Tuesday, Jan 27, 2009
Just in case anyone was worried they might have to drive a car more than two years old...
The Times: Cabinet approves aid for struggling car industry
A classic example of the government intervening to stop the invisible hand from allocating vital resources to those that are most productive. All done in the name of good intentions, which laden the road to disaster. The UK will never start making things that people NEED whilst the government continues to force companies to make things that people at best only want. a bit. Why are we bailing out employees of an Indian company anyway?
Posted by jackas @ 12:16 PM (1216 views) Add Comment
24 Comments
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2. 51ck-6-51x said...
This is, indeed, a sorry state of affairs - we have 800,000 employed in the industry and so the treasury would prefer to save their jobs in the short term.
jackas - the nationality of the company is not the question - the employment in this country is. However this will, indeed, be a misallocation of capital.
3. jackas said...
It is in the long term bad news for the employees too. If they were laid off today, they could begin adjusting to the new reality faster and more efficiently. As it is, they remain in a state of suspended employment. I know which I'd prefer.
4. growler said...
I think the nationality of the company is a dangerous argument and what I'd expect from UKIP. I can't think of any organisations that are 100% through and through red-white and blue.
There is over-production for sure - but it's not a bail out. It's a case of doing the jobs the banks aren't doing. The banks have sucked in millions, are going to suck in more and provide what? They have gorged on the good times, and now it's a bit tougher, it's number 1. At least the car industry MAKE something. Banks have bought and sold fools gold that they're asking (no, telling) us to help them with. We should be making the banks responsible and sueing where appropriate. Noone can tell me all this securitisation was not negligence or worse - thats what we need to focus on. Banks must be laughing when people moan about industry subisidies: "that's another story to deflect interest from us"
5. Crunchy said...
Would anyone buy a 'new' car knowing it has been standing for 2/3 years.
Guaranteed against rust and such.
Waiting for the car slash.
6. who stole my pension? said...
Hold on guys --- do you remember the British Leyland Austin Allegro? A superb car -- my second hand super deluxe vandam plas model (cost 50 quid from a scrap dealer) taught me everything I needed to know about cars. One week end it was fixing the gear box, following weekend the clutch, then the cam shaft and finally the electrics. Boy were those electrics fun when they got wet. Switch on the head lights and the windsceen wipers started..... Oh boys those were the days!!!!!!!!!!!!!!!!
see http://en.wikipedia.org/wiki/Austin_Allegro
Anyway when do you think the Full Monty will return to the cinema? Perhaps GB will be a stripper in the sequel!
7. shipbuilder said...
There's no such thing as a UK company or Indian company - corporates are blind to borders - that's the point of globalisation, to leverage the discrepancies between the needs, wants, wealth and regulations of different countries. Nothing to do with the trading between nations that Smith envisaged and that we are told globalisation is. The point is that rather than support part of their business themselves, the threat of unemployment will get the cash for them, from us. We essentially beg to keep our jobs.
8. mark wadsworth said...
Commonsense (economic or environmental) says it must be better to buy fewer new cars and keep them on the road for longer.
So every job they 'save' in car manufacturing is a job not created in car repair workshops keeping cars going for twenty rather than ten years on average, plus all the extra pollution caused by building a new car and prematurely scrapping an old one.
9. montesquieu said...
Being purely practical, if this really is a short-term working capital issue then it makes sense to help, so long as it's correctly structured.
The WORST thing that can happen is that we are left with no manufacturing base - regardless of foreign ownership. Let's not forget the majority of these cars go for export.
Far more sensible to spend money on this than prop up fat cat RBS & HBOS boards.
10. Real Labour said...
This is a labour party, if we must spend then bloody well spend !! Invest! invest in the people, jobs and infrastructure, invest for the future. Update the railways, build the fast links. Build social housing. Build the new Thames airport. Update sea defences. Build new nuclear power stations. Stop messing around, show the people you have vision to take on projects that will benefit all when this recession ends. Show then you have confidence in the workers of this country...
11. goweresque said...
So we (the taxpayers) are going to lend (any guess on the likelihood of getting it back?) money to the car companies to provide cheap finance to buyers of new cars? So if no one wants to buy cars anyway, this won't actually help much? Basically the demand for cars is falling massively because everyone has already bought new or nearly new cars on credit over the last 5 years and most can extend the life of that car for a good few years yet. Very few people drive old bangers anymore. Its virtually impossible to sell mechanically sound but old cars now. The car industry has used credit to bring forward demand for new cars, and now we have reached the point in time from which they stole those sales in the first place. Ergo no demand for new cars.
12. techieman said...
