7 ms·

On a higher level, there is certainly a case that foreign manufacturers have more resources available per dollar per car. In other words they can afford to put

by crdb 11y ago

On a higher level, there is certainly a case that foreign manufacturers have more resources available per dollar per car. In other words they can afford to put more in a car for the same sale price. Trying to sketch my thoughts: In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) AND massive subsidies for whoever wants to go take advantage of it (I know a company that opened a very, very expensive plant 200km from Berlin because the subsidy was such that they came out profitable even if the plant lost money for 20 years). In Japan, it is both systematic currency devaluation and the keiretsu system (which I think is what drives the continuation of "Japanese corporate culture" rather than the other way round). Its effects are/were (til early 2000s, not sure about today): cheaper currency from systematic yen devaluation (same as the eurozone effect), lack of competition including collusion to keep wages down locally (tough immigration laws help), collusion to maintain very high prices effectively "taxing" the population with the money directly "financing" inefficiencies within keiretsu companies. These are all structural advantages to Japanese manufacturers. Culture plays a part, no doubt. There are appeals in the Tokyo metro to buy Japanese bonds as a "patriotic duty", which is a form of voluntary further taxation (and just look at who owns the majority of JGBs). The Mittelstand culture, excellent education and long history of industry in Germany certainly help. But I think macro factors are equally if not more important, and much fewer discussed in "normal" circles (i.e. outside finance).

