McConnell: What’s Good for Toyota is Good for America Kentucky
GOP Senate Leader Mitch McConnell’s not so concerned about the death of the US auto industry because Japanese companies make cars in his state:
“We also have other auto manufacturers who are doing quite well,” McConnell said, naming Toyota’s Georgetown, Ky., operation. “It happens not to be American companies and that is sad. But it’s not like we don’t have success in the auto industry. We do.”
Note that Toyota, while in better financial shape than General Motors, is not in fact doing so hot. Here’s the share price:
I don’t think I’m quite ready to go the full John Judis in terms of economic nationalism here. But it’s pretty aggravating to see these Dixie conservatives who obviously have a parochial stake in letting the Michigan-based firms die off popping up all across the media without the coverage even reflecting that fact. Whenever you see Carl Levin or Debbie Stabenow on television or quoted in the papers, it’s made clear that their views aren’t just stuff they thought up one afternoon — they’re trying to represent the interests of their constituents. But people need to understand that Bob Corker and Richard Shelby and Mitch McConnell all have equal and opposite parochial interests pushed in the other direction — if Detroit folds, then that’s way more market share for Japanese-owned, non-union factories in their home states.
57 Responses to “McConnell: What’s Good for Toyota is Good for America Kentucky”
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December 5th, 2008 at 1:23 pm
And, also, these are states which certainly believed in their non-free-market ability to provide hundreds of millions of dollars’ worth of government- or government-arranged incentives to locate in their states in the first place.
December 5th, 2008 at 1:24 pm
these Dixie conservatives who obviously have a parochial stake in letting the Michigan-based firms die off popping up all across the media without the coverage even reflecting that fact.
Love to see the plus/minus of federal funds for MI vs. the same for the South (and particularly the Deep South) over any reasonable length of time. I don’t know why regionalism never comes up except when bashing the Effete Coasts.
December 5th, 2008 at 1:24 pm
“But it’s pretty aggravating to see these Dixie conservatives who obviously have a parochial stake in letting the Michigan-based firms die off popping up all across the media without the coverage even reflecting that fact.”
Of course, trying to bankrupt the Big Three is a two-fer for Dixie Republicans.
Not only would it help their own local auto industries, but it’d also be a stake through the heart of unionized labor in the auto industry, which cheers Republicans and Matt Yglesias.
December 5th, 2008 at 1:33 pm
It seems like only yesterday that Matt was arguing that the collapse of the Big Three would lower wages in the non-union factories as well. But actually, that was two days ago. McConnell sure knows how to serve his constituents – by lowering their wages, apparently.
Also, while you can point to a falling Toyota stock price as evidence that it isn’t doing well, it is probably not doing much worse than the market as a whole. It is also very obviously solvent, which GM hasn’t been for years.
December 5th, 2008 at 1:37 pm
Note that Toyota, while in better financial shape than General Motors, is not in fact doing so hot.
Yes but only because of the big three’s failed business model. If these American companies had control over what types and how many cars to produce, Toyota would be in a lot better shape (and so would the big three). But you know this and have posted about over-production before. Why the sudden change in opinion?
December 5th, 2008 at 1:41 pm
Lots and lots of “American” cars sold in the US are actually made in Canada or Mexico, while nearly all “Japanese” cars sold here are manufactured in Tennessee, Alabama, Ohio, and other US states.
Petey, the vast majority of those high wage union jobs at the big 3 vanished long ago. Why do Petey and Matt care more about the nationality of a company’s executives than the nationality of its line workers?
December 5th, 2008 at 1:43 pm
Share price doesn’t matter. It matters for financial institutions because their entire business is confidence, but the business of car companies is cars and the average or even modestly outlying potential buyer doesn’t feel disinclined to buy a car whose company stock is tanking.
December 5th, 2008 at 1:44 pm
THANK YOU
Good lord watching McConnell and Shelby grandstand on this issue with no one providing the relevant context (that their states are direct competitors with Detroit) has been infuriating.
December 5th, 2008 at 1:47 pm
I was a bit imprecise in my earlier comment. Matt argued that declining wages in Detroit would result in declining wages in the non-union car factories. The consequences of the reorganization/liquidation of the Big Three are more ambiguous. However, inasmuch as the process would involve the renegotiation of collective bargaining agreements, the same logic would apply. It’s unclear how Kentucky auto workers would benefit if the car factories in the upper midwest started churning out Toyotas or whatever instead of Chevrolets.
