This is not an abstract public policy issue for me by any means. After all, the three vehicles that our family currently owns are from each one of these manufacturers—Ford Focus, Saturn Vue, and Jeep Cherokee. We have also owned a Ford Taurus and a Saturn station-wagon in the past. The only “non-American” vehicle we have ever had was a Nissan Sentra.
It is not that we were implementing a “buy American” policy at home. It just so happens that the vehicles we bought met our preferences and budget constraints. Earlier today, when I took my Saturn Vue to the dealership for the regular oil change, I began to wonder whether the brand will even exist anymore. News reports suggest that General Motors is planning to sell the division, or merge it with another division. Even worse is the possibility that Saturn might be completely shuttered down.
On the one hand, the public policy person in me prefers inefficient economic enterprises to fade away without government intervention. I think about PanAm, which symbolized air travel when I was a kid. It has been almost two decades since PanAm closed down when it could not survive in a highly competitive global travel industry. It is the law of the jungle, so to say, where inefficient businesses lose out to efficient ones. In order to preempt a PanAm-like story, the auto manufacturers should have been watchful, and could have avoided the strategic errors they made, especially during the cash-flush decade from the mid-1990s when SUVs and minivans delivered billions of profits.
But, on the other hand, I recognize that government actively intervenes in practically every aspect of our economy. Heck, even my home is partly underwritten by the government, which permits us to write-off the interest paid on the mortgage loan. Thus, if many other industries can be subsidized or bailed out, well, why not help out Saturn and its loyal and committed employees? It is a tough question that can be an easy one only for dogmatic ideologues.
Even as policymakers try to figure out the current auto industry crisis, we might want to understand a few longer term trends as well. “Planes, Trains and Automobiles” was a holiday season movie two decades ago; these same American manufacturing industries listed in the title have also been in decline. Trains, for all purposes, have been relegated to history. The automobile industry is in a pickle—some might argue that it has been in denial since the energy crisis in the 1970s.
And not everything is well with the aviation industry either—both in the manufacturing of planes, and in passenger transportation. Boeing was the undisputed champ in its field, perhaps even more powerfully than the American “Big Three” auto manufacturers ever were. Slowly but steadily Boeing has been losing its market share to other aircraft manufacturers. Twenty years ago, in 1988, Airbus had barely 16 percent of the market and now it is nearly on par with Boeing in terms of the value of aircrafts delivered.
Meanwhile, Brazil and Canada have become active in the manufacturing of short-haul jets. China is the latest entry into this—last month, the Commercial Aircraft Corporation of China announced the sale of five of its ARJ21s (Advanced Regional Jets for the 21st Century) to General Electric’s aircraft leasing division, with an option for 20 additional aircrafts. The ARJ21 and other larger jets to be manufactured by CACC by 2020 are essentially China’s effort to crack the aircraft market dominated by Boeing and Airbus.
Over the last few years, we have come to realize that anything we do can be done cheaper in China. This means that, if we don’t watch out, here in the Pacific Northwest we could be worrying about Boeing twenty years from now, similar to the worries over General Motors today.
Therefore, even as we try to mitigate the woes of the auto industry, and even as the manufacturers begin to articulate a long-term survival strategy, I hope we will learn one important lesson—global economic competition is real, and will only get more intense than ever before. If we don’t get that lesson, another bottom line awaits us: history does repeat.
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