There are two ways to react to financial crisis:
- Like I suspect people like my Norwegian grandma reacted to things like the depression; by trimming the fat, by spending even less than normal, by developing new ways to be frugal.
- Like someone who thinks their Gold Card is never going to max out.
Bartel Schmidt at Truth about Cars compares GM and Toyota’s responses to the financial crisis:
General Motors hasn’t made money on its core auto business since 2004 – and did nothing. Same cars, same talk, same mismanagement. GM is in the government’s intensive care, hangs on a the tax payer’s money drip, and still hasn’t changed.
Contrast that to Toyota. Toyota will announce its first operating loss in its history – approx $1.6b, less than GM’s monthly cash burn – and Toyota went to battle stations months before the announcement.
And that involves choices much tougher than “Do I take my corporate jet to DC to beg for a bailout, or do I take a Caddy?”
While GM was betting on SUVs and available credit, Toyota aims to take the lead in the industry by introducing not only the most environmentally friendly cars but also budget vehicles for emerging countries and (yes) slick models that can spark young people’s interest in cars.
While GM was fleecing its suppliers and even drove its own Delphi into bankruptcy, Toyota is worried about the health of its suppliers. Toyota has conducted an emergency poll of around 50 parts suppliers, to grasp their fundraising situations. The upshot is that their financial health is rapidly worsening. “We will possibly need to help them secure necessary funds,” said Senior Managing Director Atsushi Niimi, who is in charge of procurement.
While GM coddled the UAW, Toyota slashed most temporary workers, and may let unionized workers go also.
The results?
Toyota officially replaced General Motors Corp. as the world’s No. 1 automaker in 2008. At Toyota, this is already regarded as an embarrassing non-event. Everybody knows that the reason is GM’s poor performance, rather than Toyota’s strong results. There were no celebrations at Toyota.
I think everyone’s frugal, pragmatic Norwegian grandma would approve.
(Via Peg Kaplan)
While I do agree that Toyota handled this situation infinitely better than any American auto maker, IIRC, I believe that the Japanese government regularly subsidizes their corporate entities.
Or, in the midst of a crisis, you can attempt to disloyally create rancor and discord as a mechanism to unpatriotically undermine the ability of your government to try to resolve it.
Like America Hater Rush Limbaugh.
http://politicalticker.blogs.cnn.com/2009/01/26/limbaugh-obama-is-frightened-of-me/
Yeah Rush, he’s just terrified – you meglomanical asshat.
So, on topic, GM (and Detroit in general) gave up on being able to make competitive sedans, and banked on trucks and SUV’s. While that’s a collosal failure of leadership on their part, the question is, do you let those companies fail?
I say ‘no’ because there is NO gaurantee the jobs won’t flee the country – and above all, it’s middle class employment that drives the country, not any bullcrap about ‘job creators.’ Without demand, no one creates or builds factories, without restraints on overseas flight to $1/day payscales, jobs will flee.
The $1M question is, how do you get leaders that think past their next bonus/profit distribution, and how do you integrate into a world labor pool without cutting your own economic throat? The latter one is NOT answered, in contrast to neo-con thinking, by having the US act as the world’s money manager – there a. aren’t enough of those jobs and b. they can be done as well overseas more cheaply.
So, how do you do it? Any answer that fails to address both problems, in fact isn’t an answer.
It’s not that simple. I have two cars: a Dodge Intrepid and a Hyundai Santa Fe. Do you know which one was assembled in the United States?
“So, on topic,”
OMG, FINALLY! Seriously, write for your own amusement on YOUR BLOG! stay on topic here!
& Mr. D is totally right, and as usual you have no idea what you are talking about.
WHY, is the Camry made in the US, when Toyota, a Japanese company, could just as easily make then in China, Bangladesh, Mexico or even protect their economy & make them in Japan?
There is a lot you do not understand, Peev.
Exactly, Mr. Shirt. For the record, the Dodge (the competitive sedan that Peev claims America is demanding) was assembled in Brampton, Ontario, while the “import” Hyundai (evil SUV-style vehicle) was assembled in Montgomery, Alabama.
Peev,
Just an experiment, I’ll ignore the inflammatory and largely trite “Neo-con” references (which you should, too, peev, since you have clearly never understood what the term means).
So if, as you say, the jobs you’re talking about “can be done as well overseas more cheaply”, but we supposedly need the manufacturing jobs to support the middle class, how does one keep those jobs afloat without distorting the market to the detriment of the rest of the economy.
An answer that doesn’t dismiss “inconvenient truths” (the logical construct, not the movie) as “bullcrap” would be a good next step toward “discussion”.
“as usual you [Penisma] have no idea what you are talking about.”
Of course he does. He has a neighbor that’s an auto plant.
