The SUV assembly plant in Newark, Del., will be closed. The Warren, Mich., truck plant and South St. Louis assembly plant will each lose one of their two shifts. Earlier, Ford posted the largest loss of any company in history, $12.7 billion, breaking GM's record $10.6 billion loss in 2005.
Toyota, having swept by Chrysler and Ford, is challenging GM for first in sales in the U.S. market. When we were growing up, U.S. automakers had the entire U.S. market to themselves and dominated the world market.How is Japan succeeding?
First, the Japanese make fine cars. Second, Japan manipulates its currency to keep it cheap against the dollar, to keep the price of Japanese autos below comparable U.S. models. Third, Tokyo maintains a lock on its home market by imposing a value added tax on auto imports from America, and rebating that tax on autos and parts exported to America. This double-subsidy can give a Japanese car a 15 percent price advantage over a Ford or GM car in both markets.
Fourth, Japanese auto companies setting up plants here are free of "legacy costs" of pensions and health insurance for retired U.S. workers. For Japanese companies have almost no retired American workers. Legacy costs at GM, Ford and Chrysler must be factored into the price of every car.
Finally, there is the venerable practice of "transfer pricing." Japanese auto parts manufacturers overcharge U.S subsidiaries for parts. This cuts the profits of their U.S subsidiaries and thus reduces their U.S. corporate taxes. Profits are repatriated, virtually untaxed, to Japan.
Thus is Japan capturing America's auto market and bringing down the great companies that built the machines of war which brought down Japan's empire. Revenge is a dish best eaten cold.
To stay competitive in their own home market, U.S. manufacturers are closing down plants, laying off American workers and building their cars outside the United States.
The day before Chrysler's announcement, the Census Bureau trade figures were released. Charles MacMillion of MBG Information Services had them broken down before they hit the wires.
In 2006, the United States ran a deficit in traded goods of $836 billion, a fifth-straight world record. For manufactured goods, the U.S. trade deficit reached $536 billion, worsening from the 2005 record of $504 billion. Under President Bush, 3 million U.S. manufacturing jobs have disappeared -- one in every six.