December 5th, 2008 at 1:50 pm
I’m curious as to what in McConnell’s voting record leads you to believe that he has ever been concerned about the wages of his constituents? His actual constituents don’t make hourly wages, they collect seven and eight figure salaries.
December 5th, 2008 at 1:55 pm
Steve-
If McConnell doesn’t care about wage-earners, then why does he have any interest in the fate of the Big Three?
December 5th, 2008 at 2:00 pm
Because he does care about how much monwy he can get from the VP of American Production for Toyota. Not sure how that’s hard to follow.
December 5th, 2008 at 2:02 pm
Hello.
I would like to put a link to your site on my blog roll if you want to do the same for mine. It would be a good way to build up both of our readerships.
thank you.
December 5th, 2008 at 2:04 pm
Toyota sold 2,958,000 vehicles in North America in FY2008, and produced 1,268,000 vehicles in North America in FY2008. That’s 43%, hardly “nearly all”.
December 5th, 2008 at 2:08 pm
Rob-
Toyota can give money to any senator and any representative. Why would McConnell in particular care, and why wouldn’t he take money from the Big Three instead? It’s not as though Toyota really wants to influence senators in Wyoming or whatever, but can’t because it has no factories there.
December 5th, 2008 at 2:12 pm
So Toyota’s share price is down. Well, of course it is: the
whole DJIA and S&P is down by about the same percentage. That
doesn’t mean Toyota is doing badly. It isn’t. It’s still
profitable, even in this long and severe recession, just as not
as big a profit as it was a couple of years ago. And it has
very strong products, and is continuing to gain market share.
That’s what a healthy company looks like during a recession.
And since auto manufacturing is a business requiring long-term
planning, large capital investments, and large fixed costs,
it’s always and inevitably going to be a business which suffers
during a recession: when sales drop, you can’t get back the
cash you had to pay for idle factories.
December 5th, 2008 at 2:14 pm
It’s cute that you linked to the share price Matt, but Toyota is not asking for billions in government handouts.
December 5th, 2008 at 2:31 pm
Honda’s chief, Takeo Fukui, asked the Japanese government to weaken the yen to help the company.
December 5th, 2008 at 2:35 pm
Apparently the CEO of CompuWare wrote Senator Shelby (R-Alabama) to remind him of Alabama’s massive state subsidies to foreign automakers:
December 5th, 2008 at 2:45 pm
If Japan wants to subsidize products that Americans buy, that sounds like a good reason for the taxpayers of Japan to be upset, not those of America.
The only justification for the bailout is economic stimulus. And if you want to spend between $75 billion and $130 billion on that, I’m sure you could think of better ways to do it. Which would you prefer Mr. Yglesias, a GM bailout, or supertrains?
And for those concerned about “going green” consider that the mileage of vehicles sold in the US would go up immediately if GM and Chrysler were suddenly liquidated.
December 5th, 2008 at 2:48 pm
Honda’s chief, Takeo Fukui, asked the Japanese government to weaken the yen to help the company.
To be fair, at 91 yen to the dollar, I’m pretty sure the head of every single one of the other consortiums is quitely pushing the same thing. This I think is as strong as the yen has been since the 1980’s
December 5th, 2008 at 2:49 pm
I’d add that it’s far from clear how much the South would “benefit” from a Big Three collapse. Yes, the region is dotted with so-called “transplants,” all assembly operations. But those assembly operations rely as heavily on supplier networks as the Big Three do, and could get hurt if the suppliers falter. Moreover, many of those suppliers are in the South; they collectively provide far more jobs, in far more communities, than the relative handful of transplants. I was in Birmingham a couple of weeks ago, and at one point happened to be talking to a guy who told me something told him by a friend who works at a Goodrich tire plant in Tuscaloosa, a plant already beset by layoffs; in two days the week before Chrysler and Caterpillar called to cancel all orders, pretty much wiping out an already decimated order book. The Mid-South is far more entwined with the Big Three than the politicians seem to realize–and I haven’t even mentioned the GM plant [once Saturn] in Tennessee.
December 5th, 2008 at 3:08 pm
Don’t the Big Three and the domestic plants of foreign automakers use many of the same suppliers? And won’t those secondary businesses go under if they lose a big customer like GM? Or, alternatively, won’t domestically made Hondas, Toyotas, BMWs, etc., jump in price if they have to import all the parts?
On purely political grounds, the Dixie-cans had better be careful about picking a regional fight. The South benefits from massive federal subsidies, military and otherwise; and if Southerners stiff Midwesterners, the latter have the votes — and now the seniority in Congress — to pay back crushingly.
