Greg Mankiw on Chrylser and General Motors

Is it any surprise that Chrysler and GM are now in the process of going out of business?... Their bankruptcy should perhaps be viewed as a success of the market system.
Greg Mankiw

Cartoon: The BIg Three on the Way to Washington

Against the Big Three Bailout

The spectacle of corporate magnates from Detroit pleading to be on Uncle Sam's dole is a sordid one. So why aren't more Americans appalled? One reason is widespread misunderstanding -- much of it sowed by these auto makers -- about the size of their firms. The Big Three, we are told, are "too big to be allowed to fail."

This myth begins with the idea that GM, Ford and Chrysler are so huge that if they go belly-up, the livelihoods of a disproportionately large number of workers and suppliers would be affected. At once, the market for their services and products would close. Therefore, the argument concludes, government must prevent any such failures.

Nonsense.

Bankruptcy doesn't make assets -- such as factories, machines, contractual options to buy raw materials, workers' skills -- disappear. If markets still exist for products produced by these firms, Chapter 11 is the best way to discover this. Some workers might lose their jobs and some suppliers might lose their markets, but there would be no industry-wide collapse of the sort portrayed by the bailout's cheerleaders...

What will President-elect Barack Obama tell these other firms when they come begging? If he says no, he'll be seen as having played favorites with three firms that deserved no such special treatment. If he says yes, he gives private industry a blank check drawn on the American economy. To imagine that firms will not draw on that account too often, too greedily, and without real justification is a dangerous fantasy.

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Cartoon: Congress, Automakers, and Taxpayers

Cartoon: Saving Dying Industries

Cartoon: Begging for a Handout

Huge Drop in Auto Sales

source

Cartoon: Car Sales

The Not So Big Three

from Carpe Diem

Toyota Catches General Motors

After more than seven decades as the world's biggest automaker, General Motors Corp. now has to share the title with Toyota Motor Corp., at least until the Japanese giant offers further clarity on its 2007 sales totals.

GM said Wednesday that worldwide sales rose 3% to 9,369,524 million cars and trucks in 2007 -- the second-best global sales total in company history.

Toyota earlier this month posted sales of 9.37 million, but hasn't given a final number down to the last vehicle sold. It may never release that figure.

"[Toyota's] consistent practice in years past has been to report out to two decimal places only," company spokesman Mike Michels said. "It is unlikely that this will change. It would seem that the so-called sales race is a tie."

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It was a good run for GM.

Government Regulation: CAFE Standards

New fuel efficiency requirements imposed by Congress will add, on average, $6,000 to the price of GM vehicles sold in the United States, the automaker's vice chairman and product chief said on Tuesday.

Congress passed a new energy law in December 2007 that requires automakers to increase fuel economy across the industry to 35 miles per gallon by 2020 -- up 40 percent from current levels...

"We probably have to take a lot of weight out of the vehicles. We will have to use some premium materials like more aluminum, more magnesium," Lutz said. "Which gets you the weight savings but drives the cost up."

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Another nail in the coffin of Detroit.

Big 3 Automakers Back on Top

General Motors posted a surprise sales gain in August, bucking an industry trend of weak auto sales in the period, and helping domestic brands to recapture a majority of U.S. sales.

Big Five Automakers?

Market Share

23.9% General Motors
17.1% Toyota
13.7% Ford
10.8% Honda
10.5% Chrysler


How long until General Motors falls from the top spot?