Keeping the Bubble Inflated?

MrFonzerelli

The subsidisation of Foreign car manufacturing is equivalent to dumping. Dumping allows an industry to unfairly (IMO) reach an efficiency of scale.
The UK based car industry needs a level playing field. That's all.

mewbie_2

Thrugelmir wrote: »

There are lots of UK Companies struggling to pay their bills. So why should foreign owned companies receive bail outs?

Er because they employ British workers. Who pay tax and shop in British shops.

MyLastFiver

products that we will be buying again once things pick up?

You see, this is my point. High levels of consumer spending have been due to a boom in cheap credit over the last decade. There is no more cheap credit, nor is there likely to be for a very long time.

It's not just about re-capitalizing the banks either. Even once there is readily-available credit again, people won't be taking it. People in the UK are at their credit limit, literally and metaphorically speaking. They need to pay down huge amounts of existing debt before they will be borrowing again in any quantity.

This is a permanent paradigm shift; a black swan. Things are not going to go back to what they were like in 2007; at least not for a very long time.



PS Rochdale Pioneer don't think I'm getting at you - I usually agree with you and this is all in the spirit of debate.
PPS I've never used the phrase "paradigm shift" before but I think it fits here

nickmason

MrFonzerelli wrote: »

The UK needs to ensure our high tech, high value add industries are competitive with those abroad. If other countries are subsidising the high tech industries in their countries with bailouts, I would argue that we should consider doing the same (with strings attached).

Once upon a time, wasn't subsidising industry illegal under EU competition rules? I'm shooting from the hip here, but I remember a few years back lots of complaints about the French subsidising industries, allowing them to undercut "open market" firms.

Does anyone know the answer?

piggeh

Wookster wrote: »

You are still missing the point: as Thrugelmir pointed out above there is estimated to be 20-30% over capacity globally. Somewhere in the world, someone 'bailing out' their car plants is pouring money into a black hole because the demand for that many vehicles just is there and won't be there, even when we see the seeds of recovery.

Would you like your money thrown down a black hole?

I agree to a point. However, the reduction in capacity is now being allocated to other manufacturing - stuff that was outsourced previously. For example, Eastern European manufacturer awarded orders to manufacture parts for automotive parts supplier. Automotive parts supplier sees reduction in orders and has plant space, labour etc, sitting around doing next to nothing. On the other hand, they have suppliers who are in increasingly precarious positions with tooling which they need to have available (normally this is owned by OEMs or the larger automotive parts suppliers so that if suppliers go bust then they can quickly move production).

So, tooling is being taken out of Eastern European manufacturers and production in-sourced into the UK again. This all costs money in the meanwhile of course, lots of money (on some custom plant equipment for example). It's also happening at a time when there isn't much money available, so these plants will need bridging loans and other finance to plug the gaps. However, come out the other side and the British manufacturing industry will again be near capacity (and thus, profitable) because they've in-sourced work and because those countries which don't support Automotive industries will now need their work sourcing as well and the UK will be in prime position to benefit, especially if the pound continues to be at the current rates.

The above is a real life example but not naming names.

The point is that the black holes are not necessarily being created within the UK. There's quite a lot of business that's been sent to Eastern Europe over the last few years which will probably now find it's way back into the UK manufacturing base, so the black hole in those cases is actually in Eastern Europe.

Wookster

piggeh wrote: »

So, tooling is being taken out of Eastern European manufacturers and production in-sourced into the UK again. This all costs money in the meanwhile of course, lots of money (on some custom plant equipment for example). It's also happening at a time when there isn't much money available, so these plants will need bridging loans and other finance to plug the gaps. However, come out the other side and the British manufacturing industry will again be near capacity (and thus, profitable) because they've in-sourced work and because those countries which don't support Automotive industries will now need their work sourcing as well and the UK will be in prime position to benefit, especially if the pound continues to be at the current rates.

Interesting read and good to see that creative solutions are being sought. I still simply don't believe that the government is better placed than the private sector to decide who lives and who dies.

Its not the fittest who survive, but those best able to adapt.

mr.broderick

MyLastFiver wrote: »

Forgive me if this has been discussed before.

Does anyone else feel uncomfortable with the idea of the government propping up private supply-side institutions such as car plants?

The reason I'm uncomfortable is the assumption that the drop-off in consumer demand is only temporary and, some time next year or so, we'll all be consuming and getting ourselves into debt just as much as we ever did. Because I'm not sure that's the case at all, or even if it's desirable.

Generally speaking, we have gorged ourselves on consumer goods for the last decade or so. We do not need a new car every 3 years, nor do we need the finance packages that lock us into such patterns of consumption.

I realise that a lot of people's jobs are at stake, but continuing to pay people to make cars that nobody is going to buy is just not sustainable.

Anyone?

Nice post, can i just ask if your hubbie/wife worked in the car industry would you have posted this?

mr.broderick

dopester wrote: »

New car prices are too high, in my opinion, for prevailing economic conditions. Yes there is "demand", but people who can't afford new car prices, can't get credit, or won't spend or take on debt to buy over-valued items.

It won't last because there will be new challengers, and new innovation, who will adapt to what the market needs.

Challengers might be fewer on that ground than in other sectors due to high capital costs, but not impossible - or it may come from an existing manufacturer who drops prices and goes for market share. Or businesses who overhaul older cars to near perfect new working condition for a lot less money than buying new. The market will find a way - but helped if governments don't tip the advantage in supporting failing businesses and business models.

Dopester i really like you but do you actually believe what you have posted above?

experience08

mr.broderick wrote: »

Nice post, can i just ask if your hubbie/wife worked in the car industry would you have posted this?

What a STUPID post....read what "MyLastFiver" wrote.

experience08

mr.broderick wrote: »

Dopester i really like you but do you actually believe what you have posted above?

Listen pal, get out of the car trade and into the bicycle trade...there will be a future there for you.