Tag: automakers

President Obama Represents UAW Rather Than U.S. in Korea Trade Talks

This has been a tough month so far for President Obama and his policies.

After the “shellacking” that he, his party, and his domestic policies suffered at the hands of American voters last week, his international economic policies were no more popular among his counterparts at the G20 summit this week in Seoul, South Korea.

Even the sympathetic editors at the New York Times declared in a front-page (print edition) headline this morning: “Obama’s Economic View Is Rejected on World Stage: China, Britain and Germany Challenge U.S.—Trade Talks with Seoul Fail, Too.”

The other leaders at the summit were right to reject the president’s demands that China be singled out for its currency policies, as I’ve written before, and the South Korean government was right to reject his demands for changes in the U.S.-Korea trade agreement that has been waiting for more than three years for congressional approval.

Although not perfect, the U.S.-Korea agreement is a solid step forward. As my Cato colleague Doug Bandow wrote in a recent study, the agreement would sharply reduce trade barriers between our two nations while deepening our commercial and security ties with a key democratic ally in the Asian Pacific.

The Koreans rightly refused to substantially alter the sections of the agreement relating to automobiles. The agreement would eliminate tariffs on all automobile trade between the two countries. Ford, Chrysler, and the United Auto Workers union oppose the deal, claiming that it does not address non-tariff barriers that allegedly hinder U.S. exports to the Korean market.

As I posted in this space a few days ago, there are perfectly normal market reasons why Americans buy a lot more Korean cars than vice versa. The real agenda of Ford, Chrysler, and the UAW is not to gain greater access to the Korean market, but to prevent any greater access of their Korean competitors to the U.S. market.

The talks in Seoul this week reportedly foundered on the specific U.S. demand that Korea relax its emission and mileage standards so that U.S. automakers can more easily modify their cars for the Korean market. How ironic. It has become part of the Democratic mantra on trade that agreements must strengthen the environmental and labor standards of our trading partners. Yet here U.S. negotiators were strong-arming the Korean government to weaken its own standards while the Obama administration seeks to impose higher mileage and emission standards on cars sold in the United States.

There is still time to save the U.S.-Korea agreement and to present it to the potentially more trade-friendly Congress that will convene in January. But for now, President Obama has chosen to serve the narrow interests of two domestic automakers and their union rather than the overall economic and strategic interests of the American people.

Federal Bailout of GM Still Horribly Wrong

Our friends at The Economist magazine usually talk good sense about free trade and free markets, which makes their retrospective endorsement of the government bailout of General Motors all the more disappointing.

In a leader in the current issue, the editors write that critics of the bailout (count Cato scholars among them) owe President Obama an apology. “His takeover of GM could have gone horribly wrong, but it has not,” they opine.

The Economist argues that, in contrast to state coddling of industries in, say, France, President Obama has driven a hard bargain by requiring GM to fire top management, cut jobs, close plants, and reduce its brand names. The magazine grants that the president’s labor-union allies won special concessions that came at the expense of bondholders, but “by and large Mr. Obama has not used his stakes in GM and Chrysler for political ends.”

First, it’s a pretty low bar to say an intervention was right because it did not go horribly wrong. The editors then too quickly brush over the horrible injustice of stiffing the taxpayers of Indiana and others who bought GM bonds and should have been in line ahead of the more politically connected United Auto Workers union.

To curry favor with organized labor, President Obama put $50 billion of taxpayer resources at risk. A post-bankruptcy GM turned a profit last quarter, along with most other automakers, but it is doubtful its anticipated IPO in the next few months will raise anything like the $80 billion or more needed to return the “investment” to taxpayers.

On top of that, the bailout of GM went far beyond any valid power granted to the federal government by the U.S. Constitution, and it blatantly favored two companies over a multitude of others in the very competitive automobile market.

Remind me again who owes whom an apology?

So Much for Making Money on the Bailout

Reports the Washington Post:

The federal government is unlikely to recoup all of the billions of dollars that it has invested in General Motors and Chrysler, according to a new congressional oversight report assessing the automakers’ rescue.

The report said that a $5.4 billion portion of the $10.5 billion owed by Chrysler is “highly unlikely” to be repaid, while full recovery of the $50 billion sunk into GM would require the company’s stock to reach unprecedented heights.

“Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount,” according to the report, which is scheduled to be released Wednesday.

Well, it’s only money.  And with the taxpayers facing more than $100 trillion worth of unfunded liabilities, what’s a few more wasted dollars?!

Intervention Begets Intervention, Which Begets…

The logic in Washington is ineluctable.  If government provides money, then it needs to impose regulations.  If the government takes ownership, then it must provide management.

Bail out the banks.  Set bankers’ salaries.  Bail out the insurers.  Decide on corporate bonuses.

And if the government takes over the automakers, then it should run the automakers.  That, of course, means deciding who can be dealers. 

Reports the Washington Post:

Now that the Obama administration has spent billions of dollars on the bailouts of General Motors and Chrysler, Congress is considering making its first major management decision at the automakers.

Under legislation that has rapidly gained support, GM and Chrysler would have to reinstate more than 2,000 dealerships that the companies had slated for closure.

The automakers say the ranks of their dealers must be thinned in order to match the fallen demand for cars. But some of the rejected dealers and their Capitol Hill supporters argue that the process of selecting dealerships for closure was arbitrary and went too far.

Since federal money has been used to sustain the automakers, they say Congress has an obligation to intervene.

At a gathering of dozens of dealers who came to Capitol Hill yesterday to lobby their representatives, House Majority Leader Steny H. Hoyer (D-Md.) and several other congressmen spoke in support of the dealers. More than 240 House members have signed onto the bill, supporters said.

“We are going to stand with them for as long as it takes,” Hoyer told an approving crowd.

What is next?  Congress deciding the prices that should be charged for autos?  The accessories to be offered?  The colors cars should be painted?

I have no idea who should or should not be an auto dealer.  But I do know that it is a decision which should not be made in Washington, D.C.