If Japan can bail out Toyota for decades we can save GM.

[Imperialism Inc.]

I read the book this excerpt is from. In the course of it he gives several examples of decisions countries made to go against the "free market" and support their homegrown industries for greater goals. Another , non-auto, example is Samsung who was "bailed out" by the South Korean government until they became the global powerhouse they are now. I for one have heard enough of the "free market" arguments about GM and Ford. If Japan can protect Toyota for decades we can do the same.

Bad Samaritans
The Myth of Free Trade and the Secret History of Capitalism
Excerpted from Bad Samaritans by Ha-Joon Chang Copyright © 2008 by Ha-Joon Chang.

http://www.washingtonpost.com/wp-srv/style/longterm/boo...

Chapter One

The Lexus and the olive tree revisited

Myths and facts about globalization

Once upon a time, the leading car maker of a developing country exported its first passenger cars to the US. Up to that day, the little company had only made shoddy products - poor copies of quality items made by richer countries. The car was nothing too sophisticated - just a cheap subcompact (one could have called it 'four wheels and an ashtray'). But it was a big moment for the country and its exporters felt proud.

Unfortunately, the product failed. Most thought the little car looked lousy and savvy buyers were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US market. This disaster led to a major debate among the country's citizens.

Many argued that the company should have stuck to its original business of making simple textile machinery. After all, the country's biggest export item was silk. If the company could not make good cars after 25 years of trying, there was no future for it. The government had given the car maker every opportunity to succeed. It had ensured high profits for it at home through high tariffs and draconian controls on foreign investment in the car industry. Fewer than ten years ago, it even gave public money to save the company from imminent bankruptcy. So, the critics argued, foreign cars should now be let in freely and foreign car makers, who had been kicked out 20 years before, allowed to set up shop again.

Others disagreed. They argued that no country had got anywhere without developing 'serious' industries like automobile production. They just needed more time to make cars that appealed to everyone.

The year was 1958 and the country was, in fact, Japan. The company was Toyota, and the car was called the Toyopet. Toyota started out as a manufacturer of textile machinery (Toyoda Automatic Loom) and moved into car production in 1933. The Japanese government kicked out General Motors and Ford in 1939 and bailed out Toyota with money from the central bank (Bank of Japan) in 1949. Today, Japanese cars are considered as 'natural' as Scottish salmon or French wine, but fewer than 50 years ago, most people, including many Japanese, thought the Japanese car industry simply should not exist.

If you find this useful or interesting please give the thread a kick.

[FreakinDJ]

1. French Gov. subsidize export of bottling equip by 50% cost

Installed several French made High Speed Bottling lines in the USA, all subsidized 50% by the French Gov.

So much for "Free Trade"

[MichiganVote]

2. K&R

[Libby2]

3. K&R

[madrchsod]

4. yup....ask the nascar teams about toyota

the big three teams were pissed off because nascar gave them a break on head design the first year. but what really pissed them off is there was`t anyway to know how much money the toyota corporation was giving those teams.

[Kalyke]

15. And it still SUCKED.

Tony Stewart's gonna fall flat on his ample ass.

Driving talent is one thing, but car performance is quite another.

[tammywammy]

5. K&R!!!

[FarCenter]

6. Free trade is advocated by the dominant economic power on the way up

For example, Great Britain from the Napoleonic Wars through the mid-Victorian period was the dominant economic power and an ardent advocate of free trade. Following the crises of 1873, enthusiasm for free trade waned as Germany, the United States, and other countries became more competitive with Great Britain. Great Britain's trade became more concentrated within the British Empire and gradually tarrif barriers were erected against trade with outsiders.

Similarily, after WW II, we had all the gold in the world in Ft Knox, and we had a robust, intact economy that had grown greatly during the war. So the US became an advocate of free trade.

But like Great Britain in late-Victorian times, we have become less competitive, living off our capital, and free trade will soon be discarded.

[Imperialism Inc.]

8. Kicking away the ladder.

[FarCenter]

9. Yes, but there always seems to be another way up, sooner or later

[customerserviceguy]

7. Big difference

Japan was dealing with a war-torn economy. It had other domestic industries capable of making world-class products (optics come to mind) and was starting to get off the ground on marketing it's electronics products. As we saw, the transistor radio became a hit, and ushered in the era of portable electronics that we take for granted these days.

From 1958 to 1973 is only fifteen years. When the first oil embargo shook the world, the Japanese were ready with the right product at the right time. I remember the Korean cars being shoddy during the 1980's, now they get top marks from Consumer's Reports. My 2002 Hyundai is about as dependable as my 1991 Mazda truck was. Both of them left my 1976 AMC Gremlin and my 1982 Pontiac Phoenix in the dust as far as longevity. And in the case of the Asian cars, each one was used, a couple years old, and the American cars were brand new.

Detroit's seen the handwriting on the wall for many years now. They've spent many millions of dollars on lobbyists to fight the innovations that European and Asian manufacturers have developed to make automobiles safer. They switched their business model from relative reliabilty to one where a car doesn't last past it's six year financing, and needs heavy amounts of expensive parts and service in the last years of that "life". Lately, they've been focused more on a three year life, the length of a lease.