December 5th, 2008 at 3:09 pm
you know, instead of embedding a static image in your blog, you could embed an active chart from wikinvest instead:
View the full TM chart at Wikinvest
December 5th, 2008 at 3:17 pm
big bucks, actually he was right to include a static image. you want the blog post to still make sense in the future, when the stock price may be much different.
separate note: so didn’t we all agree a few days ago that the Big 3 failing would cause a supply shock that would devastate all car manufacturers in the United States, Toyota included? if this is true, shouldn’t toyota–and presumably mcconnell–want the Big 3 to be saved?
December 5th, 2008 at 3:21 pm
To SomeCallMeTim at 1:24 PM.
Ask and ye shall receive. The Tax Foundation has state breakdowns from 1981 to 2005 on this web page of the return on federal taxes paid vs federal spending for each state.
For Alabama and Kentucky, in this time period, they have always received more in federal spending than they sent in federal revenue. While Michigan over this same time period has always received less in federal spending than they sent in federal revenue.
The data isn’t perfect I suspect, especially looking at New Mexico getting more than any other state paid for the whole 25 years, probably due to military bases and nuclear testing. Nevada is pretty low, and I wonder if federal taxes paid on gambling contributes skews the data so they seem to pay a lot more than they receive. But at least it helps gain some perspective.
December 5th, 2008 at 3:23 pm
It’s worth noting that Kentucky is not a right-to-work state; Republican efforts to make it so were soundly defeated in 2005 and 2006. It’s not “dixie” in that respect, and there is a solid union presence in the state, much around the coal mines and a large UFCW presence in Northern Kentucky.
It’s also worth noting that there are significant American auto manufacturing presences in Kentucky. Ford produces trucks in Louisville, and GM produces Corvettes in Bowling Green. An older PDF on Kentucky’s auto manufacturing (please ignore the Fletcher shillery):
http://www.thinkkentucky.com/kyedc/pdfs/KY_Auto_Industry.pdf
December 5th, 2008 at 3:28 pm
Don’t the Big Three and the domestic plants of foreign automakers use many of the same suppliers?
No, they don’t. The Japanese domestic assembly plants mainly use parts from Japanese parts vendors. The same companies supplying to GM and Ford usually can’t sell to Toyota and Honda. Those are not really open markets.
December 5th, 2008 at 3:40 pm
@American Citizen
Not nearly all. Nearly half, then. If you would tell me where you got those nifty stats, then maybe I could look up the equivalent stats for the “American” car makers and we could see how they compare.
December 5th, 2008 at 3:48 pm
I guess McConnell is reaaly pissed at those Ford Louisville Assembly plant workers for voting against him.
December 5th, 2008 at 3:50 pm
The Toyota plant in Georgetown is not the only auto plant in Kentucky.
There is also the large Ford Truck plant in Louisville, which has always been McConnell’s home.
Kentuckians certainly have a vested interest in the survival of at least some of the Big 3. And I’m sure many of McConnell’s constituents will find comments like that disappointing.
December 5th, 2008 at 3:57 pm
Contra Andrew in Texas, plenty of suppliers provide parts to both Japanese and American car companies. It’s just that the American companies are a high enough percentage of the customer base that the last 10-15 years have been devastating.
December 5th, 2008 at 4:56 pm
@Rob Mac
Toyota was the source.
December 5th, 2008 at 4:59 pm
Ford has a plant in Kentucky too:
http://en.wikipedia.org/wiki/Kentucky_Truck_Assembly
It looks like it is unionized:
http://louisville.edu/cbpa/lmc/award/award.00.htm
Oddly, I was helping my second grader research a report on Kentucky yesterday.
December 5th, 2008 at 5:05 pm
Well, McConnell is right (or at least, Matt thinks so). I don’t worry too much about the motivations of politicians who agree with me. If we’re ever going to get off corporate welfare, then in our current political system it pretty much has to be based on a bunch of shifting coalitions of other, less politically-connection corporations who aren’t asking for handouts but are pissed that their competitors are getting free money from the government.
December 5th, 2008 at 5:12 pm
I’d be willing to bet the CEO of Toyota made about 1/10 what Rick Waggoner made. You wish GM et. al. could be restructured in such a way that they could be sold to the Japanese or Chinese.
December 5th, 2008 at 9:15 pm
Toyota is obviously presently profitable, given its stable dividend payments. However, the decline in share price indicates fear that growth/profitability will stall or decrease in the future. I think that’s a safe assumption, given the economic status of its largest market.
