Tuesday, February 9, 2010

Recall U.S. Interests In Auto Industry

Sometimes stating the obvious is tough and readily apparent evidence is thin. Over at Forbes, George Pieler and Jens Laurson take the aforementioned circumstances and author a solid article addressing the issue as it relates to the concerns over government ownership of large swaths of the US auto industry. They also speak well to Toyota's raft of problems independent of U.S. government's conflict of interest. Can a regulator who owns the competition truly be objective? Who gets screwed by this lack of objectivity?

"In a way, this is business as usual and reflected in the drop of Toyota's share prices. What is not business as usual is that Toyota's competitors include not just other car companies but also the U.S. government, due to its effective ownership of GM. Whether foul play is involved, it's a bad idea for government to run a car company and regulate all competing car companies at the same time. The conflict of interest is obvious, but the government--certainly not at La Hood's initiative--didn't recuse itself. Did he suggest that "Toyota thinks they know how to fix the problem" to cast doubt on its actual ability? What would otherwise be an innocuous statement arouses suspicions under such circumstances.

The charge of bias can't be proved or dismissed. The accusation of pro-GM mercantilism will always be raised when its competitors are targeted. Genuine protectionism in favor of GM and Chrysler (as well as Ford) would be very bad for American consumers and American autoworkers employed by Toyota. But even the credible appearance of it is bad enough. If the public has to second-guess every one of La Hood's pro-safety actions and pronouncements on the ground he may be tilting the table for GM, it's not only Toyota or U.S.-Japan relations that suffer. The credibility of U.S. policies on automotive safety will be harmed most, which means that for public safety reasons alone the U.S. should discharge its ownership positions in GM and Chrysler as soon as possible and let them swim free." 

There is another conflict of interest that the werewolf believes is getting short shrift. The relationship that unions have with domestic vs. foreign automakers. Although not universal, the vast majority of foreign automakers who have established manufacturing operations in the United States have located their plants in "right to work" states. The automakers include Honda, Toyota, Nissan, Hyundai, BMW, and Mercedes-Benz and some of the states domiciling these operations include Alabama, Georgia, Kentucky, Mississippi, Texas, South Carolina, and Tennessee. 

Despite the recent contraction in credit, lower sales volumes, and poor macro-economic conditions a spectrum of reports suggest that these plants are more efficient, breed happier workers, and have a generally less adversarial relationship with management.  Given that the current administration is beholden to the labor unions that contributed handsomely to their election coffers and that the unions hold profound contempt for the foreign operations of competitors being sourced domestically under non-union negotiated labor contracts, and that since the government owns the companies that employ large segments of union membership that there is an inherent conflict of interest at work? The answer seems painfully obvious to the werewolf, but then again he doesn't want to be accused of chasing mice in his mind. Still the implications of such decisions impact stakeholders from consumers, workers, lenders, suppliers, and tax-payers that it would behoove us all if more attention was paid to the issue.


  1. "I've made sexy women wear less and try harder to amuse me. Which was the entire point to begin with."

    In a just world, Hitchens would get a spoken-word Emmy for this piece.

  2. Oops, that was supposed to be a post on the Hitchens video.