Two reasons to never buy a new car again

One of the reasons to support smaller government is because social engineering is not a proper role for government. Social engineering through the tax code, social engineering through regulation, or social engineering through manipulation of markets is wrong.

An example of the latter would be this idiotic idea from the Canadian Auto Workers, reported by Bloomberg via Automotive News:

Canada should adopt a national auto policy and investigate the possibility of establishing a domestic car company to safeguard employment in the industry, the Canadian Auto Workers union said.

The nation should negotiate “manufacturing footprint commitments” with automakers and intervene to lower the value of its currency, the Toronto-based union said in a policy paper posted Monday on its Web site. …

“Canada is one of the only auto-producing jurisdictions in the world that doesn’t have a formal national auto policy,” CAW President Ken Lewenza said at a news conference in Toronto. “This is a huge weakness.” …

A 59 percent increase in the Canadian dollar against its U.S. counterpart in the past 10 years has made Canadian factories less competitive globally. The currency is “an enormous artificial cost penalty” amounting to C$3.7 billion a year on auto parts made in Canada, said Jim Stanford, the union’s economist.

Labor costs in Canada are about C$6 to C$7 an hour lower than in the U.S., when considering prices for houses that can be 138 percent higher and the same cars can cost 20 percent more in Canada, Stanford said. Also, Canadian compensation is weighted more toward wages and pensions, while in the U.S. a larger portion is for bonuses and health care, he said.

“We actually have a labor cost advantage in Canada but it’s an overvalued currency that has converted that to an apparent cost penalty,” Stanford said.

To counter that, Canada should slow the development of the Alberta oil sands and limit foreign investment in the energy industry, he said.

“It’s clear that the over-valuation of the dollar is tied to the oil industry,” he said. “Canada is not just an oil producer. But our currency is behaving as though we were.”

The government should keep its minority stake in GM and “utilize that share in a more proactive effort to ensure that Canada’s economic interests are respected in GM’s future business decisions,” the CAW said in the policy paper.

Through state-owned agencies such as Export Development Canada, the government should gradually acquire equity stakes in other carmakers that commit to maintaining factories in the country, the union said.

This is the kind of stupid idea that actually might have some legs in the Great White North. The Canadian laws mandating Canadian content on radio and TV prove that Canada officially opposes freedom of expression and free markets. Apparently the CAW believes that the purpose of both government and business is employing people, instead of, respectively, providing government services and providing goods and services to customers, with employment the result of providing goods and services. I’m just surprised the CAW didn’t suggest the Canadian government hire all the unemployed, half to dig holes and the other half to fill them.

The comments about Canada’s supposedly too strong dollar are interesting. The beneficiaries of a strong currency are consumers, including buyers of those cars that are 20 percent more expensive than cars purchased here. As we know from our own experience with the weak-dollar Obama administration, weakening currency makes everything more expensive, while simultaneously weakening the value of savings and investments. So apparently the CAW is just fine with Canadians not being able to afford buying what CAW members build.

Thankfully, the stupidity of this idea is apparent to Automotive News readers:

  • As if we needed any more evidence that the CAW has lost touch with reality. They want everyone else to change so they don’t have to. They just want somebody to start a car company in Canada? Great suggestion. Let someone else spend Billions of dollars to start a car company so they can have jobs. What is YOUR contribution to all of this CAW? Nothing! You want everybody else to do everything for you – you want the government to create auto policies for you, you want somebody to create a Canadian car company for you, you want Canadians consumers to buy the cars you build. You want the government to manipulate the value of our currency so you can have a cost advantage vs. the US. GIVE ME A BREAK! The CAW is totally out to lunch once again.
  • … Perhaps the CAW should establish their own car company. That way they get to experience the “enjoyment” of management and global competition first hand. I’d actually pay to watch that show.
  • … The only “reasonable” option[s] for which the union has control, keeping wages/expenses in check and improving productivity, are not listed. I would just once like to see a Union state “our members will improve productivity by X%, reduce absenteeism by Y% and work with management within the economic environment/reality we live in to the benefit of the company and our members”. THEN, I would have some respect. Accept reality, work within it. When times get much better, negotiate for more. When times are tough, give up a little more. And ask the same of Management. Public support would go a long way and right now, they are losing it bit by bit daily.
  • … It takes a truly unique belief system to actually proffer a policy paper SO self-serving as to recommend creating an entire industrial enterprise PURELY for its own benefit and absolutely no one beyond its own members. CAW wants Ottawa to commission its own Trabant and devalue every OTHER Canadian’s savings ONLY so its members can avoid the same need to be competitively productive that everybody from ditch diggers to neurosurgeons must abide. What’s MOST remarkable is it being PRECISELY what anybody should’ve expected CAW to recommend. After all, their southerly neighbors have already given CAW two precedents to work from.

Proving, however, that autoworker unions have no monopoly on bad ideas, enter former Government Motors vice chairman Bob Lutz, as reported by CNS News:

“If I were emperor of the United States, I would raise the fuel tax in the United States by 25 cents a gallon per year,” said Lutz during a panel discussion on energy independence co-sponsored by the Hudson Institute.

“So that people making a purchase decision, ‘Wow it’s 4 dollars this year, $4.25 next year, $4.50 the year after that, you know what? We better buy a compact this time.’”

Lutz claimed an annual tax hike on fuel would create predictability in the auto market and consumers would be more inclined to buy electric cars.

He also called the 18 cents per gallon federal tax on fuel, “ridiculous,” because 18 cents a gallon is in his view too low, and lamented the political risk in the U.S. of advocating for higher taxes on fuel.

“In the states, the political process is such that we can’t use the market mechanism of fuel price to drive demand for these alternative fuel vehicles. So we leave taxation where it is, and then we have to find a somewhat artificial means to incent customers to look at these [electric] vehicles,” he said.

CNS didn’t report why Lutz believes government should “incent customers to look at these [electric] vehicles.” Lutz’s explanation of why, despite a $7,500 federal tax credit, $250,000 per car in federal subsidies and $4-per-gallon gas, Chevy Volt sales were a fraction of GM’s projections wasn’t reported either. Nor is reported Lutz’s explanation of how the electric grid is supposed to be able to recharge millions of electric vehicles every night, when brownouts occur in the grid every summer.

Lutz’s comments are utterly predictable from a toady for Government Motors. GM didn’t raise a finger when the Obama administration raised the automakers’ fuel economy requirement to 54.5 mpg, which will result in cars that will serve no one yet be too expensive to buy. It’s yet another application of the Golden Rule of politics — he who has the gold makes the rules — and GM is once again parroting its government masters instead of the interests of its customers.

Lutz also appears to not realize how expensive cars have become — $30,748 on average, according to the Chicago Tribune. (A Volt costs $10,00 more than that.) Lutz’s answer suggests that people trade off cars every three years, as in the 1960s or 1970s. The National Automobile Dealers Association estimates that because of the extra cost of the 54.5-mpg standard added to the sticker price, 7 million Americans won’t be able to buy such a car because they won’t be able to finance it. And I suspect that number is low, because given current economic trends, the increased costs will be more than currently estimated, and American incomes won’t keep up with the added cost of the 2025 Chevy Communard putt-putt.


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