The Auto Industry: North Versus South

As the big three continue to beg for free money, people continue to talk about how much foreign automakers have invested into America. In many cases, foreign plants build factories to avoid transactions costs, tariffs, and relative to Japan land is cheaper. Here is a good Slate Magazine article on the auto bailout when compared to foriegn investment.

“Time was, the Big Three were the U.S. auto industry. No longer. Over the past two decades, enticed by cheap labor and massive incentives, a second auto industry has emerged: nonunion, Southern-based, and foreign-owned. Large plants, with names of Asian and European carmakers emblazoned upon them, now dot the Southern landscape. By moving aggressively into Kentucky, Tennessee, Alabama, Mississippi, South Carolina, Georgia, and Texas, foreign manufacturers—call them the “Little Eight”—have transformed the economic geography of the nation’s auto industry and the political debate surrounding its future.

To hear the rhetoric wafting down from Capitol Hill of late, you’d think that Toyota, Hyundai, BMW, and the rest are as all-American as Mom and apple pie. And in many ways, they now are. Sen. Mitch McConnell of Kentucky made an impassioned plea on the Senate floor for his colleagues to oppose the $15 billion aid package the House of Representatives had approved for General Motors, Ford, and Chrysler. “Labor costs need to be brought on par with companies like Nissan, Toyota, and Honda—not tomorrow, but immediately,” he said. By the weekend, McConnell and fellow anti-bailout Republicans like Richard Shelby of Alabama and Bob Corker of Tennessee had stopped the bailout bill in the Senate.

The Southerners seem to have chosen an especially precipitous time to pick their fight with the Detroit Yankees: Without the money, General Motors and Chrysler have warned that they might be forced to file for bankruptcy protection. Harley Shaiken, a labor economist at the University of California-Berkeley, says a Detroit meltdown, on the eve of Christmas and in the midst of the worst job market in modern memory, “would be a devastating anti-stimulus package.”

The south has picked to not be unionized and side with foreign producers that have created jobs. The north is still stuck with unionized inefficient companies. So is this auto bailout simply the North versus the South?

The rest is here.

~PCCapitalist

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Published in: on December 16, 2008 at 12:35 am  Leave a Comment  
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