passing on a brother's thoughts on auto-industry and other inter-dependencies in the global economy; discussion of the contributing logical falacies and ignorance
some thoughts from a brother on things auto industry:
Sent: Thursday, November 20, 2008 09:32
Subject: more car stuff & economics
...
"From some rough approximations, the car companies have added more value to the autoworker (and population) pocketbook than most other industries. Due to the automotive worker increasing wage, the average car price is going up; however, the recurring cost of gasoline has improved (mpg from 1970 to 2010+), while the $/gal gas cost has negatively impacted the car companies gains. Again, roughly - car companies have had a neutral effect on %take home pay, while housing, insurance (car & house), and health costs have reduced the take home. Taxes (income, property, sales, socsec, medicare) - I don't have enough information at this time to put this into perspective.
"Taking this into consideration, the next questions concern -
"The three major increases in cost of living (excluding taxes, I'll still have to chase this) are;
- housing
- car insurance
- health care (ins premium & treatment costs)
(house insurance a somewhat distant 4th)
"So - housing costs are up because raw materials are up? If so, then wouldn't house insurance increase also. Or are the claims not substantiating enough? Are house insurance claims less likely to be fraudulent, then the insurance model may be okay, and car insurance fraud should be minimized.
"car insurance costs are up because raw materials are up? True, however; here multiple factors are chasing themselves. The more cars are made the supply/demand pricing takes place, and labor wages are chasing themselves. However, those suppliers that failed to make the successful OEM original build bid, can still make aftermarket parts sold to PepBoys, AutoZone, Murrays, etc. I've seen similar initiatives at these places like GM's cost reduction to limit aftermarket increases. It's said that insurance customers should request OEM parts; however, all OEM's globally quote and source any component, including those Asian "counterfeits" who may have quoted on the OEM parts, and missed due to a number of reasons - price, timing, politics, procedures, lack of quality certificate (which doesn't always guarantee non-recalls, otherwise there wouldn't be recalls now, since all parts are sources with TS, ISO, or VDA qualifications).
"Insurance costs are minimal (low labor, low materials, low overhead), until claims are paid. Hence my comparison statement to housing insurance modeling rates against claims.
"So - should US car companies get a loan (not a bailout, like the underscrutinized finance industry)? Cars are globally made, each corporation having to adhere to each nations' specific emission controls and safety standards. But the unequalizer are tariffs. As was seen as lately as four years ago, US government steel tariffs requested by USSteel and other US steel makers, caused an increase in material cost until they were repealed, then the global market for construction boomed (construction uses about 70% of globally used mined ore), and supply/demand pricing once again flourished.
"Pricing including imaginary profit geometrically raises prices as OEM's raise outsourcing and their Tier1's have more Tier2's, then Tier3's, etc..... Then the Tier3's, and so on, don't have enough buying power to push the supply/demand principle to their favor. When the OEM's purchase material with their buying power for Tier1's to Tier3's+, then this is somewhat limited. But automotive is still competing with construction (industrial/commercial buildings, infrastructure/roads, transportation (shipping, rail, ...)."
...
which highlights the complex nature of any major industry in today's global economy.
funny that we merely blinked (really) at sending funds approaching $1T (that's $1,000,000,000,000 - !) to assist an "industry" that no one is sure is even real, but when it comes to actual physical goods, and a price tag less than %3 of what has been committed elsewhere, the prevalent attitude is decidedly unsympathetic - and that's stating it gently.
so many things wrong about all this (the national reaction, i mean). but it reflects more a historical antipathy towards detroit and organized labor (where did that come from?) than anything approaching a considered response to the matter at hand.
but what people miss is that (1) old concerns of a domestic car quality gap disappeared long ago, (2) a separable "domestic" auto industry has not even existed for a couple of decades now, and (3) outsourcing and anti-labor hiring practices undercut (sometimes costly) protections that people fought for for years in this country.
ask yourselves who all this benefits. again.
(2) is even more interesting, because of the interdependencies globally and between industries. a domino effect would ensue if the supplier / skill concentrations are lost, not only for "foreign" auto makers, but other heavy industries - and _light_ ones as well. one of two things could happen: all those "foreign" companies could pull out, there being too little appropriate labor resources available; or they could stay but demand - and get - large additional labor compensation slashes, amounting to this country switching to a non-"first world" status. already, we're seeing many people not only seriously considering, but actually acting, on taking employment overseas because of "domestic" economic issues. you know how you look at mexico today ? well, start looking out your front window.
"oh, that could never happen - we're America!"
morons - it's been happening for over a decade now.
granted, preserving the huge global inequity pattern that has prevailed to date is neither wise nor possible, but there are far better ways to handle transitions.
and in a deep sense, the current perspectives, attitudes and trends are tied to the underlying "scientism" and "secular mysticism" that causes everyone to believe that everything is controllable, and that there are responsible parties for everything that happens. this is further interestingly compounded by the contradictory attitude that everyone believes in the existence of free choice. so - perfect causal chains of responsibility (determinism), ending at persons who chose to start that chain of events (free will).
the last few years i've run into many examples of this glaring logical error- the poor chose to be that way (laziness, maliciousness, whatever); the hyper-rich deserve their wealth (personally, as if there was something trans-human about them). and so on.
but no one recognizes it. and no one recognizes their own greed and intolerance as well.