The post above must be a joke or attempt at satire. India OR China can produce cars they can SELL at a PROFIT for $2500. Think about that. Add $600 to ship it here, big deal. The old big 3 can't make anything for less than $12000 here and make a profit on it. Rethink your numbers if you were really serious. Its about a 60 or 75% cost advantage to make things there instead of here. Why else do you think things are so bad here, and at the same time the corporations that moved everything offshore except front office stuff are l making such good profits?
Very Observant! I thought this as I wrote it, but doubted anyone would catch it. For the non econ majors though, 101 sounds more relevant. I suppose 101 is micro, and 102 macro everywhere?
you must be another joker, if it is cheaper to produce goods in India and China, then their currencies should appreciate in value, or have an appreciating trend, yet both have neither all that has happened is that their respective markets have extended in value becoming parabolic, which means that it should have got more expensive to make goods (i.e. inflation) this would have meant higher interest rates and borrowing costs, and that hasn't happened, which means that their original cost of production was higher than at home, and there were government subsidies in place which only served to put India and China at a loss, because their increased productivity resulted in higher energy costs the good thing is, that at this moment in time, india and china will always be behind the curve, that is one thing that they cannot stomach, but they just have to live with it (dump your ego)
I'm an ex-CFO. When I was in college I had 8 A+'s in cost accounting out of 8. It has nothing to do with ego. I worked in automotive cost accounting and systems for 20+ years. Facts, facts and more facts is all. At GM, they pay workers about $70/hr last I heard. In China, the average wage is under $2/hr They don't have Social Security and medicare to pay, there When they need a plumber or electrician, a draftsman, supervisor, or a manager, they pay 1/20th of what would be paid here The only thing they need to pay a similar price for is the raw steel or plastic or rubber. EVERY manufactured or assembled component costs orders of magnitude less than here. The ONLY thing that costs more is shipping, but it would be similar to what the Japanese or Koreans would pay. THE PROOF TO THE PUDDING IS *WHY* HAVE ALL OUR MANUFACTURING PLANTS CLOSED, AND WHY ARE THOSE PARTS NOW COMING FROM CHINA? THE ANSWER IS THEY COST 1/3 AS MUCH AS THE SAME THING MADE HERE. Go to Autozone and price brake rotors made in USA vs made in China. The US Made ones, if you can still find any are typically 4 times the price. I used to WORK for an Automotive manufacturer, and to buy brand new Water pump from China, complete and assembled in a box, was CHEAPER than JUST buying the casting here, not including bearing, seal, gaskets, fittings, hub, impeller, instruction sheets, caplugs, bag, box, labor, overhead, or administrative costs. It put the company and its 500 workers out of business and jobs because the owner wouldn't outsource it all to China, but his competitors did. End of company End of jobs End of story End of manufacturing in USA End of USA as a first world nation Checkmate is when they decide no longer to *LEND* us back the money we send them to buy all this "stuff". That's why they are currently sitting on $1.2 trillion. Its when they DO decide to spend it on something that inflation goes through the roof. Think it all the way through.
while it can be argued that china underpays its workers, isnt it also GM's fault for overpaying their workers? most americans with college degrees only dream about making $70 an hour. and what about toyota? they have many auto plants in the united states and they are doing quite well. why doesnt toyota move 100% of its operations to china if they have an absolute cost advantage across the board? why do we need manufacturing jobs in order to be a first world nation? manufacturing is a low skilled labor industry. shouldnt we be pushing our labor force towards being more high skilled? personally, i would rather have my work force designing automobiles rather than assembling them.
The transplants have costs around the $27 to $30/hr range. You need to understand that the $70/hr number at GM or Ford or Chrysler includes the cost of healthcare and retirement. The transplants don't have huge numbers or retirees sucking the life out of them. The cost in China for that kind of stuff must be minimal in dollar/hr terms. I think Toyota is putting plants here because labor is cheaper here than Japan, and they want to be closer to their market. They won't have competition from China till 2008 or 2009. You will see all of them have built or are now building component parts in China or other low cost asian countries. For example, Ford was putting $5 billion into manufacturing parts in Malaysia or Thailand. Its a cost reduction thing. Those companies are ABSOLUTELY DESPERATE to reduce costs. They have already cut to the bone, and are now amputating limbs to survive. They will not survive the imports from China, IMO, when that starts, and all those pensioners will get dumped on PBGC
china has enough labor to end the US and europe together, but the point is they haven't succeeded look at the unemployment rate, is it high as a result of the cheapo china stuff? if it is "end of story" then why do the US government tax receipts keep on going up? and china isn't lending us any money, they buy the dollar to inflate its value, thus artificially devaluing the yuan, they are not doing anyone any favors except themselves
Tax receipts are going up because they keep printing more dollars, which us traders end up with as profits, and we pay 50% of it in tax. We produce nothing. We play games on our screens and consume. The dollars buy less and less each year. The higher revenue is just a function of the debasing of the dollar and the real inflation. China has been buying treasury bonds with the dollars. Thats why the longer term interest rates here have stayed pretty low. Remember Greenspan's "conundrum"? Bernanke says they are saving too much. Its the same thing. The are selling us $10 billion worth of stuff for every $1 billion they buy from us. The rest they either lend or spend elsewhere in the world. As for unemployment, I don't bother looking when I can make 4 times what they'd offer to sit here at my screen. Nowadays they want all programming done from India for $6/hr. It doesn't matter if I can do a much better job. Its just "corporate policy" now to outsource it. I know that even if I got one of the jobs that's still here, they'd be working every day to suck the knowledge out of me and lower the cost by getting it done somewhere else for cheap. Look at all the early retirees. What are they going to do when savings run out?
When China stops lending us back the money, most Americans will no longer be able to afford cars or gas. Imagine interest rates of 20% with a $9 trillion debt. Look at Iceland a year ago. Then imagine a similar situation, where interest rates go thru the roof and the currency collapses, but a million times larger. An entire nation cannot live beyond its means forever. At some point lenders will balk, like they did back in Carter's day.
so the more dollars the US govt prints, the more money traders will make? i think i missed the memo because i havent been getting any profits from the government. china sells goods to the USA that are made in china but for american companies. the US companies that used chinese labor sell that $10 billion worth of goods for $200 billion. and most of that $10 billion inflow to china goes towards covering manufacturing costs. made in china does not mean made for a chinese company. how many goods do you own that are made in china and for a chinese company? im sure it is quite few compared to the amount of american branded products that you own. in fact, i am hard pressed to find any products in my own home that are made for a chinese company. in reality, the amount of american branded goods that china buys is greater than the amount of chinese branded goods that we buy.