Friday, 1 May 2009

Does the U.S. need an auto industry?

In answer to the question, from a New York Times symposium, Does the U.S. need an auto industry? Tyler Cowen writes
I’m an economist not a business forecaster, so I don’t have any particular predictions about Chrysler and G.M. We do know that Ford is likely to survive.

More important, there are some very efficient Toyota plants in the United States. That too is part of our domestic automobile industry and those plants employ a large number of American workers.

You might think that Toyota is different because it is a Japanese company rather than an American one. But in fact Toyota is a publicly traded company, as are most of the other major automobile makers. That means any American can, any time he or she wants, buy some Toyota shares and make Toyota more of an “American company” and less of a “Japanese company.”

Have you gone out and bought those shares? Maybe not. Maybe that means you don’t really care about whether Toyota is a Japanese or an American company. If you have bought Toyota shares, maybe it is simply because you thought that the company was a good investment. That’s O.K., there is nothing wrong with those attitudes. In fact those attitudes are a sign of your rationality.

Our automobile industry could be much more “American” if we really cared to make it so. But we don’t. Our behavior as investors and consumers is usually more rational than the claims we offer up in politics and in public discourse.
I can't help thinking the US needs one about as much as New Zealand needs one. The real question is does the US (or New Zealand) have a competitive advantage in manufacturing cars? If not, get someone else to do it.

Also there is the question of what is the American auto industry? There are a number of foreign-owned automakers producing cars in the US who now employ — directly or indirectly — hundreds of thousands of Americans. Are these producers part of the US auto industry? Or is it just firms with US headquarters? If the industry is more than just the big US based three-General Motors, Ford and Chrysler-then the US could have an auto industry without them. So if the US wants an auto industry it can have one even if General Motors, Ford and Chrysler go bankrupt. Yet another reason against bailing them out. Losing the big three will not lose the US an auto industry. And as Cowen notes, the industry could be made more "American" simply by US citizens buying shares in the "foreign" companies.

On a related issue, Robert Reich makes a nice point about what is an American car anyway?
A Pontiac G8 shipped by G.M. from Australia contains far less American labor than a BMW X5 assembled in the United States.


Lucas said...

Sorry for the nitpicking, but this is one of the worst spelling errors, and it damages credibility.

The word is not loose, or loosing. It is LOSE and LOSING.

Loose: not firmly or tightly fixed in place.

Lose: be deprived of or cease to have or retain something.

Loosing: not a word.

Losing: Gerund form of lose.

Other than that, I like the post.

Paul Walker said...

Fixed. Thanks.