It’s pretty simple — stuff made in Asia costs less to make than it does to make the same stuff in the US. Early on, US manufacturers failed because of their inability to compete while keeping their operations in the United States. But over time, they have learned the offshoring game and have exported labor costs to lower cost markets in order to reduce their expenses and keep prices low. There’s a reason why there are more US factories in Mexico, China and India than there used to be, and it’s not because of the beaches.

The US has increased its trade deficit because it feeds economic growth to have cheap goods available for sale. This is not an engineering issue.

The US runs a massive trade deficit because much of its energy is imported, plus it finds it cheaper to import manufactured goods than it does to make them. The primary differential between building something in the US and building in China, etc. is the difference in wage rates.

While I have concerns about the trade deficit, engineering is the last thing on this planet that is going to fix it. If the engineers are cheaper and just as good in India than they are in Indiana, then naturally, companies are going to try to find ways to hire more of the Indians.

Businesses such as Apple and HP have come to represent what American business is all about — creative and marketing talent managed in the US, with engineering resources dispersed in the US and elsewhere, and with manufacturing in low-cost producers such as China.

Begging like a third world outpost for the rich multinationals to please open up a factory in USA.

Then you should be upset with the Big 2.8 for using its profits to hire fewer Americans. Unless you are just looking for excuses to be anti-Asian for the sake of it, of course.

Let’s contrast your sentiment with Korea’s citizens back in the late ’90s financial crisis brought about for the reasons I spoke about earlier. As the house of cards came down from the IMF cuts, debt ratios these companies held, government running out of loans money etc – Not only did they view it as a Western assault on Korean industry , the Korean citizenry, in reply to a call to arms from Kun-hee Lee – to support the won and thus their Chaebols – exchanged their personal gold for the country’s increasingly worthless currency. The response was so overwhelming that over 50,000 Koreans turned in items from wedding rings to even gold metals saving the Chaebols which have since gone to do overtake giants like Sony (samsung), commercial ship building and LCD and memory production among others things.

I hope this type of unity is where Obama gets us to.

You frequently restate this point. Which would be interesting, except that it is false.

Let’s take Toyota as an example. The company’s R&D expenditures during FY 2007 totaled 5% of the company’s total expenses. Which means that 95% of the company’s expenses were not related to this at all.

Not only do the profits and higher engineering wages go back to Japan…

This is false. Company profits will ultimately be reinvested somewhere in the business.

For a car company, reinvestment will largely take the form of new plant and equipment. If you want to follow the money, watch where a car company builds its new factories, and that’s where you will find the profits are going.

The car companies that are investing in US facilities are the foreign transplants, not the Big 2.8. The US companies are trying to expand outside the US, not within it.

The irony here is that we will be looking to foreign companies to provide American jobs, while the American companies will be investing their money in exporting work.

Our rice sucks. It’s no mystery that the Japanese won’t buy it – it’s barely fit for pigs. Thai jasmine rice is better than Japanese rice, but Japanese rice is better than American. You can’t blame the customer for prefering quality.

Americans are extremely short-sighted and selfish nature has been our doom while Japanese would rather die than buy our rice at 4x less than theirs let alone one of our cars or a part from delphi.

Does the terms ‘chaebol’ or ‘keiretsu’ mean anything to you? The reason for Asia’s current success is Asia’s notorious record of dumping products in other markets at below their cost, propped-up by a combination of tax dollars, sordid nationalized holding schemes, loan guarantees, and other types of government assistance that are generally prohibited by US law, regulations, and tax code, or just plain offensive to most people in the West (including a good number of business people). Add in national HC, free university these countries present employers with and rabid overt nationalism/racism these countries have the USA is at an enormous competitive disadvantage. A measly 50 billion, or about 1 month in Iraq, is a small pittance to pay.

SK and Japanese reformers are still unwinding this sordid 40 year-old labrynth of mutual government-cheabol/keiretsu cooperation formed for the goal not to compete with foreign companies, but to destroy foreign companies in their own markets. And SK has never been held accountable or compensated the countries they have deliberately harmed. They are still spinning it domestically with great success as SK products winning fair-and-square in foreign markets because their products were “superior”.

Superior a monkey’s ass. We were deluged for some 10+ years with cheap Asian garbage before products from Korea and other Asian countries began to meet any standard of quality, reliability, or even safety for that matter, while our domestic companies were forced down a slippery slope of cost-slashing and product cheapening just to compete with cut-throat foreign pricing (facilitated by illegal dumping practices, of course). The domestic fall-out from this has still not fully settled.