Yes, adding to the national debt can save GM from bankruptcy, but the question should be, can we save GM from the folks who have been making the decisions there? It may be too late.

[Kalyke]

16. Bullhockey.

Detroit saw Americans demanding trucks and SUVs and gave them to us.

Stop blaming the Big 3 for our stupidity (and, I know, I don't have a truck or SUV and you probably don't either. But, we're atypical. Learn to live with that).

[Hannah Bell]

20. "Detroit saw Americans demanding trucks and SUVs"

It did? Then how did the Japanese take so much market share?

[Kalyke]

22. Uh... the 1980s.

When American cars actually did suck.

People nowadays still have a bad PR reception to American cars even though they're cheaper and as well built.

BTW, it's hard to argue with a Hannah. That's my daughter's name. In fact, it's Hannah Elisabeth... and we call her Hannah Bee or Hannah Belle (for Beth or "Bee" and "Belle" - we're Southern).

[Hannah Bell]

23. The Japanese were already the world's biggest auto producers by 1980.

"By 1980 the American auto industry had lost its first-place standing to Japan. In fact, Japanese auto imports accounted for a large portion of annual car sales in the U.S. One out of every four cars sold in 1980 were imports"

http://eightiesclub.tripod.com/id291.htm


My best friend in college in the early 70's drove a Toyota ("the Toy"). There was a gas crisis then too, remember? (Maybe you're too young?) It was cheap, easy to fix, sipped gas & ran forever.

Then Reagan came in in the 80s & told us we were macho men, no more of that namby-pamby Carter conservation, we were going to burn oil!

I still remember the sinking feeling I got when it was widely (& proudly) advertised that Reagan was taking Carter's solar panels off the white house. Downhill ever since.


Your daughter has a cute name. :>

When I argue, it's nothing personal.

[customerserviceguy]

24. The Japanese companies

also made SUVs and large trucks, but they made them economical, relatively speaking. I don't own an SUV, but I do drive my lady's Accura MDX when we swap driving on long trips. If we drive at a decent rate of speed, it can get 27 MPG on the Interstate, better than a lot of cars I've had.

It sure beats paying for two airline tickets when we want to drive down south. And I can drag back all of the local beer I want to find, without being treated like a terrorist by the airlines!

[rhett o rick]

10. GM will take the money and build plants in Mexico and China. They will become solvent and their

exec's will get richer at our expense. We will continue to loose jobs. GM had a chance to lead the world in electric car manufacture but they crushed all the cars and went with the hummer. Now they want us to feel sorry for them. Give money to starving children and they call you socialist, give money to rich exec's and that is somehow called free trade or some other free something. Fuck Reagan, fuck Greenspan, fuck Bush, Fuck GM. I say don't give anyone a fucking cent until Paulson is fired.

[Hannah Bell]

11. the US gov has bailed out & subsidized the US auto industry since WW2.

Ford & GM both supplied vehicles for the Germans in WW2 & Ford, at least, got a million or so in war reparations from the US gov't for the bombing of some of their German plant.

The US gov't also "subsidized" the Japanese auto industry & facilitated tech transfer by using them as suppliers & repairers of trucks & other equipment during the Korean & Vietnamese Wars, & by opening the US market to them (so that the cheap imports could be used to gain concessions from union labor).

It also subsidized the German industry.

Why should we "save" GM when they're currently busy building new plants in Russia, China & India?

Do you know which Japanese & Korean auto companies GM owns pieces of?

What do you want to "save," companies or jobs?

[Hannah Bell]

13. GM has colluded with the Japanese to extract labor concessions & get rid of the smaller fry.

http://www.nader.org/index.php?/archives/780-Iacocca-Wa...

Iacocca heaped ridicule on the Federal Trade Commission, which by a vote of three to two, approved the joint venture saying,in effect, that a giant with a net profit of $10 million every day, needs Toyota's help to compete effectively. He accused GM of trying to weaken the fuel economy standards "so it can continue to build large cars and make even more money." He charged that GM lobbied for an increase in import quotas so that "it could pick up 300,000 small cars from Suzuki and Isuzu, and -- in the real world -- lay off its small car production base to Japan." He said that GM "wants to get rid of the Chevette, which contains 95 percent domestic content, and substitute a car that has 40 to 50 percent domestic content."

In a nutshell, Iacocca was exposing GM's clever plan of abandoning its small car production in America to its overseas affiliates' factories for re-import or re-assembly into this country.

Iacocca was not just warning; he was promising that this GM shift overseas would force Ford and Chrysler to shift more of their production abroad. He said if the GM-Toyota deal is not judged unlawful under the antitrust laws (Chrysler has already sued), he will look for still more Japanese partners. "By the time the rest of us get through following GM's lead just to stay alive, U.S. auto plants are going to fall like dominoes," along, he added, with several mid-western cities. He estimated a net loss of 300,000 American jobs as a result of the repercussions from the anti-competitive GM-Toyota deal.>>


Oh, you don't believe "our" companies collude with "their" companies?

http://www.usdoj.gov/atr/public/press_releases/1996/103...

