On another thread, I described how the plunging value of the US dollar has made heavily taxed gasoline in Australia barely more expensive than fuel is getting here. Now, Lincoln's small SUV (which was to be made in Germany) has gotten the axe.

Is killing plans to import the Mondeo to follow?

 

That thing kinda reminds me of the vehiCROSS.

 

And the dollar isn't done dropping either.

The Chinese gov't has said the dollar needs to lose about 50% of its value.

 

Luckily for GM, the Astra sells at near $30k levels when compared to U.S. figures. Or near there.

Thankfully that will help GM stem some of the costs of importing it.

 

Numerous lessons abound in this news article that I have tried to bring to this board for a long time...

1) The value of our dollar is very significant when it comes to offshore trading. It is linked closely to trade deficits and credit with other nations as well, but most significantly it determines our "buying power" here in the USA, which is something that 99.9% of us reading this post on the internet have never had to wrestle with - we have always been a dominant market to the world with high buying-power. That my friends, is not only changing, but it's changing fast... in the WRONG direction. We have tough times ahead (as a nation).

2) China is not going to be the solution to "lower cost production" if we keep losing ground to them either. Funny how nobody thinks of the UK, Germany, France, or any other EU country as an economic "threat", much less a military one, yet we don't trade with them if it's not hugely beneficial. Yet we go to China and Asia in a heartbeat - despite the trade deficit, political differences, and cultural differences... because the labor is so cheap and we think we are saving a bunch of dough.

3) I have said many times how highly Ford is poised in the EU. This demonstrates it in spades... a basic Ford product for sale in Germany comes to the USA as a LINCOLN!!! Now you should start understanding why the basic Mondeo and Focus do so well in Europe, and why we so desperately need those superior designs here in the US at comparable pricing as our current models. We could CLOBBER the Asians in quality and design.
Same goes for the Opel and Vauxhall units as well - they impress the chit out of me for basic units over there. At least GM has sniped some Opel stuff to be sold here as the new Saturns. It should bode well for them to do this as long as they don't dope-down the design to make it US-friendly.

I digress. I still think they could/should bring the Iosis here in under some brand. It rocks IMO. Interior is awesome.

 

Ooohhhhh, thats nice, and since China bankrolls the US, making us China's bitch. I suppose its gonna happen.

Somebody tell me again why free trade is a good idea?

 

If you could link to an atricle, that'd be great! (not calling you out on your statement, rather I'd be interested in the ideaology behind that)

 

China has about $1 Trillion in US dollars. If they dump them it will probably start a chain reaction with other countries trying to get away from the dollar too. Supply and demand means the dollar will get owned.

Free trade is good as long as there is balanced trade.

I'll keep looking for the one were they said the dollar needs to lose half its value, but in the mean time this one is pretty good http://www.washingtonpost.com/wp-dyn...010901042.html

Basically the Chinese buy dollars to keep us importing from them at or current pace. They do it to keep there manufacturing going and economy growing, we buy there cheap crap because Americans like inexpensive things and we like to buy now and pay later.

 

Thank you for posting this.

 

Not to be too cynical, but does it exsist? Except in the delusional minds of a bunch congresssmen and senators, it seems to me, know that we've sold ourself out to the idea of "free trade" we are stuck with it and are damned if we do and damned if we dont in a vain hope that the rest of the world will adopt the same naive policy as the US.

 

If the US dollar tanks it will be too expensive for us to import and we will have to go back to domestic manufacturing. It will also make US produced goods cheap to other nations so they will be more willing to import from us.

Look at it this way, 5 years ago a Euro was worth $1. Now a Euro is worth $1.36. So that $20,000 car in Europe now cost $27,200 for those paying with the dollar. Yet those still paying with the Euro still pay 20K.

It works the other way too. American stuff is cheap to Europeans, Every thing in America now sells at 36% off compared to 2002 prices. That might be over simplified but you get the point.

 

Another thing about the the low value of the dollar is that it tends to increase our trade deficit. Importing goods cost more, as a result, more money leaves the US to the countries whose goods we're paying more for.

I theory, it should be balenced out by making our manufactured goods cheaper, and therefore we should export more, however that's necessarily the case anymore. Alot of United States' manufacturing has migrated to other countries (as has much of our service industry and engineering). The collaspe of one of the remaining US manufacturing bases (ie: the US auto industry) would not only wreck the US economy on it's own, but combined with a depressed dollar and a large trade deficit would do very serious economic damage, not just for a few months to a year, but quite possibly for a very, very long time..... assuming we recover.


Expanding on Z28x post about China, this is where I'm going to go political and hammer those who advocate deficit spending or blind tax cuts.

