Inexplicable forces

FTLComm - Tisdale - Thursday, May 21, 2009

As i drove down a street late this morning I was surprised to see a cylindrical object making its way north on the street, seemingly of its own volition. It came to a parked trailer and truck on the right side of the street and gently altered its course and rolled right on by, then when it crossed the centre line of the street, it began to lean a bit toward the west, as the tilt of the street and the weak force of gravity, slowly bent it toward the west side curb.

Though it was surprising, the roll appeared to be some building material and was a heavy enough object not to be out wandering around on its own. However, the force of the fifteen knot south wind was steady and with its smooth circumference and one of the few smooth streets in the town, that force of wind was enough, that once it got it moving, the thing just hustled along as though self propelled.

For most things in nature, there is a plausible explanation, as a species we have made excellent progress in figuring out how most things work and even the remaining mysteries are well within the realm of ultimate explainability.

One day in a university math class in 1970 or 71, the professor asked several students in the class for their solution to the problem he had written on the chalk board. All of the suggested answers were incorrect and the professor proceeded to jot out the correct answer. I was rather impulsive and told the wise old professor that "I just don't believe that is the answer". To which Professor Toewes replied, " Mr. Shire, mathematics is not a matter of faith."

The puzzle, that is generally referred to as the present recession, is something I have been trying to get my head around. What forces have created the mess, what forces are making it worse and what forces will eventually combine to make things better, or perhaps more accurately, temporarily better. In general, it seems that there are quite a number of experts and well trained men and women who have sorted out the primary factors involved, but as we have seen, few of them saw it coming and none, it seems, are able to devine its ultimate course. There are some exceptions, Nobel Prize winner Paul Krugman has been warning of this recession and has been quoted on this web site more than four years ago.

As one thing topples over crashing upon another, the consequences are apparently compounding. The wild speculation in real estate led to stupid banking practices and even more inane behaviour by individuals who made purchases they would never be able to pay for, resulting in the collapse of the American banking system, which in turn eviscerated the British banking system. Lay-offs ensued and manufacturing world wide began to suffer. Having done little to cause the problem, there have been casualties who to some extent are collateral damage.

The American auto industry is one of these sectors of the economy that is clearly a victim of a recession to which it had done little to create. Now, up to this point though confusing, the sequence seems to make some sense. But, as the two automakers, Chyrsler and General Motors slip into, or slide toward bankrupcy, government has offered them some rescue money, provided the trash their operations, bust their union contracts with the people who make their products and generally commit themselves to shrinking.

At this point, late in May of 2009, Chrysler is in bankruptcy court and GM is perhaps a couple of weeks from that poiint of no return. Both companies have received more money from government then they are actually worth and both have all but ceased production. They do have inventory they will sell, but their prospects are amazingly bleek. This is where the inexplicable forces seems to kick in. With these companies in survivor mode, one would think they would look toward the future and try to figure out how they are going to weather this tight spot and eventually get out of it, once the economy begins to improve.

Hiring workers to build and design products costs money, money these companies do not have, but the retail network that markets their products is self sustaining. It costs almost nothing out of pocket to the manufacturers and is their only hope of ultimate survival. Lots of dealers out there hustling their products, making deals and offering service, to get and keep the customer. But, instead of attending to their problems at hand, these dying companies have decided to eliminate half of the dealerships, the very source of their income in the future.

Most of these independent, non-government subsidised operations, are the pillars of the free market business community in their towns and cities, right across North America. They know how to do their business and though suffering from the economic downturn, they are still surviving. To considering lopping off these dealerships is quite simply suicidal. These business people will stay in business and many of those let go, will end up selling vehicles made in Japan, Korea Europe and China. Chinese car makers are as little as two years away from moving into the North American market and eager to develop retail networks to move their less expensive cars and trucks.

Fearing that the consumer would panic and dump millions of orphan vehicles onto an already saturated market, the governments of Canada and the United States have assured the public that they will back up the warranties on GM and Chrysler cars and trucks. This move by government made sense, until those two broke automakers decided to get rid of so many of their dealerships providing comfort to the customer. What good is a warranty if you can not get service. Without removing a single dealership the whole process of getting a Chrysler vehicle repaired under warranty is really difficult, General Motors is much better but that will not be the case after those who have lost their license to sel,l go out of business or start selling Volkswagons and Kias. (Two of my three sons drove new Chrysler vehicles, both have switched to Ford and Volkswagon because warranty service was a week to a month if at all)

So as I watch that roll of tar paper rotate down the street, I can figure out what forces are involved, but as I consider the North American auto industry in its death throes, burning their bridges and piling wood on their own funeral pyres, it just seems inexplicable.

Timothy W. Shire

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Editor : Timothy W. Shire
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