Industry Scuttlebutt

Costa Rica is the hot spot these days for the medical machining business. With the free trade agreement with Central America, medical companies are ignoring Puerto Rico, which has become increasingly uncomfortable with crime, and heading to the beautiful little country with two ocean coasts. San Jose is an easy plane ride from Miami or Dallas and the political climate is benign. On medical or dental products the airfreight is tiny versus the value added.

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I’m such a sucker for underdog sports stories; I think I have a Rudy complex. But Jeremy Lin – you gotta love it.

Because I spend a lot of time in Palo Alto, California, the Lin story has special meaning. The kid went to Palo Alto High School, across from the Peet’s Coffee I often frequent when I’m visiting my daughter. I used to read about him in the local paper. I’ve become a Stanford fan over the years and the real Linsanity is that Stanford did not offer Lin a scholarship. They had a nice player in Landry Fields, who in a quirk of fate is starting for the New York Knicks alongside Lin. If Lin had gone to Stanford (he could have walked to school) there is a good chance the Cardinal would have been a Final Four team. They certainly would have been better than Butler on paper. But Stanford thought Lin wasn’t good enough for the Pac 10, so he took his only other offer – Harvard – and made All-Ivy League twice.

I think big time sports are a lot like online dating. People look for a profile, a set of qualifications, a scouting report like the old scouts in Moneyball. So a Steve Nash gets overlooked coming out of high school in Vancouver and goes to Santa Clara, because who wants a Canadian soccer player to play point guard? For the pro scouts, a Chinese kid who went to Harvard was so contrary to the profile of a typical NBA guard that they just couldn’t fathom the fact that Lin had game.

Will they ever learn?

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The Michigan Republican Primary has put the spotlight on the GM–Chrysler bailout. The Republican candidates have been amazingly tone deaf in denouncing the emergency measure to conform to Tea Party orthodoxy. C’mon guys. As unpalatable as it was to inject taxpayer money, the sad fact is that the infrastructure of suppliers that so many of us are part of could have crumbled if the bailout had not occurred. Banks were so shaky and paranoid at the time that few would have stepped up, and everybody including Ford would have been in jeopardy.

The rapid rebound of the Big Three should be applauded. The success of the Chevy Cruze and the Jeep Grand Cherokee is a wonderful thing, and the leadership of these companies has done a terrific job. And from what I hear from suppliers the relationship with the Big Three is more businesslike than it has been since the awful Ignacio Lopez era began.

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The new Charles Murray book The Great Divide is one of the most important works on American life in years. Jerry Levine will be reviewing the book for TMW shortly. It discusses how America has changed over the last 50 years with the rich getting richer and the poor and middle class losing ground. This is not an Occupy rant, but a clear-eyed look at how changing social more`s and educational choices have produced a chasm in the country. It should be the topic of debates in the coming election. Unfortunately, so far the Republicans are looking backward at auto bailouts, and Obama is sending outrageous budgets to Congress that he knows are dead on arrival. Let us hope we see and hear a realistic argument about issues in the real Presidential campaign.

Question: Three years after the auto bailout, do you think it was the right decision?

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19 thoughts on “Industry Scuttlebutt

  1. AvatarDaniel Richter

    They should have been allowed to go through bankrupcy without the government’s help (as should have the banks and Wall St.). The bondholders got screwed under threat from Obama (gotta love Chicago thuggary style politics), the Unions made got re-paid handily for their support of Obama, and as usual, the taxpayers foot the bill.

     
  2. AvatarNick

    Daniel is spot on. Let Chevy and Chrysler go through bankruptcy. This was a massive payoff to the unions. Had the workers not been union members Obama would had let them fail.
    The auto industry should not be considered too big too fail. They are an industry like every other industry and should have to play by the same rules. The government should not be bailing out ANY industry (banks, auto, aerospace, etc.)
    Also, do not think for one second that GM or Chrysler is in the clear. They will go through this again. The government can not run anything efficiently; never has, never will.
    Ford’s rebound was genuine and had nothing to do with the bailout. Chevy and Chrysler was propped up by us taxpayers. The government loaned GM money and then bought stake in GM (with more taxpayers dollars), GM took that money and “paid back” the initial loan. The whole thing is a farce.