comrade1 11y ago
Am I in a time warp? Germany is on the Euro and hasn't been on the Mark for almost 15 years. And the Berlin wall has been gone for 25 years!
- crdb 11y ago
  That's the whole point! The monetary union means the EUR (the "new" mark) is lower (from a German standpoint) than it would be should it be trading separately. Having Greece in the EU is an ADVANTAGE to German manufacturers. Greece is "passing on" its currency advantage to Germany. See what just happened to the CHF when the peg lifted.
- scintill76 11y ago
  I was wondering the same thing and did some searching. It turns out the mark is still exchangeable to Euro, fixed at 1.95583 marks to EUR. As of 2012, there were billions of marks supposedly still in circulation. Not directly related to the GP comment, just interesting IMO. http://www.wsj.com/articles/SB10001424052702304373804577520930784840596 http://www.wsj.com/articles/SB100014240527023043738045775209...
kalleboo 11y ago
> to keep wages down locally (tough immigration laws help), This is the first time I've heard of tough immigration laws help to keep wages down. All I hear from the US is complaints about H-1B immigration depressing wages. And immigrating to Japan is definitely NOT tough at all for any educated labour, only uneducated labour (and letting in uneducated labour from S-E Asia would absolutely be send wages plunging). If you have a college degree and can find an employer, you will have zero resistance immigrating to Japan. Way easier than Europe or the USA where there are strict quotas.
- crdb 11y ago
  My mistake. I had a point to make about immigration but forgot to make it, the draft stayed in place. Regarding long term immigration, I thought gaijins could never secure PR or citizenship (i.e. residence not tied to work) unlike in say the US (Green Card) or Singapore (PR, PEP) to name two. FWIW I think immigration policy being overly strict harms economic growth in two ways: - depleting the supply of talent increasing the cost of running a business that depends on the talent; - stopping foreign founders from starting a business in your country to take advantage of its better conditions cuts the number of high growth businesses. On the first point, Singapore is the extreme example. There are/were no Haskell developers there at least at the price we were able to pay (because the only Haskellers were at Standard Chartered making about twice as much). I tell this story often so the details might be fuzzy as time passes and the numbers dissolve in my memory, but our job ad had 150 qualified applicants (i.e. completed our selection task and it compiled and worked as expected) from the rest of the world (mostly from the US, Canada and Northern Europe) and 0 from Singapore, not even on EPs, although two SCB chaps did get in touch informally asking about the salary range. My then team of 10 would never have existed had Singapore not had its extremely open Employment Pass system (which the US does not have); every single member (bar one Singaporean who learnt Haskell) was "imported". In practice, we had planned for this eventuality and had looked into alternative locations; half the team ended up remote anyway. On the second point, I once made a back of the envelope calculation showing that around 40% of famous Silicon Valley founders (i.e. Intel, Apple, etc. level companies - I just took the list of the highest valued and kept working down until I had a significant sample) were first or second generation immigrants. Taking our two examples, Jobs had a Syrian father and Andy Grove was born Andris Gróf in Budapest. The real damage of the H1-B policy (other than being a lottery and being gamed to hell and back) is thus tying the visa to a workplace. It's not damaging per se, since one could in theory spin up a company and apply for the visa; it's damaging in practice, because the process takes months, expensive lawyers, and piles of paperwork which is definitely not "useful" work and usually unaffordable to a "normal" startup founder. Singapore, again, has it right: an Employment Pass takes around 7 working days to be approved, making it extremely easy to change jobs. (However, due to people using its EntrePass to skip investor visa requirements, it now has ridiculous requirements such as hiring levels to be maintained and having to be invested in from a shortlist of approved investors none of which actually do seed investing. So people spin up a company with their accountant as the local director and get themselves an Employment Pass that way...) It's never been easier and cheaper to start an international software company, and software is "eating the world" so I suspect at some point a location will realize the potential. I wonder how long Silicon Valley's advantage in capital and knowledge will last as it restricts its effective talent pool to a population of 300 million vs the other 9 billion in the world rapidly arriving to middle class living standards and knowledge; but so far no country has gone forward and allowed foreigners (or non-Europeans, in the case of Europe) to start companies easily in their land.
rbehrends 11y ago
> In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. The Euro actually appreciated massively between 2000 and 2008 as the German economy recovered [1]. > On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) The pay for the average German auto worker is considerably better than that for the average American auto worker [2]. (Note that this needs to be relativized somewhat because German car companies also employ temp workers that aren't paid that well, but they still make up a minority.) [1] http://www.dollars2euro.com/Charts http://www.dollars2euro.com/Charts (click "All", then "Flip"). [2] http://www.forbes.com/sites/frederickallen/2011/12/21/germany-builds-twice-as-many-cars-as-the-u-s-while-paying-its-auto-workers-twice-as-much/ http://www.forbes.com/sites/frederickallen/2011/12/21/german...
- crdb 11y ago
  If the "German Euro" was to split from the "not German Euro" tomorrow as the CHF unpegged recently, do you think it would trade higher or lower than it trades now? What would happen to Audi and VW if it was to trade twice as high?
  - rbehrends 11y ago
    A fictional "German Euro" would still appreciate relative to the "not German Euro", yes. My point is not that Germany does not benefit from a comparatively weak Euro – it does – but that this doesn't really explain differences between the German and the American automobile industry. It's also not clear that a stronger "German Euro" would necessarily harm German exports. See this article: https://medium.com/@dsquareddigest/what-would-the-german-export-sector-look-like-3d22644daeba https://medium.com/@dsquareddigest/what-would-the-german-exp...
    - 11y ago
aschreyer 11y ago
> In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) AND massive subsidies for whoever wants to go take advantage of it (I know a company that opened a very, very expensive plant 200km from Berlin because the subsidy was such that they came out profitable even if the plant lost money for 20 years). Fascinating story, if only Germany had started producing cars in 2000 with the introduction of the Euro. How do you think VW, Audi etc. fared in the 70's and 80's (and the rest of the German economy in general)? In addition, the Euro is pretty much irrelevant because the cars are mostly produced in the region where there are sold - do you think the exchange rate is relevant for the VW factories in Mexico, Tennessee and Pennsylvania for the north American market? How does a cheap Euro make the import of resources from outside the Eurozone cheaper, steel, aluminium etc.?
- crdb 11y ago
  According to [1] around 170k of Volkswagen 370k employees are in Germany. That is a significantly higher proportion than is warranted by the size of the market. Hence export advantage. Second, I did not claim that macroeconomics of the Euro period were sole responsible for the success of German companies. I said that one large contributing factor to the success or even survivability of German companies in export markets, versus other countries (such as the Koreans) was the fact that the euro allowed for de facto currency devaluation without any of the durable disadvantages associated (either the structural breakdown of the country that implies the devaluation, or the impact of inflation on savings, etc.) I worded it in long form because it is a complex, high dimensional subject not suited for one sentence summaries. As is most of economics and politics. [1] https://en.wikipedia.org/wiki/List_of_Volkswagen_Group_factories https://en.wikipedia.org/wiki/List_of_Volkswagen_Group_facto...

