To be perfectly honest we haven’t wanted to get involved in the row over the potential rescue of the Big Three auto manufacturers in MI.  We’ve had and have a bucketful of other more important projects and issues to deal with, and simply haven’t devoted the time and staff effort required to really dig into the issue.   Something came in today that we felt compelled to share however. 

The debate in Washington over the potential rescue of The Big Three appears to be heating up quite a bit today, and a reader (Lizzy in Austin, TX) sent in a link to a most interesting article dealing with the issue that was posted on National Review’s blog (The Corner). 

Before you run off and brand any and all information from NRO as “frothing at the mouth hard-core right-wing nonsense” – read the piece here.  You may not agree with author Jim Manzi’s politics, but his economic analysis is often right on the mark. 

We’ve reproduced a couple of the graphs from the article that are particularly intriguing – first, the pre-tax operating profit per vehicle for North American sales. 

If indeed the posted data is accurate, no bailout will save the Big Three – unless it includes a top to bottom restructuring. 

The second graph tracks the market share of the Big Three and Michigan motor vehicle manufacturing employment over time.  Impressive. 

We have great empathy for the honest, hard-working families in Michigan and the upper Midwest that are caught in the ever-sinking quagmire that is traditional American automobile manufacturing.  On the other hand, automobile manufacturing is alive and quite well in Alabama and South Carolina in particular, as well as in Texas.  Throwing billions at an out-dated, under-performing business model certainly doesn’t seem to make a lot of sense, particularly when competitors on American soil have such a divergent (and much healthier) operation. 

Yes, the argument is very complex, and in particular the “foreign companies” manufacturing vehicles on American soil don’t have the legacy costs that the Big Three have.  The Big Three have such a load of baggage, however, it’s hard to imagine them ever being competitive in a recession / depression environment without a top to bottom re-design of their entire business model. 

Nope – we don’t think it will happen either…….

Technorati Tags: