Re-thinking Foreign Car Makers In The U.S. - How They are Subsidized VS How U.S. - Auto Companies Create Wealth For The U.S.
STATEMENT: Foreign car makers selling cars in the U.S., particularly if they are Japanese, is not a matter of competition with American car makers. It is an attack on the system using American money to help subsidize the companies while also enjoying the support and funds from their own government.
EXPLANATION: American car makers work within the American capitalist system. They may now have federal loans which give the government part ownership, but those loans must be paid back.
Our industry operates differently from the foreign car makers which are heavily involved with their government and with our American state governments wherever they have a car plant. The Japanese car makers receive tax abatements from the states which means the American taxpayers are subsidizing them. The money given to the companies does not have to be repaid. The state on some issues for the plants will pay outright for the costs for the companies.
HISTORY OF AMERICAN CAR MAKERS: The automobile industry and its service to the country won the label "ARSENAL OF DEMOCRACY" during World War II. Today, it is called the National Defense Industry for America.
Detroit Business reports that the American automobile industry has been so successful over the last 100 years that it is the $60 Trillion equation which has been a major role in creating "Main Street" in the U.S. with 7 out of every 10 jobs in the U.S. related to the auto industry. Currently there are one quarter billion registered vehicles in the U.S. Detroit Business also explained that the American auto industry is our National Defense Industry which is absolutely essential for the security of the U.S.
It is essential not only for the ability to turn out vehicles, but guns, bombs, bullets, planes, tanks and whatever we need. The talents of the people running the industry plus the machine tooling and other machines in the industry are essential for making a variety of other products. We must not ship this off shore as we have our machine tool industry and the polymer ejection system. There are some industries and tools which must not be off-shored and must be restricted to American needs and not shared with foreign companies. It is all part of governance of the nation to protect the American people and the nation.
HISTORY OF JAPANESE CAR MAKERS: The car market in Japan was monopolized by the American companies until the passage in Japan of the Automobile Act in 1936 when both Nissan and Toyota were created as official car companies. Shortly after this act was passed General Motors and Ford left Japan as it was gearing up for war. The Japanese car manufacturers were also labeled the munitions industry by the Japanese Ministry of War. Nissan was present in the early 1900's in Manchuria under the guise of its zaibatsu supplying vehicles and other services to the military. It had many businesses attached to it. Today, Nissan/Renault is known for its manufacture of autos as is Toyota. Nissan is 44% owned by the French company Renault which has government ownership.
FOREIGN CAR MAKERS ACTIONS IN U.S.: Both Nissan and Toyota as well as Honda, have excellent treatment in the U.S. from the American government and the state governments. The companies have been in the U.S. long enough that press releases by enthusiastic individuals in the industry claiming they are indigenous to the U.S. or they are American after this time are not so. Nissan has even shared in Federal HUD funds getting the State of Mississippi to set aside 75% of the HUD funds for the State for two years for Nissan's exclusive use. The companies also are supplied with taxpayer abatements for their plants in the manufacturer of their cars. Toyota is postponing a plant in Mississippi outside Tupelo because of the economy but Nissan has a plant in Canton, MS.
SUBSIDIZING FOREIGN CAR MAKERS: There is a serious issue of weakened yen payments made by the Japanese government to its car makers, Nissan, Toyota and Honda. The weakened yen hallows out the American auto industry and is a deliberate policy of the Japanese government.
At a briefing in 2007 for journalists at the National Press Club sponsored by the Automotive Trade Council, the Chief Economist for General Motors, Mustafa Mohatarem stated, "Japan is the second largest economy in the world. It claims to have a market-determined currency. But this is simply not true." He continued "Maintaining an artificially weak yen has been a central, consistent component of Japanese economic policy for more than a decade. First, since 2002, the Japanese government has spent over $400 billion in direct interventions in foreign exchange markets to keep the Yen undervalued.
Then the Japanese government engaged in persistent jawboning and threats to the market to ward off any movement to strengthen the yen. Finally, Japan has pursued an ultra low interest rate policy, which has fueled the dangerous carry trade and maintained pressure keeping the yen low."
In testimony before Congress in 2007, Dr. Mohatarem testified "Japan's policies provided anywhere from a $2,000 to $14,000 cash windfall for each of the 2.2 million vehicles Japan's automakers exported to the U.S. in 2006." "This amounts in total to a more than $13.5 billion annual subsidy on imported vehicles and parts used to assemble vehicles in the U.S.