If no-one wants a house reduce the price .... if no one wants a new car reduce the price. The more money in the economy the more it gravitates to fullfilling wants at higher prices - whether car manufacturers / employees etc. What did the companies do with the money in the "good times"?. I am not saying they are more wrong than the gov but they arent less wrong.
The switch has been flicked.... deal with it!
It misses the point to compare this to the position of the banks. "Credit = lifeblood oh industry" - yawn!
13. Notbuyingoneyet said...
@6
Totally agree
I have never bought a 'brand new' car. I buy vehicles which are about 5 years old, then run them until they fall to bits. Replacing any parts which fail until the cost of repair exceeds the current value of the vehicle. I save on the taxes paid on a new car. I don't borrow to make a purchase but save up. So no finance company or bank will ever benefit. I put a lump sum away every month from my salary to cover the running and replacement cost. I plan to replace the vehicle every 5 years and hopefully will have accumulated enough money in this time to purchase another when it is required. This budgeting works for me and generally a vehicle will last me until it is about 10 to 13 years old.
I suppose the only down side is that a 10 year old car may not be as 'green' as a more modern one. However I get my monies worth and believe that I get value for money this way.
14. plato said...
If these companies don't slim down and go over to alternative energy and materials technology they are doomed.
Good points mark wadsworth. The credit crunch will ensure this happens to a large extent.
15. kruador said...
We're not just bailing out an Indian company - we're bailing out Japanese companies. The biggest car manufacturer in the UK is Nissan. (They don't sell well here - 80% of them were exported.) Likewise Toyota (#2) and Honda (#3). At this lowly point, Aston Martin is pretty much our sole representative. Lotus is still owned by Proton of Malaysia.
The top four cars are all American(-owned): the Ford Focus, Vauxhall Astra, Ford Fiesta and Vauxhall Corsa. The Astra is at least built here (Ellesmere Port). The others are imported: the Focus and Fiesta from Germany, the Corsa largely built in Spain.
16. techieman said...
Kruador so are you suggesting it would be ok to bail out british companies but not uk based foreign branches of overseas companies? Or are you just correcting a previous post?
If the former that smacks of protectionism.
17. thelostdecade said...
Falling demand should mean a reallocation of resources and therefore retraining and/or redundancies - why won't the government accept this simple economic principle?
Have Jaguar and Land Rover tried slashing prices on the forecourts in an attempt ease any liquidity concerns they have?
And for Growler's benefit, the financial sector is contracting, resulting in a lot of people losing their jobs, and not everyone working in this sector has been 'gorging' and acting irresponsibly.
18. Theeggman said...
As far as I see it the car industry has been ripping us off for years, mauufactured in this country cheaper to re import from europe and further afield. Let them all go down the pan. They do not deserve saving.
19. mark said...
tescos will be asking for money soon so they can use it to screw more suppliers into the depths of hell.................
20. cyril said...
Why not retrain the car assembly workers to build all the new houses that Gordon Brown says we need? (You remember - small island, rising population etc)
21. troy said...
this seems relevant :-
under the existing monetary system the money that is borrowed by the Government today will become a debt inherited by posterity.
So that when you hear or read of someone pleading with the Government for money to improve a school, to fund an essential medical service, to subsidise your local council or to give aid anywhere in the world, you should know that the cost will be handed down to our great grandchildren.
That is the way things are under the existing monetary system.
We owe some £660,000,000,000,000 to the banks.
One of our senior statesmen tried to reassure us by stating on the radio during my breakfast "When the figures get big enough they get meaningless". The second definition of a billion in Webster's College Dictionary is "any vaguely large number".
We are sort of lulled by the enormity of the problem into believing it is not real and need not be taken seriously.
But the fact is that we live on credit with no possibility of getting out of debt. We pay some £33,000,000,000,000 per annum as interest on that debt, more than we spend on health or defence and that money comes out of our pay packet as taxation.
With that amount of interest to be paid on debt we can calculate that every man, woman and child in this country, owes £10,000,000. You would each and every one of you, have to win at least one good sized lottery in order to pay it off.
http://www.monetaryreform.org/money/pg1.htm
22. 51ck-6-51x said...
^^ Nonsense. Little point putting forward any rational argument it seems however.
23. icarus said...
The Lord of Darkness talks of "fundamentally sound companies". Grant Bovey talks of "unmaterialised profits". Are they related?
troy - £660 trillion? A stack of £50 notes 80 inches high = £1 million. The stack would have to be a almost a million miles high to make £660 trillion.
24. troy said...
5ick ~~~ oh yes there is ~~~ it's pantomime season.
icarus ~~~ exactly, there lies the problem.