I propose it should be a $2000 tax credit for 25 MILLION hybrid or plug-in hybrid vehicles. Now THAT would do something for the country (as in radically improving fuel economy).
Maybe wiser spending than plugging the bottomless pit of failing car makers.

1) In other countries, the government has helped the companies when times went tough. Example Fiat. They didn’t gave money directly, but changed the policies, through subsidizing car scrapage so people was attracted to buy a lot of new cars. Main winner in Italy: Fiat.

2) Any government helping any domestic company is not a sin per-se. It can be done in name of a “higher good”.

3) Nobody can deny, that there’s a huge amount of jobs in play. And a lot of companies that depend directly or indirectly from the D3 too. If they fail, it will create a hole in the economy everyone will feel.

I support this bailout. And I have said so every opportunity I have had. Why:

You need and deserve to have a domestic auto industry. And that is very different than transplant manufacturing or assembling cars there. In the end, the USA will be the owner of the technology. The other way, is a foreign company.

I live this everyday, and believe it, it’s not nice.

If you lose your manufacturing, but even worse, your engineering base, you steadily and slowly approach 3rd world country level. Again, is NOT nice to be here (3rd world).

Maybe (big one) they don’t deserve the help.

But they must be helped. But not for “free”. There must be conditions. Strong ones.

Current management has to go. This is a MUST.

Product plans have to be presented, and their competitiveness demonstrated.

Using the flag/patriotism to support the effort is not correct. Using their mistakes to bash it isn’t either.

$50B / 250M people = $200 per person

Kind of a small sum, really.

And no, I’m not a domestic automotive supporter and do think they should be left to go bankrupt. And I live in Detroit and work for a supplier. To hell with the consequences, let’s hit the reset button and see what’s left because these three couldn’t manage their way out of a paper bag.

That one of the big worries about this – they’ll use their low interest loans in lieu of filing Ch 11. They need to do it in conjunction with Ch 11.

I’m admitedly not a fan of any of the government-intrusion options. If it has to happen, I’d say some form of regime change has got to be a condition. Bear Stearns got a “real” bailout, but two of their hedge fund managers also went to jail. Something tells me the D3 execs aren’t going to face that level of scrutiny.

I’m also not arguing dogmatic non-intervention here. Detroit is starting the bidding with low interest loans for retooling, and justifying it as “not a bailout.” That’s not going to fly. Detroit needs to come back with a different offer.

This is all karmic payback.

John

That’s true, it doesn’t have to be from cars. But there is no reason to make low interest loans to industries already growing.

It doesn’t appear that any industry is growing enough to take up all the slack of a dying auto industry.

There is nothing that says the US has to make cars, but reality says that most of us will have to drive them for the foreseeable future. There is a need for the product. Why not have the jobs that go with making them?

Do we really or could this money be invested in other industries in the USA that are actually growing and NOT shrinking. Folks need to make a living BUT nothing says that it must come from making cars.

First, the language of this discussion is all wrong. It sounds like a lot of people took econ 101, learned about the invisible hand, laissez faire, and then took no more classes.

The auto industry is huge -even if it is a shell of it’s formerly much larger self- and it’s collapse would take us from the current recession into a full blown depression. That would not be good for most of us. Personal bankruptcy attorneys otoh would have a bonanza.

We need to do this for the overall economic health of the nation.

Second, we don’t really know how the “bailout” will be structured. As far as I can see it’s a low interest loan. If the D3 turn around, then it really isn’t going to cost us taxpayers anything.
(And if they don’t turn around, the depression my cost you your job.)

Third, these companies can be turned around, but not by the current management teams (Ford being a possible – but by no means certain- exception) We absolutely must have new management teams at GM/Chrysler and maybe even Ford, otherwise this is just throwing money down the drain. I will oppose whatever plan that may come together if we are just going to give money to the same bozos who’ve been running the show.

As an aside – and I don’t think this is a crucial point right now, but it’s come up – one cannot simply say it isn’t WWII anymore. In 1939 the D3 were making precious little in the way of war materiel. It was highly specialized back then as well. But from ‘42-’45 the D3 cranked out a lot of materiel, which was instrumental in winning the war. Not to take away from our allies, but US production was vital in the allied victory. So, it’s not so far fetched to say that the manufacturing capability of these companies may, someday, be strategically important.