Regulatory Challenges and Automobile Manufacturing

Many folks wonder how come the auto industry takes so long to recover as the economy gets better. I would submit to you that much of the problem has to do with regulations, and the bureaucracy in the industry. Yes, there are also unions and lawyers, which cause a great deal of animosity and speed bumps to the industry, but the regulations first and foremost are the biggest problem, and I’d like to talk to you about this if I might.

You see, we can blame the unions and the lawyers, and they are quite problematic when running a large business, especially making automobiles. And we should also realize that it is the lawyers and the unions which lobby their politicians in order to put more regulations and restrictions on the auto industry. The more regulations and restrictions, the slower the sector moves and hires more additional workers, or can recover in a downturn economy.

Luckily today, the US automakers are doing quite well, and the politicians are busy taking credit for the bailout, but in reality much of the market share that has been gained by General Motors, Chrysler, and Ford has more to do with the supply-chain disruptions that happened due to the giant Japanese Earthquake and Tsunami. All the gains made by US automakers are gains which were lost by the Japanese automakers. And it wasn’t the fact that the US automakers could compete better, it was due to those global events by Mother Nature which were Black Swan


Right now, we see that the Chevy Volt was a total flop, but that should be expected considering the challenges with bringing new prototypes to market, retooling factories, and all the regulations which are involved in the innovative process. Not to mention the fact that even though there was only one Chevy Volt which caught on fire, it triggered congressional investigations. And yet we expect our auto manufacturers to lead us into the future of alternative energy, hybrids, electric cars, and hopefully fuel cells in the future? You have to be kidding me?

It’s time to reduce the bureaucracy and regulations. General Motors did not need a bailout from the United States government, and when the US government and taxpayer did bail out General Motors, what did the government do, it override bankruptcy law, it also override franchising law as all those dealerships were cut. If General Motors could have done that without the government’s help, let’s say those regulations didn’t exist in the first place, they wouldn’t have needed a bailout, they could’ve done a bankruptcy very smoothly, made the transition on their own, and let the free market take it from there.

Indeed, I suppose this point is lost on many people, especially at a time when we are in an election year, and everyone is taking credit for the bailout of an American company. It was a slap in the face to the free-market system and capitalism. It was exactly what Adam Smith warned us about with regards to the incestuous relationship between big business and government.

Indeed, it was exactly what we don’t want in America, and what we pride ourselves against. We aren’t any better than the rest of the world when we do things like that. Americans are better than this, and we can do just fine in the auto industry and compete if we can get rid of some of this incessant, obtrusive, and overburden bureaucratic regulation. Indeed I hope you will please consider all this and think on it.