Wednesday, October 27, 2010

Will Auto Makers Really Lead A Jobs Recovery?

I happened to catch my old friend, auto journalist Paul Ingrassia, on CNBC yesterday afternoon. He was debating, with several other pundits, including Bob Lutz, the role of Detroit's auto makers in sparking a US economic recovery.

From what I gathered, Paul was arguing that the best chance the economy has of creating jobs is for the three US-based auto makers to grow smartly in the years ahead. Essentially, he and the other guests, including, I think, an economist or two, some industry analyst, and the irrepressible Lutz, all agreed that we must pin our hopes for economic rescue on the auto sector.


Are these people crazy?

Autos are pretty much commodities. Sure, one or two models are special and command price premiums. But, generally speaking, as evidenced in China, entry into the auto sector is pretty easy. Auto makers are, in fact, auto designers and assemblers. It's not like River Rouge in 1920 anymore.

Plus, last time I looked, most economist bow to the Small Business God for job-creating growth. Ford, GM and Chrysler, wounded as they are, aren't small businesses. Except maybe in the 'small-minded' sense.

So how do you resolve this paradox? Three poorly-run large, old-industry companies, two of which should have died a few years ago, are going to magically lift America out of its recession? And magically create millions of jobs?

Sure, an uptick of auto sales gives these three companies their share. They hire a few people, and, indirectly, their orders for parts and materials spark hiring at their suppliers. I get it.

But that's nowhere near the number of jobs lost, plus population growth, since the official beginning of the recession in late 2007, is it?

Don't we usually hope and expect job growth from smaller, newer, more innovative firms than the erstwhile Big Three? Something more related to new applications of technology? Perhaps more in the vein of the next Google, Genentech, etc?

I respect Paul Ingrassia immensely for his knowledge of the inner workings of the auto industry. But I must confess, I missed the part where he became a respected macroeconomist by correctly explaining and predicting hiring in a large, complex economy as it exits a recession. And I guess I missed Bob Lutz having those credentials, too.

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