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Obama Auto Strategy Is To Level The Playing Field

Now that the GM bankruptcy is on its way to becoming an afterthought it's time to ponder what will happen to the domestic auto manufacturing industry. As Kim noted yesterday, GM and Chrysler are totally different companies post bankruptcy, most significantly in terms of ownership. One blogger predicts a more difficult competitive environment for the new federal government/union controlled companies:

Want to know why a nationalized General Motors will struggle to survive? Just read the UAW General Motors memo "Modifications to 2007 Agreement" sent out to UAW members a couple of days ago.

...It's, of course, easy to brush off some of the memo's language -- "brothers and sisters" or "in solidarity" -- as just old-school union talk. But such words are important. They remind the union members that they're in this together and that the UAW's overarching mission is to protect its members' interests.

In the memo, the UAW mindset is still "us vs. them." The "them" being GM's management and its controlling shareholder which is you, the taxpayer.

....With the UAW mindset still stuck in the past, the new, nationalized GM will have a hard time competing with Toyota in the future.

There is only one way GM and Chrysler can survive given their bankruptcy's failure to effect any real restructuring and changes in the business model and that is to level the playing field. If a company can't rise to the level of competitiveness required by the marketplace then the only choice left in this new world of Obanomics is to bring the competition down to your own level. Does anyone think that under the current administration foreign owned domestic manufacturers like Toyota and Nissan are going to escape this domestic auto bailout with impunity? Look for bureaucratic and regulatory sanctions against these companies as the first indicator that the government will continue to game the system.

Protectionism takes many forms and politicians like President Obama are too smart to march a Smoot Hawley type policy through the front door (too politically risky). Better to use the frog in hot water technique and slowly raise the temperature. Foreign owned manufacturers (and their American employees) should be alert to this coming threat.


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Comments (2)

Others have made a similar ... (Below threshold)

Others have made a similar point, Hugh, but not as well reasoned as you have. If we look at Obama's past words and actions, he is all about leveling the playing field. If a consumer wants to purchase a Honda, Toyota, Suburu, Kia, Hyundai, BMW, Mercedes, or any other foreign vehicle, he will end up paying much more for it.

Interesting writeup Hugh.<b... (Below threshold)
Hank:

Interesting writeup Hugh.
If it isn't some variation of Smoot-Hawley, then it seems the newly floated VAT might just be what they have in mind.

who knows, maybe NoKor will end up solving this problem.




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