The economic relationship between China and the United States is the defining issue of our day. While debates over health care are vital to American society, and while challenges ranging from Iran to Afghanistan to North Korea are real, nothing will determine the arc of the coming decades - or will shape domestic life and prosperity in the United States - more than the emergence of China as a global economic superpower unrivalled except by America.
The rise of China is hardly a secret, but because it is a complex economic that is constantly evolving, it gets less attention than hot-button issues. Absent a real crisis between the two, the relationship is more about the flow of capital and the nature of global business than it is about heated battles inside the Beltway or on Main Street. And while the rise of China and America's increased dependency on Chinese loans to fund its deficits certainly generates anxiety, it's mostly amorphous barring some specific issue to focus it.
How that relationship came to be is the subject of my new book, Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends On It. While this economic fusion has taken more than two decades to evolve, with the crisis of the past year, it has become both a tighter embrace and one more fraught with tension. It's to the credit of both governments - for now - that those tensions have not boiled over.
Doing away with local car dealers is a short-sighted, anti-consumer move that won't help Chrysler or General Motors sell more cars but it threatens more than 100,000 jobs at dealerships.
Chrysler has notified 789 dealers with 40,000 employees that it would end their franchise agreements in June and the company would not buy back unsold vehicles and parts inventories.
GM has told 1,100 dealerships with more than 63,000 workers that it will not renew franchise agreements next year.
So there's a lot of conversation out there about car dealerships being told they won't be selling cars for Chrysler and GM any more.
The idea, we are told, is to save the auto manufacturers money by reducing the number of dealerships with whom they do business.
I don't really know that much about the car business; and I really didn't understand where these cost savings would come from, but I was able to have a conversation with the one person I do know who actually could offer some useful insight.
Follow along, Gentle Reader, and you'll get a bit of an education at a time when we all need to know a bit more about these companies we suddenly seem to own...and about the closure of thousands of local businesses that will make the news about our bad job market worse.
President Bush will make an announcement at 9 a.m. Eastern today about an auto bailout, the White House said.
The plan is likely to include taxpayer assistance for GM and Chrysler in return for radical restructuring. And they will have to present a credible plan to become viable firms, according to administration sources.
"It's all about viability," one official said. "We aren't going to throw good money after bad."
Officials said the most likely scenario is a plan that looks like bankruptcy but is not legal bankruptcy -- an orderly restructuring in return for taxpayer assistance, as the administration is putting it.
WASHINGTON (AP) -- The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.
Time to stock up on gasoline, canned food, an ammo... it's going to be like a Mad Max movie around here...
Granholm's remarks on the rescue came after her announcement that state tax breaks for 20 business projects will net the state $2.3 billion in new investments.
That will ultimately produce 7,400 new jobs, directly and indirectly, according to the Michigan Economic Development Corp. (MEDC).
Among the ventures is a company that makes wind turbines and a firm that will make a lightweight bus that gets three times the gas mileage of conventional buses.
Such a vision might transform manufacturing in the midwest and bring new prosperity to the long suffering rust belt... Except that this initiatives is very close to failing, if... if... (more over the break)
Looks like we might actually get to a full scale Depression after the Senate Republicans, led by southern senators with foreign car companies based in their states, shot down the $14 BillionBig 3 bailout.
Richard Shelby of Alabama cried the crocodile tears for the Repubs saying that the Big 3 didn't know how to be competitive any more and that bailouts don't work.
GM and Chrysler will probably go bankrupt and restructure...but this will put thousands, or hundreds of thousands, of people on unemployment for short or long terms.
The anti-union stance of the Republicans will come back to bite them in the ass... the fact that Mitch McConnell and his buddies don't realize this is a sign that the change we have all wished for with Obama will have considerable, short-visioned competition from the old guard right.
So have a Merry Christmas, autoworkers. We'll get back to you in January.
Do you want a depression? Because if you do, it's easy to get one. Just rail against bailing out the auto industry. Or just argue that the industry should get a blank check. Either one will bring us to a depression. Well, I shouldn't say that's definitely the case, since this is virgin territory no one really understands, I'm no expert (not that the experts know what's going on) and as a friend told me, 'You can only cry 'depression' so many times before the public gets skeptical'.
Still, this problem is really sad and really difficult. While Wall Street got a $700B bailout, the auto industry is looking for a bridge loan because auto sales just crashed in October from a run rate of around 16 million vehicles to 10 million vehicles. That's not something that can really be managed away in a short period of time, it's the equivalent of demobilizing a small war. That's overhang of factories, management, people, capital, and expertise of six million vehicles a year. The auto industry reaches into every community in America, with car dealerships, supply chains, and parts makers sustaining millions of jobs a year. Beyond that, as Wes Clark notes, there's the national security element of electrifying our armed forces, a project the auto industry is moving forward.
Yes, the auto industry has been badly managed, and labor has fought against reasonable environmental regulations. And the management doesn't really 'deserve' a bailout. But what's going on here is not a normal market failure; auto companies have done done surveys which show that consumers will not buy from companies in bankruptcy, and GM is going to be in chapter 7 not chapter 11, which means full liquidation. People won't buy from a company that looks like it'll go bankrupt, but a company without customers will go bankrupt. That's a feedback loop we don't want to see, because liquidation of the auto industry will probably cause a depression. Millions of retirees with pensions and health care will lose it, consumers with domestic cars will lose benefits associated with those cars, the secondary car market will be destroyed, and consumers will lose confidence about all major consumer purchase.
In other words, the auto industry, and really the entire economy, is in the midst of the same dynamics that take hold in a bank run. I just read Paul Krugman's The Return of Depression Economics, and this is the scenario that he draws out in economies system-wide. The temptation here from policy-makers is to cut the baby in half, which is the wrong strategy. Either the government should decide to defend the auto industry at all costs, and tell consumers their car purchases are safe, or the government should let the auto industry die. A bridge loan must be accompanied by a government guarantee,because without it the industry is just in limbo and the underlying confidence problem remains.
Well, the UAW went on a nationwide strike, which makes sense as they are being asked to sacrifice more than is reasonable. After all, CEO Rick Wagoner of GM and Vice Chair Bob Lutz are doing just fine, thank you very much.
General Motors nearly doubled the compensation for its chief executive, Rick Wagoner, last year, even though he voluntarily reduced his salary to aid the automaker's restructuring effort, G.M. disclosed Friday in its annual proxy filing.
G.M. valued Mr. Wagoner's 2006 pay package at $10.2 million, up from $5.5 million in 2005. Most of the compensation came in the form of stock awards and options, and he received no bonus for a second year. Mr. Wagoner's base salary, which had been $2.2 million since 2003, was cut to $1.3 million last year at his request.
Mr. Wagoner and other top executives, including the vice chairman, Robert A. Lutz, and the chief financial officer, Frederick A. Henderson, will continue to receive reduced salaries in 2007.
Including noncash compensation, Mr. Lutz earned $8.4 million in 2006, nearly triple the $3 million he received the previous year.
Oh, and if you want to pay GM Vice Chair Bob Lutz a visit, go to his blog Fast Lane and leave a comment. How can he ask GM workers to take $5/hour pay cuts and pay more for health care when he made more than $8M last year?
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