US President George W. Bush has finally done what really needed to be done - he has approved a partial emergency loan program for the US auto industry, amounting to some $17.4 billion US in loan guarantees to General Motors and Chrysler. At the moment Ford says it doesn't need such assistance, but it has asked for a line of credit in case things tighten up unexpectedly.
Interesting that the main opposition seems to be coming from two senators from Kentucky - which just happens to be home to a Toyota assembly plant.
This decision also triggers the Ontario and Canadian federal governments' plan which kicks in another four billion, disproportionate compared to the relative size of the countries, but about right with respect to the relative size of the industries - Canada does about 20 percent of auto production between the two countries.
Various constraints have been placed on the companies. They have to show progress in restructuring, cutting costs, etc.
The fact is that much of this has already been done. Plants have been shuttered, white- and blue-collar workers are now walking the streets by the thousands.
As various analysts have pointed out, the actual labour rates in import-branded and domestic-branded assembly factories aren't that different any more.
And labour as a component of the overall cost of the car isn't all that significant anyway.
Michigan governor Jennifer Granholm - too bad she's Canadian-born; otherwise, she probably would be the vice-president-elect - noted that the new UAW contact signed last year reduced starting wages in auto plants by half, and implemented a new health care benefits system which reduces long-term obligations on the companies.
The problem there is that there won't be many new jobs in the industry; it's looking after the older and retired workers that is the nub. This is almost exclusively an issue with older, domestic-branded plants which helped build the economy which all players old and new have prospered in. This emergency plan does nothing to help that.
But as the old office wall motivational poster approximately reads, "when you're up to your butt in alligators, it's hard to remember that your original objective was to drain the swamp".
The domestic industry is up to its butt in alligators. These plans should shoo them off for a while; let's hope they can start draining that swamp right smartly.
"when you're up to your butt in alligators, it's hard to remember that your original objective was to drain the swamp"...
True Jim, but as I recall, "Draining the swamp" to these guys in the last half decade meant that they maintain the huge pricing differentials between Canada and the USA and put up as many roadblocks as possible to "drain" the Canadian car buyer's pockets with the found arbitrage margins and warranty denial. I don't recall them offering me any deals comparable to US pricing, I just remember their waterboarding tactics.
Guess they don't really have to care, since they have the lobby ear of government. Now looks like they get my money thru the backdoor anyway. Even if I didn't bend over and buy their story.
Pass me the feathers and boiling tar. The closest one I can hope to get to is my local free enterpriser MP, and even he ain't listening, the self preservational pension wise soul that he appears to be ..
4 billion divided into a few million car buyers.. Why not give the 4B to us and let *us* spend our tax money on Canadian made cars over the next year .. No?? Can't do that??
I give up. "They" win.
Posted by: Whipped | December 24, 2008 at 10:17 PM