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.

No Comments

Leave a Reply

Your email is never shared.Required fields are marked *