Russian auto bailout

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http://www.nytimes.com/2009/04/07/business/global/07lada.html?ref=europe
 Quote:
The factory here has been stamping out the same version of the Lada, the typical boxy people’s car of the former Eastern Bloc, for four decades. Known as Avtovaz for short, it is one of the least efficient automobile factories anywhere in the world — each worker produces, on average, eight cars a year, compared with 36 cars a year at General Motors’ assembly line in Bowling Green, Ky., for example. Yet the government is giving Avtovaz (pronounced aft-OV-az) billions of dollars in aid, no strings attached. No chief executive firings. No renegotiation of workers’ contracts. No demands to turn out better-quality cars, much less fuel-efficient hybrid cars. (The first car with an airbag was introduced here in 2005.) But the auto bailout, Russian style, is intended more to ensure peace in the streets than restructure a business, much to the lament of some critics who think tough love might be better. “The key issue is too much government protection,” Yegor T. Gaidar, a former prime minister, said. “The factory will create as many problems for the Russian economy as General Motors for the States.”
40 years making the same product. How's that for innovation! More bailing out bad behaviour.
 
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The russians did not bail the company, they bailed the people. But they made a mistake by not letting the market fix their mess. Interesting points in the article. "...All told, the Avtovaz factory and its suppliers support two million jobs, according to a statement by the factory’s management, out of a total Russian work force of about 75 million. Many of those jobs are in small and medium-size towns not far from Moscow. Avtovaz’s management, in a written response to questions, hailed the company’s “indisputable advantages” in a downturn owing to its inexpensive product line. The car now marketed as the Klassika — a design for the squared-off Fiat 124 that the company bought in 1974 — sells for $4,160..."
 
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I guess they could lay off 3/4 of the work force all the way down the line and up the productivity. You've got to understand what productivity means in terms of impact. Take our same assembly lines (which, oddly, that contained the same commentary about how bad US automakers are) and just cut the wages to 25% and have the workers doing 25% of current productivity levels and employ 4X the workers. The stats would be the same ..the cost would be the same ..the product would be the same. You would just have fewer useless eaters that were not employed. That's where most of the stats are distorted. You can up productivity to 100% and have no customers. Just develop robotics to replace all human toil. Who will buy them besides those you have to hire to repair robots ..until you develop robots to replace them. If you can't convert productivity into some shared benefit, it doesn't really do much for anyone accept the owner.
 
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 Originally Posted By: Tempest
40 years making the same product. How's that for innovation!
Works for me - the Lada has been a pretty reliable and usable workhorse for us.
 

Tempest

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 Quote:
If you can't convert productivity into some shared benefit, it doesn't really do much for anyone accept the owner.
What a narrow view. Productivity reduces the need for labor for a particular product/service and frees up labor/resources for other economic activity. It also reduces prices which frees up capital to be spent on other products...which creates other jobs. So productivity increases the economic base and benefits all. Of course we could always go back to tilling fields by hand...as was done before the industrial revolution. Electricity, who needs it?
 
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