by crdb 11y ago

comrade1 11y ago

Am I in a time warp? Germany is on the Euro and hasn't been on the Mark for almost 15 years. And the Berlin wall has been gone for 25 years!

crdb 11y ago
That's the whole point! The monetary union means the EUR (the "new" mark) is lower (from a German standpoint) than it would be should it be trading separately. Having Greece in the EU is an ADVANTAGE to German manufacturers. Greece is "passing on" its currency advantage to Germany. See what just happened to the CHF when the peg lifted.
scintill76 11y ago
I was wondering the same thing and did some searching. It turns out the mark is still exchangeable to Euro, fixed at 1.95583 marks to EUR. As of 2012, there were billions of marks supposedly still in circulation. Not directly related to the GP comment, just interesting IMO. http://www.wsj.com/articles/SB10001424052702304373804577520930784840596 http://www.wsj.com/articles/SB100014240527023043738045775209...

kalleboo 11y ago

> to keep wages down locally (tough immigration laws help), This is the first time I've heard of tough immigration laws help to keep wages down. All I hear from the US is complaints about H-1B immigration depressing wages. And immigrating to Japan is definitely NOT tough at all for any educated labour, only uneducated labour (and letting in uneducated labour from S-E Asia would absolutely be send wages plunging). If you have a college degree and can find an employer, you will have zero resistance immigrating to Japan. Way easier than Europe or the USA where there are strict quotas.

crdb 11y ago
My mistake. I had a point to make about immigration but forgot to make it, the draft stayed in place. Regarding long term immigration, I thought gaijins could never secure PR or citizenship (i.e. residence not tied to work) unlike in say the US (Green Card) or Singapore (PR, PEP) to name two. FWIW I think immigration policy being overly strict harms economic growth in two ways: - depleting the supply of talent increasing the cost of running a business that depends on the talent; - stopping foreign founders from starting a business in your country to take advantage of its better conditions cuts the number of high growth businesses. On the first point, Singapore is the extreme example. There are/were no Haskell developers there at least at the price we were able to pay (because the only Haskellers were at Standard Chartered making about twice as much). I tell this story often so the details might be fuzzy as time passes and the numbers dissolve in my memory, but our job ad had 150 qualified applicants (i.e. completed our selection task and it compiled and worked as expected) from the rest of the world (mostly from the US, Canada and Northern Europe) and 0 from Singapore, not even on EPs, although two SCB chaps did get in touch informally asking about the salary range. My then team of 10 would never have existed had Singapore not had its extremely open Employment Pass system (which the US does not have); every single member (bar one Singaporean who learnt Haskell) was "imported". In practice, we had planned for this eventuality and had looked into alternative locations; half the team ended up remote anyway. On the second point, I once made a back of the envelope calculation showing that around 40% of famous Silicon Valley founders (i.e. Intel, Apple, etc. level companies - I just took the list of the highest valued and kept working down until I had a significant sample) were first or second generation immigrants. Taking our two examples, Jobs had a Syrian father and Andy Grove was born Andris Gróf in Budapest. The real damage of the H1-B policy (other than being a lottery and being gamed to hell and back) is thus tying the visa to a workplace. It's not damaging per se, since one could in theory spin up a company and apply for the visa; it's damaging in practice, because the process takes months, expensive lawyers, and piles of paperwork which is definitely not "useful" work and usually unaffordable to a "normal" startup founder. Singapore, again, has it right: an Employment Pass takes around 7 working days to be approved, making it extremely easy to change jobs. (However, due to people using its EntrePass to skip investor visa requirements, it now has ridiculous requirements such as hiring levels to be maintained and having to be invested in from a shortlist of approved investors none of which actually do seed investing. So people spin up a company with their accountant as the local director and get themselves an Employment Pass that way...) It's never been easier and cheaper to start an international software company, and software is "eating the world" so I suspect at some point a location will realize the potential. I wonder how long Silicon Valley's advantage in capital and knowledge will last as it restricts its effective talent pool to a population of 300 million vs the other 9 billion in the world rapidly arriving to middle class living standards and knowledge; but so far no country has gone forward and allowed foreigners (or non-Europeans, in the case of Europe) to start companies easily in their land.