Nobody likes taxes. I know I sometimes sound like I'm all for new taxes, but the truth to the matter is that I'm a realist. I personally prefer to have prisons, a strong military, roads and bridges that I can drive on without destroying my car, enough police to keep my family safe, decent schools, knowing that if I become a disabled parapalegic I will have something resembling reasonable care, etc. Just like everyone, regardless as to if you're conservative or liberal. But I'm realistic enough to know that someone has to pay for all this, and that someone is us. At the same time, I've traveled around enough to know that we're paying next to nothing in taxes compared to other first world nations, so there's nothing to whine about.

But, as with any budget from a multi-national corperation, to any government, to your own household, somebody is going to have to pay the bill. You can't spend more money than you have, and you aren't going to cut anything but the most ridiculous or wasteful of government spending. In the late 90s, government was cut as much to the bone as it ever was going to get (and combined with a relatively balenced tax rate, we had surpluses) Rule of thumb: if it does enough people some good, it's not going on the chopping block. That means only 2 choices:

1) find ways to pay for it, or..
2) find ways to have someone else pay for it.

Pay for it ourselves, and we maintain control over our own house.

If someone else pays for it, they're going to want collateral or something in return.

To cut to the chase: China is giving us money to make up the difference between what we take in in taxes and what we are spending. In return, China can all but dictate US economic policy and the US government turns a blind eye to policies that are unfavorable to us. Sure, you'll get some lip service towards demands for these countries to change, but when was the last time you saw anything followed through?

Want more tax cuts, despite already running massive deficits? There's plenty of countries (again, China in particular) who would absolutely LOVE to fill in the difference.... and gain even more influence.

Companies that want to set up shop in China, MUST essentially work under a Chinese owned company. So in effect, China gets it's manufacturing base modernized, the quality of it's locally made products vastly improved, makes money via taxes for doing business there, makes money off of exporting to other countries, & not the least, dramatically decreases government expense of caring for it's populace by putting more of them to work in the private sector.

Now, keep in mind, that's on top of making the United States of America China's economic "biatch" by earning intrest on the trillion-plus dollars of US Treasury T-notes, bills, & bonds (intrest which WE are paying China as taxpayers) while being told what to do economically, even if it's at the expense of US workers, manufacturing base, or even US foreign policy (wonder why we drained our bank to go to Iraq without real evidence of WMDs, yet China backed North Korea can actually explode nukes, send missles over Japanese airspace and threaten South Korea... both of which we are bound by treaty to go to war with anyone who attacks them and have a large military presence of our troops in both countries... yet we do nothing?).

As a side note for the uninitiated, China is free to start dumping Treasury Bonds 10-30 years after maturity, "Notes" after 2-10, and "Bills" in a year. If you say "so what" let me point out that if China dumps even a modest portion of the securities it holds,

1. The value of the US dollar will plunge.
2. The deficit will explode because we'll have to pay that intrest back all at once.
3. All the bad things already mentioned due to plunging dollars and and exploding deficits will occur.

Another side note: You may very well recall that the US ran a surplus in the late 90s. That surplus went towards buying back various securities from foreign governments.... in effect, paying off our accumulated federal debt. As a result of better financial prospects, the US stopped issuing 30 year bonds back in 2000 or 2001.

Now we have run massive deficits for about 6 years.

Last February, 30 year "Long Bonds" went back on sale.

Sleep tight.

 

That would be a very short term effect, if it happens at all. When our dollar goes down and imported goods cost more, people are quick to either buy less of them, or the importer find new sources. It is very much accepted that a cheap currency is a good thing for a nation's trade balance. That's why China kept their yuan low for so long.

Getting back to the original article, I find it amusing how the US auto executives love blaming currency exchange rates for their problems. For the longest time they've been bitching that Japanese artificially weaken the yen which gives them an unfair advantage. So now when the dollar goes down, they bitch that that is hurting them ... well, which way do you want it? Do you hate a low dollar or do you hate a high dollar? Make up your mind.

If a low domestic currency is what exporting nations like China and Japan love, maybe this lower dollar will help even the playing field we hear so much about from the US automakers. And maybe then they'll stop complaining that it's the currency that is the root of their all their problems (nah, they'll just find another scapegoat to deflect the blame to).

 

Ford is not unique in this; it's not like they are more highly regarded among their competition in Europe than they are here. They are a basic mass market retailer over there, and they are a basic mass market retailer here. It just so happens that Europeans pay more for all of their cars (and usually get better cars in return), whether they be Fords, Opels, BMWs, or Volkswagens.

As to a European Ford becoming a Lincoln over here ... remember the Cadillac Catera of the late 90s? It was an average Opel Omega in Europe.

 

If people hate gas prices now they are not going to like them when the dollar plunges. Workers pay won't be able to keep up with rising prices. I know at my work (state worker) we are on a 4 year contract for raises. With our personal debt rates higher than Japans in the 90's we could easily fall into another great depression or at least a very hard recession.

Lets just hope our Gov't can stay out of Iran and those that predict peak oil in 2010 are off by a decade or two.