Trade, cars and the great recession

Remem­ber the glee with which he com­mit­ted $6 bil­lion of our mon­ey to res­cue the moan­ing motor-vehi­cle mul­ti-nation­als from their mar­ket­ing errors, just ahead of the ‘GFC’? Since the Rudd-Carr plan for motor vehi­cle sub­si­dies was announced, the sector’s exports have tum­bled fur­ther than all oth­ers.

Once we con­trol for [price defla­tion], 56% of the real drop in exports is in motor vehi­cles and cap­i­tal goods. Raw mate­ri­als rep­re­sent anoth­er 24% of the drop.” Fran­cois and Woerz

But the trade-plunge was not the cause of the car mak­ers’ recent woes. The dra­mat­ic fall in ship­ments came after peo­ple stopped buy­ing their over-priced, over­sup­plied vehi­cles.

The drop in motor vehi­cle trade actu­al­ly lags the cor­re­spond­ing drop in US pro­duc­tion. Accord­ing to the BEA, domes­tic pro­duc­tion of cars was down 60% from Feb­ru­ary 2008 to Feb­ru­ary 2009. Over the same peri­od, real exports fell “only” 45%, which is slight­ly bet­ter than the 47% drop from Jan­u­ary 2008 to Jan­u­ary 2009.” Fran­cois and Woerz

The les­son for Carr? Gov­ern­ments have no busi­ness pick­ing indus­tri­al strate­gies on the basis of dog­mat­ic ‘grand visions’ and advice from mates. All too often it’s the mar­ket­ing strat­e­gy that has failed and no amount of pub­lic mon­ey will rem­e­dy that.

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