and thousands of good jobs in the auto industry exist today in America. The cars are assembled with American labor and to me that is an American car. And these companies are financially viable and are not siphoning billions of dollars from American taxpayers to stay alive.

Just visit the website of Honda of America Mfg., Inc. It’s as American as apple pie, highlighting the company’s recruiting philosophy, its equal opportunity policy, its philanthropic activities and so on.

The basic problem with the “Big Three” is that their labor cost structure was unsustainable. Numerous articles, including a Wall Street Journal editorial last fall, have clearly and precisely identified the issues on the labor front. The unions refused to reduce their bloated costs, and most particularly their retirement medical benefits. The new entrants into the auto industry in this country, i.e. the foreign companies that have come over here and provided Americans with good jobs, made deals with local governments and with their own labor forces that helped them to be competitive and to allow for their parent companies to make money and stay in business.

Globalization and outsourcing are blamed by many for the failure of the major companies in the American auto industry and for the loss of so many jobs. But in fact it is that very outsourcing by foreign automobile companies that has created American jobs over the last 25 years. In a capitalist society and economy, i.e. where the means of production are privately owned (as opposed to a socialist economy where the means of production are controlled by the Government) protectionism is a bad economic solution for economic growth and job creation, and it is counterproductive to profits generation.

The scary thing about the U.S. Government’s majority ownership of two of the three “Big Three” is that the means of production are now owned by the Government (see above – that is Socialism) and agendas other than capitalism and profits will now likely play a role in ‘business’ decision-making. This is unlikely to make Chrysler and General Motors anything but perpetual wards of the state, and the automobile industry in this country will increasingly be the domain of Ford (if they can keep themselves out of the clutches of Government) and the foreign automobile companies.

Thanks to the foresight of foreign car manufacturers, there should still be plenty of American auto industry jobs for many years.

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Patricia W. Chadwick has had more than 35 years of investment experience. She is the founder and president of Ravengate Partners LLC, a consulting firm that provides advice on financial markets and global economics.