Archive for August 28th, 2009

Detroit Bias

Friday, August 28th, 2009

With the U.S. government serving as a majority stakeholder in General Motors and the House of Representatives passing bills that forbid federal agencies from buying cars not made by Detroit, foreign automakers are becoming concerned over a Washington bias in favor of Chrysler, Ford, and GM.

Smeal’s Terrence Guay comments:

Despite rhetoric to the contrary, there is a tendency for all governments to protect strategic industries, although the definition of “strategic” can differ across countries. The automobile industry is considered strategic by most countries that have one (like the United States, Europe, and Japan) or are trying to create one (like China and India). The U.S. automobile industry, including its supplier network, still makes up a sizable part of the U.S. economy, although it has declined over the past two decades.  So it should come as no surprise that the U.S. government is trying to support it in various ways. 

While foreign companies may complain, these policies probably will have little effect on the U.S. industry if it is defined as GM and Ford. Chrsyler is now owned by Italy’s Fiat, and European, Japanese, and South Korean companies now have strong U.S. roots. Two-thirds of all “foreign imports” are built in the United States. CSM Worldwide, an automotive market forecasting group, predicted earlier this year that foreign-based car makers will build more vehicles in the U.S. than the “Big 3″ by 2010—and this was prior to the Fiat-Chrysler merger. 

The point is, foreign automakers will increase their presence in the United State in terms of sales and production regardless of what Washington does to protect the remnants of indigenous companies.  As this happens, the lobbying clout of foreign companies soon may drown out the voices of GM, Ford, and their protectors.

Tags: Auto Industry, Globalization, Guay, Politics
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