The political everybody has an opinion not based in fact pundit world is ablaze over a new Romney ad claiming Chrysler is planning on building a plant in China and making Jeeps there. The ad references this Bloomberg article, from October 22nd, which reports Fiat, the majority shareholder in Chrysler, wants to move some production to China.
Fiat SpA (F), majority owner of Chrysler Group LLC, plans to return Jeep output to China and may eventually make all of its models in that country, according to the head of both automakers’ operations in the region.
Fiat is in “very detailed conversations” with its Chinese partner, Guangzhou Automobile Group Co. (2238), about making Jeeps in the world’s largest auto market, said Mike Manley, chief operating officer of Fiat and Chrysler in Asia. Chrysler hasn’t built Jeeps there since before Fiat took control in 2009
Because Romney called out the auto manufacturers offshore outsourcing and used the above Bloomberg article, the Obama campaign went on the attack. In response the Romney campaign went all in and is standing by their ad. No surprise then, the Chrysler CEO came out and said the ad is flat out false. Yet....watch the words closely...
We are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world’s largest auto market, in order to satisfy local market demand, which would not otherwise be accessible. Chrysler Group is interested in expanding the customer base for our award-winning Jeep vehicles, which can only be done by establishing local production.
Now the thing to notice is the claim Fiat, aka Chrysler must manufacture local to sell in China. Notice how they are not going to export to China from the U.S. That is in part, a direct demand from China in order to obtain access to their markets. Companies are often forced to manufacture in China by their policies. Last December China slapped a 22% tariff on large autos, of which a Jeep would be classified. Now the Obama administration did recently file a WTO complaint against China, but on auto parts, not China's tariffs on autos & trucks. The other thing to notice is the Bloomberg quotes are from Fiat, the parent or controlling shareholder company of Chrysler. Chrysler make do one thing, but in spite of the massive investment in plants, physical advanced manufacturing, the decision to move to China would actually be the majority shareholder, Fiat.
We also have a former Chrysler CEO step into the fray and is all up in it on Romney. He's upset, not because the ad is lying, but because he doesn't want the U.S. government telling corporations that they should hire the citizens of the nation. Isn't that nice, especially considering all of the corporate welfare U.S. taxpayers give to these firms?
Most of us know jobs are tradable and there has been massive job losses in manufacturing, in particular durable goods. The United States has lost millions of jobs and manufacturing to China and yet the Obama administration will not label China a currency manipulator.
While Chrysler is manufacturing in the U.S. and will continue to do so, the real story is those Jeeps manufactured in the United States will be for the U.S. domestic market, not for export to China. This does mean less jobs for Americans, at minimum.
We also know corporations hate for the public to know about their offshore outsourcing activities and plans. Surprise, it's bad public relations and they go to extreme ends to hide even their headcount abroad. Corporations even force the government to sign non-disclosure and confidentiality agreements just to obtain even payroll data. All of this is so corporations do not have to disclose their offshore outsourcing of plants and jobs, even though most are publicly traded companies.
It is no small wonder then, Chrysler would deny this is going to happen. That may even be true, after all Chrysler is heavily invested in plants and production in the U.S. Yet we know, all to well, the history of the U.S. auto industry is to move plants, manufacturing and jobs offshore as is true in many manufacturing sectors. Million dollar facilities have been shuttered, the equipment sold at auction or shipped to, you guessed it, China for a manufacturing facility there.
GM just announced Q3 quarterly earnings and notice the increase in Asia:
GM's international operations unit -- which includes China, South Korea and Australia -- posted an operational profit up 89% to $689 million. The South American unit turned to a profit of $114 million from a loss of $44 million a year ago as GM began rolling out a batch of new products.
U.S. auto companies are frothing at the mouth to get access to 1.4 billion people who potentially want to buy cars and these multinational corporations will trade jobs to do it.
Let's go back in history to the auto bail out. At that time, it was widely announced GM was offshore outsourcing jobs.
People fail to remember, but Bush actually started the auto bail out. We actually were here, strongly in favor of bailing out the auto industry and writing many articles to that effect.
We all know the auto bail out demanded concessions from unions. Chrysler turned around and hired Indian offshore outsourcer TATA in a $120 million contract deal. So, let's get real, Chrysler is offshore outsourcing and bringing in foreign guest workers to displace American ones.
Treasury exited from the Chrysler bail out to the tune of a $1.3 billion dollar loss. As soon as Fiat moved in on Chrysler, the worker squeeze started in earnest. When Chrysler entered bankruptcy, a few unsecured creditors, bond holders made out like bandits on the deal where a host of pension trusts sued due to the 29¢ on the dollar agreement. Today GM and Chrysler pension funds for the UAW are seriously underfunded and often referred to as a hidden time bomb.
What isn't realized is the Obama administration also squeezed on workers for Chrysler, by demanding their decimate their health care promises for retirees. Also what seems to be forgotten is during the auto bail outs, GM was outsourcing like mad and invested in Brazil.
One of the most underreported stories was Delphi Automotive, an auto parts manufacturer, with plants in places like Kokomo, Indiana. Delphi was part of the bail out as some of it was eventually purchased by GM. Hedge fund managers made out like bandits on government money as they shipped most of the Kokomo, Indiana jobs to China and took most of the pensions of salaried workers by dumping underfunded pensions onto the federal PBGC. The PBGC is a kind of a government, our pensions are bankrupt really fund. Now these hedge funds have been attempted to be connected to Romney, but that's ridiculous for Romney's investments, as well as his wife's are and were in a blind trust at that time. A blind trust means one has no involvement or awareness on how those funds in that trust are invested. While we can blame some rogue hedge funds that the trustee, managing the Romney's blind trust, did invest in, how those hedge funds were allowed to hold a managed bankruptcy hostage, for profit, or make billions in a glorified government bailout is another issue that never gets addressed. What we do know is team Obama knew all about these investors and nothing stopped them from raping and pillaging the salaried workers at Delphi. In fact the workers themselves blame the Obama Administration.
On the other hand, Chrysler's government and Obama's stimulus funds did get some automotive manufacturing jobs back in Kokomo, which is the good news generally on the very necessary auto bail out.
The bottom line is we don't know which is worser for the U.S. worker, Obama or Romney. We do know that the U.S. auto industry had to be saved, if it had not been we really would have seen a economic depression. We also know Elliott Management, the hedge fund involved with the Delphi bankruptcy, is a notorious bad boy, squeezing nations by holding their sovereign debt and demanding sweet deals, all to wrangle maximum profit from the vulnerable. On the other hand, we also know Obama has offshore outsourcers in his administration and certain never did anything about NAFTA, as promised in his 2008 campaign or has done anything to stop the mass exodus of jobs to China. Both Obama and Romney are promising more bad trade deals, more foreign guest workers and more offshore outsourcing.
We also suspect Bloomberg's quote from Fiat is probably right. After all, the auto industry has been outsourcing jobs for decades, moving entire manufacturing plants abroad. The job hemorrhage started in earnest with the bad trade agreement NAFTA and the flight of industry to Mexico. The decimation of Flint, Michigan was the subject of Michael Moore's documentary, Roger & Me. We don't see why this time would be different from all of the other times where the auto industry is bailed out and says thank you by layoffs and moving jobs abroad. After all, no matter which party is in the White House or controls Congress, nothing stops our Benedict Arnold corporate culture.