"This unearned windfall, which is documented in the profit reports of Japan's auto companies, has been a major factor in the success of Japanese auto companies in the U.S. I*t has contributed significantly to the loss of hundreds of thousands of U.S. jobs in our auto and supplier industries; it is a major source of the nation's nearly $90 billion U.S. trade deficit with Japan; and it has contributed to the severe economic decline in my home state of Michigan and in many other communities in America" said Mohatarem. (NOTE: The free port in in Mississippi where products may be imported or exported with no fees also helps contribute to this windfall for Nissan as the port is in the contract for Canton.)
Ford Chief Economist Ellen Hughes-Cromwick discussed the impact of the misaligned yen on U.S. automakers. "The artificially weak yen provides a significant advantage to Japanese automakers and is the one competitiveness issue that is outside the control of our companies. By provided this unearned windfall for Japanese automakers, the artificially weak yen is driving a major export push out of Japan. In fact, last year, Japan exported more than two million automobiles to the U.S. market, while sales of vehicles produced in their U.S. plants declined.
Stephen Collins, President of the Automotive Trade Council wrote in Real Clear Politics that "Few Japanese automotive companies are making any profits in Japan, where demand for new cars has been declining for some time, Toyota, Honda, Nissan and other Japanese automakers earn almost three quarters of their worldwide profits from the U.S. market, with a major portion coming from vehicles they export to the U.S. Some of the vehicles are shipped as parts and assembled in the U.S. thus by passing some of the taxes and fees that would be charged for a fully assembled car upon delivery in the U.S.
U.S. FEDERAL FUNDS TO JAPANESE CAR MAKERS: Nissan Motor Corp received $1.6 billion in loans by the U.S. Department of Energy to enlarge the capacity to make 100,000 more electric cars at their plant in Smyrna, TN. At the same time Nissan presented itself for TALF funds of $1.3 billion from the Federal Reserve. It intends to work another $3 billion under this program.
The funds are to help run the auto business and it is partnering with Enerl's manufacturing arm, EnerDel, and will conduct research at the U.S.'s Argonne National Labs near Chicago. Nissan is also partnering with Oak Ridge National Labs.
NOTE: Nissan's CEO was quick to point fingers at General Motors during the attempted take over of GM for its products and management. Those efforts did not work, but Nissan is quick to take American money, as are other foreign car makers and then complain because Congress wants to restrict the sale of a military fleet to American car makers.
The U.S. is a sovereign government and we have the right to build up the American National Defense Industry. War reparations are long gone and we are under no current obligation in the U.S. to finance Japanese car makers at they take American taxpayers funds for periods of 25 to 30 years, plus work the same deals for their suppliers to the detriment of the Native American car industry.
The people the Japanese employ in Canton, MS plant have 4% of their taxes for working for Nissan paid to Nissan in a kick back by the State to the company. The same arrangement goes for their suppliers. American companies do not receive kick backs on the taxes paid by employees to the states and federal government.
This raises the question of how you treat a company receiving federal funds when they have broken the laws of the United States. Nissan retitled illegally a fleet of over 50 cars and rolled back the odometers then returned them into commerce in over 16 states. The number of frauds and criminal offenses are for a court to decide. When you do take money from a state you must sign an agreement to comply with all Federal, State, County and City laws and regulations. How can you sign such an agreement when such an act has been committed with no Statute of Limitations.
The American automobile manufacturers have not engaged in such practices. With one quarter billion registered vehicles in the United States we must be accurate and very precise in the law. That is why titles and odometers and VIN numbers are so important in this industry. The foreign companies come to the United States because of the market.
CONCLUSION: The difference between the Japanese and American automobile companies is one of the economies in which we deal. One country has a deliberately weakened yen to drive an advantage for their companies. Another, the U.S. has their companies operate in the free market economy.
One has their company ignore the law and retitle cars and roll back the odometers. They also ship in parts and assemble them as cars thus avoiding the taxes. In addition the CEO of the company went all over Europe meeting with heads of organizations and States so there would be no help for General Motors. In this country that company, Nissan is quick to ask and take American taxpayers and the Federal Reserves money.
It is time for them to play by the rules in the U.S. instead of expecting special privileges and writing their own rules. Americans are very irritated with this particularly in this economic climate.