Why Does Mitt Hate Profit?

[I posted substantially this post yesterday, but the BlogGods ate it along the way. So I’m reposting.]

Along with the deceitful attack on Italians who make better car company owners than GOP Private Equity types and the Lee Iacocca spin, Mitt has rolled out a radio version of attack on the auto bailout. From Greg Sargent, here’s part of the script:

Barack Obama says he saved the auto industry. But for who? Ohio, or China? Under President Obama, GM cut 15,000 American jobs. But they are planning to double the number of cars built in China — which means 15,000 more jobs for China.

And now comes word that Chrysler plans to start making jeeps in — you guessed it — China. What happened to the promises made to autoworkers in Toledo and throughout Ohio — the same hard-working men and women who were told that Obama’s auto bailout would help them?

The ad continues Mitt’s deceptive insinuation that GM and Chrysler aren’t also adding jobs in the US, which they are doing.

But it does something else. It takes a decidedly anti-profit stance.

You see, there are two reasons car companies are so gung-ho to enter (or re-enter, in the case of Jeep) the Chinese market. First, because it’s growing; when I was working in China, auto people considered the rising Chinese middle class to be 300 million–almost an entire US full of population. And most of them were just aspiring to buy their first car. That’s a whole lot of first time car buyers to sell to, as compared to US consumers, who are driving less and replacing their cars at a slower pace given more durable cars.

The other reason to go to China? Profit margins are bigger there than here. When I was in Shanghai in the mid-2000s, the profit margin on Buick Regals was about $2,000, as compared to the roughly $200 profit margin on a similar car here. The margins are closer now (because manufacturing in the US has gotten cheaper and in China has gotten more expensive), but China still offers good profit margins. Selling Buick Regals or Jeeps in China allows GM and Chrysler to accept lower margins on cars here.

By selling high margin cars in China, US companies can be more competitive here, meaning they will be able to expand sales and therefore production here, too.

All this is implicit in Sergio Marchionne’s response to Mitt’s ignorant rantings.

Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world’s largest auto market, in order to satisfy local market demand, which would not otherwise be accessible. Chrysler Group is interested in expanding the customer base for our award-winning Jeep vehicles, which can only be done by establishing local production. This will ultimately help bolster the Jeep brand,and solidify the resilience of U.S. jobs.

Marchionne notes 1) you can’t sell in China unless you build in China, 2) selling in China makes the Jeep brand stronger, 3) making the Jeep brand (and its profit margins) stronger makes it easier to keep up US production.

Marchionne’s implicit point should be where this discussion is heading: free trade hasn’t worked out to be fair trade. China–and Japan and Korea–still protect their markets, meaning if you want to sell there, you’ve got to make cars there.

Mitt has promised to get tough on China. But his series of auto ads have made no mention–not a peep!–of how he’ll reverse this practice and make it possible for Jeep to export cars made in Toledo. Indeed, when Obama launched a trade dispute over auto parts in September, Mitt scoffed at the effort (and ignored Obama’s decent and sustained effort launching trade disputes, one of which pertaining to specialty steel recently won at the WTO).

“The president may think that announcing new trade lawsuits less than two months before the election will distract from his record, but American businesses and workers struggling on an uneven playing field know better,” Mr. Romney said in a speech to the Hispanic Chamber of Commerce in Los Angeles.

Mitt Romney wants to attack American companies for going where profits are. And he’s doing so without discussing why that’s necessary.

That makes him neither a tough guy nor a good businessman.

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2 Responses to Why Does Mitt Hate Profit?

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Emptywheel Twitterverse
bmaz RT @NAChristakis: here is the link to the thoughtful open letter from @yale faculty https://t.co/jotWsvfzIE mentioned here https://t.co/wU5
bmaz Also, "terrorism" and "hate crimes" create preferred sets of victims to where all men and women not equal anymore. https://t.co/ybaHOD0NUt
bmaz This is spot on. Crime is crime. "Terrorism" and "hate crimes" are just excuses for the govt to leverage defendants https://t.co/ybaHOCJcvT
bmaz RT @BostonGlobe: Daily fantasy sports sites tell fans that it’s possible to win big money, but they tell a different story in court https:/…
emptywheel @charliespiering You do know USAF gives the govt MORE data w/fewer restrictions?
emptywheel @MoonofA Not to mention that usually when we're conducting regime change we LOVE to hurt the economy in question.
emptywheel RT @dandrezner: Four tough things columnists should do before writing about universities. https://t.co/cC5FVOGztK
emptywheel @MoonofA Which is why I asked. Can't even think of any way NYT claim could be true except if we acknowledge Kurds have to sell to someone
JimWhiteGNV For Michael Rogers, every Monday is Cyber Monday.
emptywheel How would targeting ISIS' oil business would hurt Iraqi and Syrian economy? https://t.co/mfnrZ228nt https://t.co/tES7LRHrCP
emptywheel @lib_ertarian_ I wish we would too. Q is how we go about doing that.
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