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The MASTERPLAN Part 6(a): The Car Industry (with podcast)

by Marquette Turner

in Features, Podcasts, Special Reports, The Masterplan

PODCAST [podcast]http://marquetteturner.com/audio/090303_Masterplan6a.mp3[/podcast]

The car industry is a mess. It’s a problem that has been in the making for many years and ultimately you can only keep propping up a loss making industry for so long.

There are too many car brands in the world. Ford and General Motors own so many brands and the marketing of each brand is extremely expensive but all the same, what is making the industry so uncompetitive?

German Chancellor, Angela Merkel convened a meeting of the European members of the Group of 20 industrialized nations in Berlin to discuss a joint strategy to the economic crisis. No joint strategy was found and France has announced loans of approximately 5 billion Euro to its car manufacturers – which screams protectionism. The loans are to ensure that French manufacturing plants are not closed. This ultimately does not make the French car makers any leaner or more competitive.

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Britain and Germany are concerned that protectionism is creeping into French politics – which would of course make a mockery of the European Union. The problem of course is that both Britain and Germany have already announced assistance packages for their car industries – the scent of politics is everywhere.

The US also seems to be resorting to protectionist measures, calling for all the stimulus money to be spent with American companies. This also doesn’t make the US car makers any leaner or more competitive. In fact the United States by propping up its car industry is proving that the industry is not competitive or efficient. Maybe the US should import cars from a more competitive player? Maybe the car manufacturers should produce a much smaller range of cars? Maybe they should only produce profit making lines?

General Motors has received 13 billion US in bailout money already and is now seeking another 16.5 billion US in bailout monies. The arguments to support GM are simple – the cost to the government will be more in social payments to let it go broke. The unemployment costs will be huge, so why not nationalize it? Why not secure tax payers money? There are so many questions with common sense answers and yet common sense doesn’t seem to make political sense.

In Australia

The General Motor’s brand in Australia is called Holden. In the last financial year the company made a $6 million AUD loss which was a huge improvement on the previous 12 months. The majority of cars are imported into Australia and it is a trend that looks set to continue. If GM needed to separate from its Australian arm it is likely that the Australian Government would support Holden.

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In Summary

The car industry needs to be competitive to survive. Car companies will need to decide which brands are profitable and manufacture only those brands. Governments around the world have chosen to assist their local car manufacturers, which is okay for the short term. Longer term, government will need to decide if importing cars would be a better solution for the country and tax payers.

Michael Marquette

Next Part:

Part 6(b):  Climate Change

Before:

The MASTERPLAN part 1 – My “Solution” to the Economic Mess (with podcast)

The MASTERPLAN part 2 – Credit Cards, Consumer Credit & Endless Economic Growth (with podcast)

The MASTERPLAN part 3 – Government Debt (with podcast)

The MASTERPLAN part 4 – Banking, Company Regulation & Limiting the Size of Corporations (with podcast)

The MASTERPLAN part 5 – Capitalism, Nationalization, and Executive Pay Limits (with podcast)

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