FOR IMMEDIATE RELEASE
TUESDAY, DECEMBER 3, 1996

FORMER TOP Archer Daniels Midland EXECUTIVES, JAPANESE EXECUTIVE, INDICTED IN LYSINE PRICE FIXING CONSPIRACY

Korean Company Also Charged: Agrees to Plead Guilty, Pay Fine and Cooperate with the Government's Investigation

[Kalyke]

17. I want to save choices.

I absolutely refuse to by a rice-burner. I hate them. They're ugly, lack personality and are generally pieces of shit in the features department (unless you want to pay tons extra).

I posted a picture of my beauty on another thread. I don't want to give HIM up. And I don't want my only choices to be bubble, box and wimpy horn.

[Hannah Bell]

18. a "rice-burner," eh?

most cars built anywhere these days share parts, bodies, labor.

[Kalyke]

21. General industry slang for a Japanese car.

Crude, yes. But, I've been called worse on this board for sticking up for domestic automobiles.

[Quantess]

30. Toyota is mostly manufactured in the US.

[FKA MNChimpH8R]

12. When I was a kid, "Made in Japan" meant cheap junk

(I am 52). By the mid 1970s, "reliable and high quality" and "Japanese automobile" were synonymous. The Japanese earned the dominant market share they now have.

Japanese carmakers have always looked at the long term, where US companies were always concerned about the next quarter. Toyota sank incredible amounts of money into hybrid research for the last 10-15 years. American carmakers kept building bigger, more gas-guzzling SUVs because they were highly profitable. Where did the money the Big 3 made in those years go? I'd bet a much smaller portion went into R and D than was the case at any of the major Japanese manufacturers.

[drumtrip]

14. Yes

But we need to send a strong message about what they need do to , in order to deserve it, and they need to follow through!

[Hannah Bell]

19. like "we" did to wall street, eh?

face it, it doesn't matter what "we" think, our masters will decide.

[HamdenRice]

25. Good point. It's called "industrial policy," something Bill Clinton

I believed talked about doing in the 1992 campaign, but was shot down by the free market fundamentalists.

Industries have "economies of scale." The bigger the factories get, the cheaper and more efficient production becomes. So if you are Japan and its 1960, there is no way that you can currently produce cars cheaper than GM. Therefore, no market driven investor will invest in car factories in Japan in order to make Japanese cars competitive with GM cars.

But if the government comes in with a massive investment, Japanese cars can leapfrog GM and make cars that are better, cheaper and more efficient.

That's one aspect of "industrial policy" -- the government or a government agency looking ahead at ways to transcend current market conditions through strategic investments in the private sector. In Japan, that ministry was MITI -- the Ministry of International Trade and Industry.

Every "Asian Tiger" economy has followed the MITI model, and most of them have been successful, while our "leaders" have excoriated it as a violation of free market principles or socialism.

As a result we beg and borrow our own dollars from the Asian Tigers in order to buy their stuff.

[Imperialism Inc.]

27. For developing countries Chang calls it "infant industry theory".

The idea being that you don't send your 10 year old child out to be a shoe shine boy. Sure he can make money at it but that is probably all he will ever be. Much better to protect the little tyke and allow him to develop before competing with all the big boys. Obviously GM and Ford are not infant industries but we now find ourselves in a situation that is very similar.

[NNN0LHI]

26. And the only reason they could do that is because US taxpayers pay their defense costs

If someone else was paying for our military budget we would be in high cotton right now.

Don

[The2ndWheel]

28. Almost the same thing with Europe too

Pretty much the only people paying for that global military is the US taxpayer. That's also why the rest of the world can't say no when the US Government wants to do something militarily around the world.

[nichomachus]

29. If Japan can provide free universal health care, we can too

The benefits of government action have to flow both ways. Right now, the redistribution is going from workers to corporations with nothing coming back the other way.

Also, executives in Japan make nothing close to what American top executives pull down -- just a tiny fraction. American execs earn between 10 and 50 times what Japanese CEOs make.

[naaman fletcher]

31. I for one think we should let them go bankrupt...

For the record, I was/am entirely against the financial sector bail-out. Yes, Japan subsidized its industries, and yes, America has subsidized plenty of industries over the years. The simple fact though is that GM has destroyed, DESTROYED over 100 billion of investment capital over the last 25 years. IT IS A NET LOSS TO THE ECONOMY, which affects everybody. Whether it is the fault of management or the unions is irrelevant to that fact (I think its both).

Bankruptcy DOES NOT mean everything closes down. Look at the airlines. They go in and out of bankruptcy all the time. It means that the existing structure is rationalized and taken over by new owners, bringing in new capital, if it is profitable to keep the operations running.

Now, if the point is to bail out the workers.. then they should simply bail out the workers. You could pay thee workers a massive government benefit, and the total price would come in far, far, less than having a massive unprofitable company that sucks wealth out of the economy.

[The Wielding Truth]

32. K&R