Stuart Loory, Lee Hills Chair in Free-Press Studies, MU School of Journalism: The American steel and clothing industry have long since moved overseas, and so has the electronics industry. Now, General Motors and Chrysler have gone into bankruptcy. The largest bank in Russia will become a stockholder in GM’s overseas operations. This year, GM lost its place as the world’s largest auto manufacturer to Toyota of Japan. The U.S. government is pouring billions of dollars into relieving the crisis and is becoming a major stockholder in the industry that was capitalism’s model. This homegrown crisis has again shaken up the economic system throughout the world. Will the restructuring of the American automobile industry re-establish supremacy in the auto market at home and abroad?
Sarah Webster, automotive editor, Detroit Free Press, Detroit: It may help make the companies successful again, but thinking that these companies might dominate the marketplace again would be unrealistic. There are far more players in the U.S. market than there used to be — when they had 50 percent of the market. Aside from the Japanese, we now have the Koreans, and we will have Chinese manufacturers here soon.
Loory: GM still does well overseas because it is producing more fuel-efficient cars. Why don’t they bring that technology and design home?
Webster: One reason is gas prices. We have had historically low prices relative to other parts of the world. These prices have not allowed the stability to make the investments required to have those vehicles here. Also, it’s not as easy as packing them up and shipping them over here. We have different rules about how rigid the cars have to be to withstand a certain level of impact. They would have to be retrofitted, making them heavier and less fuel-efficient.
Loory: Canada is now becoming a major player, through a partnership with the Russian Sberbank, in picking up the overseas operations of GM. What are the ambitions Canada and of Magna, the corporation involved?
Tony Van Alphen, business reporter, Toronto Star, Toronto: Magna is the largest parts maker in North America, and third in the world. They have always been able to keep wages just below the industrial average, making them far more competitive. Frank Stronach, chairman and founder of Magna, wants to instill the same culture in Opel and make them more competitive.
Loory: He is in partnership with the largest bank in Russia.
Van Alphen: He likes to spread the risk, but he clearly wants to get into Russia in a big way. The Magna people see Russia, and Eastern Europe, as an emerging market. He is convinced that (Russian Premier Vladimir) Putin and his people want to build a middle class hungry for Opel cars.
Sergei Balashov, staff writer, Russia Profile, Moscow: Sberbank, of which the Russian government owns 60 percent, has confidence that the market is going to grow because market saturation is low. Even though car sales have declined in Russia over the first half of 2009 by 50 percent compared to 2008. They think 4 million cars per year can be sold by 2015. The Russian government has been trying to make its car industry competitive by imposing ridiculously high tariffs on imported cars older than five years.
Loory: On the streets in Moscow, you see few Russian cars compared to BMWs or Mercedes. The Russian people don’t seem to want Russian cars.
Balashov: Russians who can afford to buy a foreign car will never buy a Russian car. Those who can’t afford to buy a foreign car will take the bus. A strong perception in Russia is that whatever is manufactured here isn’t that good, especially the cars. The government is saying the quality has improved, but foreign cars are really still better than anything manufactured in Russia.
Loory: This year, Toyota surpassed GM as the largest automobile manufacturer in the world. Yet, the re-alignment of the industry has to be of some concern in Japan.
Leo Lewis, Tokyo correspondent, The Times of London, Tokyo: The spiral down of GM is not being seen as a victory. Instead, it is causing Japan to ask itself serious questions. Japan’s population, in contrast with every other developed country, is actually shrinking. It is all about how it positions itself in those emerging markets. The battle with GM was simple, but things have become much more complicated with many more competitors.
Loory: Suzuki is the one automobile company in the world showing a really good profit this year.
Lewis: Suzuki has a joint venture in India. They have about 50 percent of the mini-car market, which is huge and growing. Suzuki has done what a lot of Japanese companies have failed to do, including Toyota and Honda, which is to enter the emerging markets early. The game has changed; China, Korea and the re-aligned version of GM will be tough competitors in those emerging markets.
Loory: What will happen with the major manufacturers in Germany?
Andrew Bulkeley, correspondent, The Daily Deal, Berlin: BMW, Mercedes, Porsche, are luxury cars. The people who buy these cars are not as affected by the economic ups and downs as others. Those companies will still be around. Mercedes has been diversifying, making cheaper versions, which are now in America. Volkswagen is the most popular car in Germany, so its fortunes are tied to the German people and not in danger. The one really in danger, and has been for over a decade, is Opel. I don’t see the logic in Magna’s move. Now, VW has a reason to renegotiate supplier contracts with Magna because it is now also a competitor.
Loory: Why did Fiat not get Opel?
Bulkeley: Fiat could not put together an offer quickly enough. Their CEO said he is still interested in it, they have bought part of Chrysler, but he was right to think shareholders would have revolted.
Loory: President Obama says the government doesn’t want to be in the automobile industry, or in the banking industry, but it is now a large owner in both. What does this mean for the American economy?
Webster: The government will not be able to get out of this quickly. We have a competitive downside, related to health care, primarily. Major changes are needed in manufacturing and trade policies, also. By being invested in these companies, they might make smarter policies. A gas tax is political quicksand, but there has to be an incentive for people to buy fuel-efficient vehicles.
Loory: In Germany, high gasoline prices don’t seem to impact car sales, is it because of changes in how they are designed?
Bulkeley: To a certain extent. Europeans don’t have to drive as far as Americans do. Also, the streets are smaller; no one will drive a huge SUV when it can only be used in parts of town, or not at all in Italy.
Loory: Will bikes begin to replace automobiles in this country more, like many parts of Europe?
Webster: Bike riding is definitely on the rise. The Obama Administration’s vision is to have light rail and electric cars, which are desperately needed. Maybe the country can put together a comprehensive transportation plan that makes sense, which includes many types of transportation.
Loory: That doesn’t speak well for the automobile industry.
Lewis: Japan is hoping the technology side will give it the advantage. To give them credit, the companies in Japan were investing in hybrid and electric technologies when GM and others were not.
Webster: GM did have the first electric vehicle sold for the masses. They did invest, but the market was not receptive because gas prices here were so low, and it was not profitable.
Lewis: Japan pushed through the fact that it was not commercial on the expectation that it would be one day.
Loory: The question of whether American economic dominance throughout the world is on the wane also affects the future of its military, political and moral leadership in the world as well.
Producers of Global Journalist are MU journalism graduate students Jared Gassen, Geoff George and Brian Jarvis. The transcriber is Pat Kelley.
Stuart Loory, who holds the Lee Hills Chair in Free-Press Studies at the MU School of Journalism, is the moderator of the weekly radio program “Global Journalist.” It airs at 6:30 p.m. Thursdays on KBIA/91.3 FM or at globaljournalist.org.