The recovery of the
auto industry is part technical and part policy. The technical part refers to the fact that
(a) the U. S. United States
transportation system is built around the personal auto use and (b) the age of
the cars in the U. S.
had become so old that replacement was necessary. In short, because U. S. citizens depend upon the auto
for basic transportation needs, when the old car gives it up it must be
replaced. So after falling for several
years the U. S.
auto industry is now selling at a very high rates.
The second factor that resulted in a recovery of
U. S. auto manufacturing was
government policy. In a truly
bi-partisan effort, the Bush administration started the process of saving the
auto industry and the Obama administration finished the job. When partisan feelings have ebbed (in about
150 years) objective historians will be able to list the auto industry policy
as proof that government industrial policy can work.
The comparison between the
U. S. experience
and the experience in Europe is
startling. Because of its recession and
because of national policies in various countries to support their local auto
manufacturing, Europe has too
Western Europe’s car market is, overall, in its fifth year of falling sales. But in some markets, such as
Britain and Germany, sales are slightly up so far this year,
whereas in Italy they are
down by 20% and in
by 14%. Apart from the huge and efficient VW, the mass-market carmakers are
worst hit: premium brands such as BMW and Land Rover are enjoying strong export
demand from emerging markets. Peugeot’s compatriot, Renault, is also struggling
with sinking sales, though it has moved faster in taking production out of
high-cost France . France
Given how much restructuring the rest of European industry—including the makers of car parts—has undergone, it is remarkable how few car factories have closed. The only significant closures since the financial crisis have been one apiece by Fiat (in
Sicily) and Opel (in ).
Aulnay would be the first French car-assembly plant to close in 20 years. Belgium
The problem is that while
is integrated economically, it is not integrated politically. As a result no country wants to absorb the
impact of closing auto factories and the resultant unemployment.
When Peugeot said earlier this month that it would cut 6,500 jobs and close its Aulnay factory near
President François Hollande insisted that its plan “will not be accepted”.
However, his government’s promised rescue package for French carmaking,
announced shortly after Peugeot revealed its losses, was feeble: bigger
subsidies for electric cars; loans for small suppliers; but nothing that will
make a real difference. Paris
are self contained, they were able to suffer the pain early, absorb the
political impact and now their car industries are in pretty good
The motor industry in
and, more recently, in
has endured the pain of deep cuts and is now profitable and expanding. After
the 2008 financial crisis President Barack Obama and his “car tsar”, Steven
Rattner, oversaw a restructuring in which GM and Chrysler were pushed through a
rapid bankruptcy and, between them, American carmakers closed 18 factories. Now
AlixPartners reckons that car plants in America Britain,
America and Germany (despite Opel’s troubles) are working at
well above the level needed to make profits, whereas those in France, Italy
are in the red. Spain
The forecast for
is not good. Since no country will cut
capacity in the auto industry, the glut will continue, the losses will continue
and ultimately the cost of fixing things will rise substantially. See, in some cases the U. S. does do things correctly, in
spite of what politicians claim. But don't feel too comfortable. If Mitt "Let Detroit Go Bankrupt" Romney is in power the U. S. can soon experience what it is like to be Italy, Spain or France. Kinda ironic, isn't it?