End of The Automotive Fairy Tale

Robert Kurz

Despite all the talk of a service society, industrial production is still the basis of real capitalist value creation. And the auto industry still forms the core sector. A wide range of suppliers and services depend on it. That is why the auto companies were the preferred recipients of state aid alongside the banking system during the major crisis slump in 2009. They were given a helping hand in the form of direct state investments (General Motors), rescue measures and guarantees, as well as subsidies for car sales worldwide. In this country, there was the infamous scrappage premium. This was sorely needed, because it was precisely in the auto industry that the largest global overcapacities had built up, which threatened to melt away like snow on the sun after the collapse of the fictitious purchasing power fed by the financial bubbles.

Within a very short time, car companies everywhere were miraculously deemed to have been saved. The central banks’ flood of money did the rest to cushion the crashing economy. And car sales also benefited from this to a considerable extent, because the rolling tin can is now the preferred object of desire in this world. The next dream of anyone who has just escaped starvation is a car. China in particular experienced a car boom with almost fantastic growth rates. A few months were enough to make the country shine as the most important new export market for German carmakers. A warning sign could have been that it was not small and medium-sized cars that made up the bulk of the export miracle, but the extremely expensive premium class. It was not solid mass consumption that matured here, but rather the need for ostentation on the part of crisis profiteers – not least on the airy basis of the Chinese real estate bubble, which (along with government programs) had replaced the U.S. one as the driving force of the economy.

As is well known, public finances around the world are now running out of steam. The debt crises in the USA and the EU are already having an impact on the economy. In China, galloping inflation and the central bank’s so far inadequate dampening measures indicate a slowdown. Just as the auto industry was one of the first beneficiaries of the rescue packages, it is now likely to be the first to be hit by the increasingly likely return of the global recession. The recovery was too fast and too lush to be true. As early as the second quarter of 2011, the global passenger car market entered a period of stagnation. Forecasts are being revised downward, from 65 to 60 million cars for 2012. The end of the automotive fairy tale will also soon put the substantially unsolved problem of global overcapacity back on the agenda. The old bankruptcy candidates are also the new ones, with General Motors at the forefront. If the robust business feigned with the help of government injections dissolves into the old misery, the fate of GM’s German subsidiary Opel will also once again be on the line. The rumors about a possible sale of Opel a few months ago already spoke a clearer language than any success stories. The only thing is that no one will want the company in the event of a new economic slump. The tame eagle of the subsidized upswing could soon mutate again into the bankrupt vulture of the crisis. In any case, the development of the auto industry is an example of the development of the global economy.

Originally published in Neuen Deutschland on 08/22/2011

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s