     
  3. AvatarBob B

    Lloyd – I really enjoy your blog. Keep it up.
    I live in the Detroiit area and still think that the auto bail-out was wrong. The backruptcy process enables companies restructure in the way that makes sense for the industry. I believe that both GM and Chrysler would have come out stronger for it. The bail-out was tainted by too many politically motivated rule changes.

     
  4. AvatarSteve M

    The bailout was a bad idea from the get go and all it really showed us is how big business, unions and the government all came together to screw the public. Do you think that any small business in this country would or could be given such a handout at taxpayers expense? The answer is no, and nor should they or any other business including automotive. Back in the 80’s when Chrysler went begging the first time for a bail-out, they should’ve been told no then. And now GM has the nerve to hand out bonuses to the workers when they’ve not even paid back the taxpayers bail-out money yet. Kind of tells us all what they really think of the general public doesn’t it.
    As for the price of their cars, well in my opinion these automotive clowns haven’t learned a thing. The prices are high and have remained that way throughout the downturn and are going higher to pay the ridiculous salaries,wages and bonuses. After all if they can’t make money selling cars we’ll just bail them out again. What a crock.

     
  5. AvatarDomingo E. Mojica

    I visited Costa Rica last March to see the “Best” CNC machining house there. If they were the best, I don’t wish to visit the the one that came in second. They were trying to hold +/-.0001″ on parts in a dirty, under-lighted, non AC-room, with floors that has not seen a mop in years. No way were they holding even +/-.001″ tol. that our parts. Before, I left all the parts were pull out of there and back in our USA suppliers. Oh, we were saving 10% going over there with these 12 different parts and it cost us $10 of thousands with rework and parts that were then rush to get done here!

    The country is great to go on vacation, but machining is still 30/40 years behind.

     
  6. AvatarRay Frattone

    I agree with all of the above. It was the wrong thing to do: It was just buying votes and another taxpayer giveaway.

     
  7. AvatarNick Bloom

    In October 2010 I grudgingly supported the bailout for three reasons:
    1) The bailout had a decent chance to succeed.
    2) Failure of the auto industry would have dramatically increased unemployment (and cost to the government/taxpayer) and the cost of industry made products to consumers.
    3) At a time when manufacturing was already experiencing a devastating downturn, further damage to the auto-related manufacturing infrastructure would have inflicted a much deeper wound that would have substantially muted the manufacturing turnaround that we’re seeing now (and desperately need). And a severely weakened manufacturing base would have threatened our national security.
    Today, I am convinced the bailout was the right course at the time and has proven to be an overwhelming success. We taxpayers are far better off as a result.

     
  8. AvatarMike Richards

    The bailout prevented the market from making its normal correction. I think the company is still in trouble, with huge union-related costs. So it is a zombie corporation that will most likely wind down its U.S. manufacturing.

     
  9. AvatarScott Carpenter Sr

    Every one is correct with the exception of Mr. Nick Bloom. I will never again purchase a GM or Chrysler, even though, I have purchased many in the past. I am a Ford. Toyota, Hyundai, guy etc…for the rest of my days.

     
  10. AvatarLarry G

    To the victor go the spoils, FORD. Oops guess not, Obama gave the spoils to the unions. It’s a myth that the bankruptcy of GM and Crysler would have spread like cancer through the suppliers. Had the normal processes be allowed to take place, American auto manufactures would have sold exactly the same number of vechiles, demand would not have changed. Now instead of cleaning up the union control of the industry, because of Obama, Ford must continue to deal with these asses (liberals and unions).

     
  11. AvatarDomingo E. Mojica

    Oh, one other thing, we all went to dinner the second night, and between themselves, they started asking, in Spanish, if it was time to discuss “Gift$”. Unknown to any of them I understand Spanish. They were surprise when I told them, in Spanish, that we were not interested in discussing this subject.