December 5th, 2008 at 11:23 pm
The Dixie senators are talking up “their” companies, they are expressing the genome of the parasitic South, its very essence, and the way it has served as a model that has overtaken ‘Conservatism’. It is an easy model. A relatively undeveloped economy, like the South, with a low tolerance for public investment due to the consciousness that public investment benefits people who are low in the social hierarchy – blacks – makes the effort to leech on the industries and human capital developed in those areas where public investment is higher, meaning that education levels are higher, taxes and social insurance are higher, and the economy is more creative. Step two is to use the government to offer huge benefits to companies to relocate in the South. The lack of creative or endogenous industry in the South is thus compensated for – the state’s lowered tax rates and offers to take on the cost of negative externalities – or simply allow them to be taken on by the population, in the case of carcinogenic pollution and poor black populations – attracts the industries. But, because of the systematic production of Dixie stupidity, the human capital for managing it doesn’t exist – thus companies have to import management from elsewhere. The new immigrants enjoy the low tax burden, but they make sure, in their various counties, that the school system, the sewage system, etc. all works for them. They even are local environmentalists. Now, at this point, one would think that the states would slowly bootstrap themselves into the developed world, increasing public investment, taxes, etc. But no – having discovered that free riding as a way of life has a lot of advantages, the Dixification strategy was to expand it. And so it happened, from Reagan until, finally, Dixie heaven, George Bush, thus hollowing out the American economy and leaving it on the brink of bankruptcy and disaster.
The Dixification strategy brings together so many of the things dear to the Dittoheads – the rancid racism, the desire to leech off creative enterprises created elsewhere combined with the hatred of creativity in general, the anti-intellectualism combined with the weird cult of technology, the libertarianism which boils down to low taxes combined with the moralism which boils down to arrest homosexuals. It is the pathology of the South in the post-civil rights era. This is why the Red States were appalled, shocked by the 700 billion dollar bailout – for once, money would flow out of those states to elsewhere. And the party that they had captured, and that they loved to have captured, the Lincoln party, was doing it to them! Though they have been on life support since 1865 from the Northeast, the Red Staters couldn’t believe that turnabout would ever happen.
Japan, which of course interfered so majorly in Toyota’s history that it changed it from a textile company, I believe, into an auto company to make trucks for the war in Manchuria, and that has nursed it actively with funds and passively with tariffs and laws against foreign investment in the company for decades poses little threat to the Dixie mindset, since it is unimaginable Japan would ever take their hard earned tax money. Thus, leeching of Japan has become a little bit of heaven for your Southern rube.
What is funny, of course, is that the Republican compromise, between the investors of the Northeast and the Dixie peasants, has taken a hit it might not survive. The Southern part of the party, which simply wants a good lynching, to lie with their daughters, and to make sure those daughters don’t get any damn abortions as a result, is feeling its oats, at the same time that it is weaker, politically, than it has been in perhaps a hundred years. The South has no lever of power in the Senate, House or Presidency. How wierd is that?
Trying to bring down the auto industry is just a parting gift from this terrible crew.
December 6th, 2008 at 12:43 am
Not only would it help their own local auto industries
Until, say, Brazilian- and subsequently the Chinese-made cars with Chevy badges rolled into the docks.
Rob Mac: ‘manufactured’ is a tricksy phrase.
For the German-owned plants, it’s even more clear-cut: the workers in Tuscaloosa trained up on the state dime put German-made engines (from union plants) into those Mercs. The same applies for BMW in Spartanburg, SC. But Shelby is just a giant fuckstick, anyway.
December 6th, 2008 at 11:42 am
A misleading analysis. Detroit automakers aren’t asking for a bailout because of low share prices. They face possible bankruptcy because they can’t sell their products profitably.
One major cause has been Detroit’s refusal to invest in innovation and energy efficiency.
The parochial and self-serving nature of the Yankee Blogger’s analysis far exceeds that of the “Dixie Conservatives”.
December 7th, 2008 at 12:56 am
It takes some fortitude for a drunken driver to say he had an open can of beer in his car earlier this year when his vehicle slid off the road into a snowbank. It takes some – we don’t know what – for that driver to call a reporter and
December 12th, 2008 at 12:40 am
Those senators in Alabama,Kentucky,South Carolina and Tennessee with foreign auto mfg use the same distributors and vendors for parts as GM,Ford and Chryslar. If the big three go so will those jobs ,vendors and much more. Why not have the oil companies help bail out GM and Chryslar since they are part of the problem . Why not eliminate the current billions in state and federal subidities we taxpayers provide those foreign companies in Alabama, Kentucky SC and Tenn!!
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