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Saturday, June 06, 2009

US Autos: Those Were the Days My Friend

In subsequent years, when Wal-Mart Automobile Works sells more cars in America than Ford, we shall have forgotten the pain felt in 2009 that the bankruptcies General Motors and Chrysler caused.

The giant automakers demise were a common affliction at the turn of the 20th century; 20th century debt servicing overwhelming 21st century balance sheets.  The two cash flows were incompatible and destroyed many companies that crossed over into the new millennium without restructuring.  Wal-Mart, from the outset of its international ambitions in the later part of the 20th century, however, harnessed non-union labor, market share, pricing, and nurtured a strategic relationship with China, the future of global production and consumption, to its fullest advantage. 

General Motors and Chrysler were dinosaurs that limped into the new century awaiting death.  Their hubris to ignore its customers, its competition, the marketplace and demographics, and new technologies, all played a part in their financial cardiac arrest.  In addition, their commitment to paying union wages, and the legacy benefits to retirees was quant and noble and unsustainable post NAFTA. 

Equity shareholders lost, unsecured creditors lost, taxpayers lost, municipalities dependent on the auto industry lost as the brutal realities of international capitalism displaced traditional domestic capitalism; so who won?  It depends on whom you ask.  Nevertheless, the larger point was this foreclosure on the American automobile industry signaled the end to America’s unchallengeable leadership in international business.

Great Britain passed the economic baton to America after World War I for many of the same reasons America relinquished control to the People’s Republic this century.  The Obama administration presided over the liquidation of the American automobile manufacturing industry with little opposition in the country from organized labor, congress, consumers groups, or domestic manufactures.  Oddly, only the mainstream media and the financial services industry applauded this sobering event as it unfolded.

The next few years saw more manufacturing jobs evaporate, service sector wages stagnate, GDP growth flat line, while interest rates and inflation accelerated and the national debt swell.  The prosperity of the average American receded.  The magnificent and historically unequalled American century eventually was no more.  Emotionless international capitalism had defeated once more a particular unique domestic capitalism as their workers and societies watched their standard of living fade.  Perhaps, the decline of America’s love affair with its own automobiles was another black swan that was too obvious for anyone to see.

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