     
  12. AvatarSteve Horn

    I am pleased to read all the positive responses to capitalism. Anyone can make a profit when the creditors are told to get lost by the government. What is amazing is that most of the people thought it was fine to steal from the creditors (bond holders). I have been purchasing GM products and we’ll see if the quality remains good or goes down with the Unions running it. BTW Chysler isn’t a foreign controlled company, so in fact we bailed out Fiat. From the adds on TV I’d say they are now using that bailout money to grab a market share in this country. It was a crooked thing to do and will have consequences long into the future.

     
  13. AvatarJerry Johnson

    Bail Outs are BS. Just another Obama control mechanism. Somebody should teach hm free market economics.

    LLoyd, I have a question for you. Why do the Jews continue to support Obama when he is hell bent on the destruction of the State of Isreal?

     
  14. Lloyd GraffLloyd Graff

    Hi Jerry,

    Jewish support for Obama is waning because of Israel policy and the economy, but the stance of the Republican candidates on social issues and immigration is scary to most of my Jewish friends. For me Israel is an Obama negative, the economy should be an Obama negative but the Republican stance on taxes seems silly on the very rich. I am annoyed by the obstructionism of Congress and lame brained policies of Obama on the Keystone pipeline and natural gas .

    Romney is a losing candidate. Sanatorium is interesting because he actually has passionate beliefs even if I don’t completely agree with him. I actually would like to see Obama vs Santorum but Santorum must take Jeremy Lin as his Vice President.

     
  15. AvatarCar part guy

    Opponents of the auto bailout – name one private institution who could or would have stepped in at that time. Bain Capital? They passed. Name one part of the US supply base that would have stayed open and could have been reopened to start rebuilding within a year or two? Ask yourselves why heads of the other US and import firms said “Please extend them the money right now, and keep the lines of credit open for us as well.” Go onto CNBC or other video streams and watch them, to this day, back what occurred.

     
  16. AvatarTerd Ferguson

    WASHINGTON (AP) — President Barack Obama is proposing to cut the corporate tax rate from 35 percent to 28 percent and wants an even lower effective rate for manufacturers, a senior administration official says, as the White House lays down an election-year marker in the debate over tax policy.

    OMG He’s out to destroy the country !!

    P.S. to all of you who still think the bailout was a bad Idea even though it was actually a resounding success. The Dow might still be below 10000 and unemployment would still be in double digits. I may also remind you that TARP was started under the Bush administration, the same radical conservatives that started a very expensive war on two fronts.

     
  17. AvatarJACK FROST

    Great comments with the effectivity of a thimble of water in a desert. We can feel satisfied with our mutual agreement that Obama screwed up the recovery, but what we think and say will have little affect on the gen-exers and mileniums who would rather have “job benefits” than “jobs.” We can’t off-set the publicity of the free-loaders of the “Occupy Cult” or the more insidious “Cheer-Leaders” on nightly news. When you are drenched in the phoney Americanism and Buy America as a solution to our economy it is difficult to convince the grabbers that they have it wrong. I am amused when something favorable is reported in the news, Diane Sawyer reports it like she has just been goosed. The histrionics are effective. BTW. Were any of the automobile producers in the sun-belt bailed out.

     
  18. AvatarFrank

    The bailout was the right thing to do. As it was when president Carter bailed out Chrysler and Boeing. The main purpose of government is to provide for the common welfare. This is an effective, cost efficient and strategically correct method of doing that. To do otherwise would have produced massive disruption in the nation. Unemployment claims would have skyrocketed, uninsured medical claims as well, both of which are more expensive than the bailout, most of which was paid back, so the impact upon taxpayers has actually been quite minimal.

     
  19. AvatarJim

    I agree with all the capitalists in the group. The only reason autos are selling is because of cash for clunkers. Only because of the government working well with the unions to create artificial demand and ya, that little detail of taking advantage of shareholders and creditors which created “government biased”/union protectionism did this all work. Fair market place? Oh yes, since the problems really haven’t been resolved, defined benefit plans, wages based on work being done right, this auto story will deteriorate in the short future, failure then will be mediated by the press that it will have happened and is because a republican will replaced OBAMA and oh yeah, it’s almost all Bush’s fault.

     

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