Reply #16: GM sells more cars out of North America than in

[Psephos]

GM uses the profits it makes globally to subsidize its money-losing North American operations. It's nearly impossible to profitably market cars globally that carry the additional cost burden of North American manufacture, and GM has shown it doesn't have the answer to that problem.

This is tough to understand at first, but consider that the competition that actually determines the future of North American car manufacturing is not between car companies, but between their workers. Globalization's strongest effects are upon workers who were formerly insulated by national boundaries and obsolete logistical constraints. A typical UAW autoworker is making $60 or $70 an hour (including benefits and future obligations). His global counterparts make half that (Japan) or a fourth that (Korea) or a tenth that (China). The math is not difficult, and it leads inexorably to an uncomfortable political realization.

Meanwhile, it makes no financial or logistical sense to build cars in North America for the Chinese market. Because of North American production costs, no one there could afford them if they were available, and they aren't generally available anyway, because the Chinese market is not open. The government protects that market with major tariffs and regulations. The only entry is through local partnership, by building domestic car plants to produce local product. It's a Hobbesian choice for car companies, because the potential Chinese market is Earth's largest. So they suck up and do what they're told for now, so that they can keep a foot in the door for the future. That's why GM is building plants in China. The cars produced there will not be sold here.

I don't see much of a future for American car builders stuck with old cost structures.