Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Skip to main content
Tags: bailouts | automakers | innovation | big three | tesla

Innovation the Only Way Forward for Automakers

 logos of car companies on white background

Robert Zapesochny By Wednesday, 29 March 2023 04:45 PM EDT Current | Bio | Archive

For decades, politicians in both parties have given the car companies one bailout after another. Despite all the money they spent, the bailouts failed to reverse the decline of America's automotive industry.

Last year was the worst year for car sales in the United States since 2011.

In 2020, Mark J. Perry of the American Enterprise Institute wrote: "In 1960, the USA produced more than half (52%) of the world's motor vehicles and produced more vehicles than then next ten countries combined. Last year China's share of world motor vehicle production was 28% compared to America's share of 12%."

The Big Three automakers (General Motors, Ford, and Chrysler) had been losing market share for decades both abroad and at home. The market share of Big Three automakers in the USA declined from 95% in 1955 to 75% in 1980.

In 1976, Chrysler (now called Stellantis) received its first bailout when it won the contract to build the M1 Abrams tank. At the time, the Department of Defense needed to build a new main battle tank.

Donald Rumsfeld, who was the secretary of defense in the Ford administration, wrote in his memoirs about how GM and Chrysler were competing for the XM1 tank contract, which is now the M1 Abrams tank.

Rumsfeld acknowledged that Army's leadership preferred GM's model. According to Rumsfeld: "However, Deputy Secretary [William] Clements and Undersecretary of Defense for Research and Engineering Dr. Malcolm Currie had come to a different conclusion. They favored Chrysler's design: It could be filled with a larger, 120 millimeter cannon and it had, for the first time, a turbine engine instead of a diesel."

Secretary Rumsfeld believed that Chrysler's tank was better, but it looked bad because Chrysler was in bad shape in the '70s. To be clear, Rumsfeld awarded the contract to Chrysler two weeks after President Gerald Ford lost the 1976 presidential election.

In 1979, the federal government had to save Chrysler with a bailout. At the time, Chrysler employed 134,000 workers.

In 1981, the Reagan administration helped American car companies by pressuring the Japanese to agree to "voluntary" limits of how many Japanese cars were shipped into the United States.

According to the Economic Policy Institute, the share of the Big Three in American car sales remained at 70% until 1997. By 2008, the Big Three fell to just under 50% of the American car market.

According to the Congressional Budget Office (May 2022), Troubled Asset Relief Program (TARP) dispersed $80 billion to bail out the automotive industry. As of May 2022, $63 billion was repaid while the remaining $17 billion was written off.

Saving the Big Three was supposed to give them a chance to compete in the greatest auto boom in history. While the American market is fully developed, there is still a lot of potential in developing countries.

In 2006, Joyce Dargay, Dermot Gately and Martin Sommer produced a fascinating academic paper on the historical pattern between the rise in per capita income levels and a surge in auto sales. In the conclusion, they argued: "The relationship between vehicle ownership and per-capita income is highly non-linear.

"The income elasticity of vehicle ownership starts low but increases rapidly over the range of $3,000 to $10,000, when vehicle ownership increases twice as fast as per-capita income. ... When income levels increase to the range of $10,000 to $20,000, vehicle ownership increases only as fast as income."

In 2002, China only had 16 vehicles per 1,000 people. By 2010, China had 58 vehicles per 1,000 people compared to 804 vehicles per 1,000 in the United States.

Another growing market is India. In 2018, India only had 22 cars for every 1,000 people.

As per capita incomes grow in Asia, it is only inevitable that hundreds of millions of Chinese and Indian consumers will be able to afford a car for the first time. In 2022, China (315 million) had more automobiles than the United States (290.8 million).

In per capita terms, China is still far behind the United States. With approximately 300 million cars and 1.4 billion people, China now has about 200 cars for every 1,000 people.

In 2023, Tesla and China's BYD are competing against each other to become the world's largest manufacturer of electric vehicles (EVs).

If America is going to win this contest, bailouts are not the answer. As Steve Jobs once said: "Again, you can't connect the dots looking forward; you can only connect them looking backwards.

"So you have to trust that the dots will somehow connect in your future. You have to trust in something— your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life."

Robert Zapesochny is a researcher and writer whose work focuses on foreign affairs, national security and presidential history. He has been published in numerous outlets, including The American Spectator, the Washington Times, and The American Conservative. When he's not writing, Robert works for a medical research company in New York. Read Robert Zapesochny's Reports — More Here.

© 2023 Newsmax. All rights reserved.

If America is going to win this contest, bailouts are not the answer.
bailouts, automakers, innovation, big three, tesla
Wednesday, 29 March 2023 04:45 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved
Download the NewsmaxTV App
Get the NewsmaxTV App for iOS Get the NewsmaxTV App for Android Scan QR code to get the NewsmaxTV App
America's News Page
© Newsmax Media, Inc.
All Rights Reserved