rbehrends 11y ago

> In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. The Euro actually appreciated massively between 2000 and 2008 as the German economy recovered [1]. > On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) The pay for the average German auto worker is considerably better than that for the average American auto worker [2]. (Note that this needs to be relativized somewhat because German car companies also employ temp workers that aren't paid that well, but they still make up a minority.) [1] http://www.dollars2euro.com/Charts http://www.dollars2euro.com/Charts (click "All", then "Flip"). [2] http://www.forbes.com/sites/frederickallen/2011/12/21/germany-builds-twice-as-many-cars-as-the-u-s-while-paying-its-auto-workers-twice-as-much/ http://www.forbes.com/sites/frederickallen/2011/12/21/german...

crdb 11y ago
If the "German Euro" was to split from the "not German Euro" tomorrow as the CHF unpegged recently, do you think it would trade higher or lower than it trades now? What would happen to Audi and VW if it was to trade twice as high?
- rbehrends 11y ago
  A fictional "German Euro" would still appreciate relative to the "not German Euro", yes. My point is not that Germany does not benefit from a comparatively weak Euro – it does – but that this doesn't really explain differences between the German and the American automobile industry. It's also not clear that a stronger "German Euro" would necessarily harm German exports. See this article: https://medium.com/@dsquareddigest/what-would-the-german-export-sector-look-like-3d22644daeba https://medium.com/@dsquareddigest/what-would-the-german-exp...
  - 11y ago

aschreyer 11y ago

> In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) AND massive subsidies for whoever wants to go take advantage of it (I know a company that opened a very, very expensive plant 200km from Berlin because the subsidy was such that they came out profitable even if the plant lost money for 20 years). Fascinating story, if only Germany had started producing cars in 2000 with the introduction of the Euro. How do you think VW, Audi etc. fared in the 70's and 80's (and the rest of the German economy in general)? In addition, the Euro is pretty much irrelevant because the cars are mostly produced in the region where there are sold - do you think the exchange rate is relevant for the VW factories in Mexico, Tennessee and Pennsylvania for the north American market? How does a cheap Euro make the import of resources from outside the Eurozone cheaper, steel, aluminium etc.?

crdb 11y ago
According to [1] around 170k of Volkswagen 370k employees are in Germany. That is a significantly higher proportion than is warranted by the size of the market. Hence export advantage. Second, I did not claim that macroeconomics of the Euro period were sole responsible for the success of German companies. I said that one large contributing factor to the success or even survivability of German companies in export markets, versus other countries (such as the Koreans) was the fact that the euro allowed for de facto currency devaluation without any of the durable disadvantages associated (either the structural breakdown of the country that implies the devaluation, or the impact of inflation on savings, etc.) I worded it in long form because it is a complex, high dimensional subject not suited for one sentence summaries. As is most of economics and politics. [1] https://en.wikipedia.org/wiki/List_of_Volkswagen_Group_factories https://en.wikipedia.org/wiki/List_of_Volkswagen_Group_facto...