Peev-
Are you questioning Rush’s patriotism? Remember, dissent is the highest form of patriotism.
If Obama were half as smart as he’s given credit for, he would ignore Rush instead of explicitly mentioning him by name. That’s a lesson that you would have thought the Dems would have learned after Clinton.
Here’s a question for you Peev (that others have posed as well): if it’s so easy for companies to “flee” overseas to mythical countries with “$1/day payscales” then why have Toyota and Volkswagen built plants in the US in recent years?
Another question, Peev, to piggyback on Chelder’s:
if it’s so easy for companies to “flee” overseas to mythical countries with “$1/day payscales” then why have Toyota and Volkswagen built plants in the US in recent years?
And why (under normal, non-recession circumstances) can US industry never find enough CNC machinists, tool and die makers, and other high-skill manufacturing jobs?
[blindingly-obvious]So, penigma has no clue what he’s talking about?[/blindingly-obvious] Same as it ever was.
“Another question, Peev”
Are you really expecting an asnwer or just trolling for another offtopic rant?
Toyota did not get their share by underselling their competition. Their offerings can hardly be considered “cheap”. Even if they are subsidized, it is no more so than the Mismanaged 3.
dissent is the highest form of patriotism.
I thought it was payingf taxes.
Buried in peev’s 2nd comment there is actually an interesting question: If we believe that we want public policy in the US to be driven by the values of the middle class, and the existence of the middle class is dependent on wages, and those wages are very high compared to world standards, how can we keep the middle class strong enough to determine public policy while maintaining free trade?
My answer would be to fund the federal government entirely by tariff. Not a perfect answer, but better than anything else I’ve heard from the political mainstream.
Personally, I find it hysterical that Peev’s supposed Twitter acount has 2 followers. Must be his neighbors.
Sorry, obviously we can’t maintain free trade while imposing tariffs. Pls insert one phrase ‘We can’t.’ at the end of the first paragraph of my comment above.
I don’t know. There is a difference between a modest tariff used as a funding mechanism (say 10-15%), and a high protectionist tariff of say 40%.
I think “Twitter” may have been named after Peev. It may be worth following him on Twit, though, just to see him stay under 140 characters.
My answer would be to fund the federal government entirely by tariff.
You mean like they did at the time of the Founding Fathers? Before the “temporary” implementations of income tax on the “rich” during the Civil War, then WWI, then made permanent by FDR?
The whole idea labels you as a paleo-paleocon!
Actually, if you wanted to cause a world-wide depression that would be a good start. Right now we’ve been exporting US jobs by running government deficits that suck up the balance of trade. Taxing trade enough to come close to funding the Feds would hammer trade so hard that Germany, China, and Japan would go bust and the dollar would implode since it would be useless as an exchange mechanism outside the US.
Mr. Shirt, I believe the concept is called ‘tariff for revenue only’. It is not a panacea, but I believe it has more good than bad to it compared to the income/payroll/investment taxes we use to finance the government now. Both left & right have reasons to dislike the idea of financing government by tariff.
The idea is so radical it will never be implemented, but if you really don’t like the current system, you have to offer some alternative.
As I said, Nerdbert, it would not be a panacea 🙂
I think the doom-and-gloom predictions about tariff for income only are overblown. Currently we take what, 800 billion out of the economy as taxes on labor? What effect does that have on the economy? I can’t believe it’s a net positive.
Of course tariff works against free trade. I guess I would restate my rephrasing of peev’s question:
“If we believe that we want public policy in the US to be driven by the values of the middle class, and the existence of the middle class is dependent on wages, and those wages are very high compared to world standards, how can we keep the middle class strong enough to determine public policy while maintaining free trade?”
Terry, we do approximately 2000 billion in imports each year. If you were to tax imports enough to raise 800 billion you’d need a tariff of 40% under the generous assumption that Americans wouldn’t change buying habits.
You might want to do some research on Smoot-Hawley and see what a trade war in the midst of a recession can do to an economy. That said, I do believe that Obama’s massive stimulus will have one positive effect: it will drive the dollar down relative to foreign currency with massive inflation. It won’t be pleasant and China will be hit hard. It’s one of those fun things you can do when you promise to pay in your own fiat currency — you can print money to pay off the bills for a while.
OOOOO, Imagine this radical idea:
The government only making what it can off a 15% tariff, & then spending NO MORE than they bring in off the tariff.
Hmmmm, Seems like that was tried once, somewhere…
Nerdbert, I think that what you call a bug I might call a feature. We are being told now that we face the greatest financial crisis since the Great Depression — and this after more than two decades of free trade (well, free enough). Smoot-Hawley was enacted as a protectionist scheme, not as a revenue scheme. There is a difference.
I would still like an answer to my question — and I don’t mean to be snide. I really do not see how free trade is compatible with a politically powerful wage earning class.