Bosses profit – while workers suffer

THE MASSIVE demonstration in Birmingham directly resulted from the world car industry’s crisis of overcapacity.

Bill Mullins

Major car manufacturers have expanded their production facilities way beyond what the market could bear. Even in the USA, where 1999 car sales exceeded 16 million for the first time, productive capacity exceeds market potential by five million cars a year.

A major cause of the 1997 South East Asia crash was Japanese and Korean car manufacturers’ massive debts. They built more and more assembly plants with ultra-modern production methods to try to drive their competitors out of business.

They borrowed massively from the banks. Then when the market slowed down, the banks called in their debts. Many East Asian car makers moved into bankruptcy and became victims of predatory US and European car multinationals’ take-over bids.

In the 1990s Fords built up a huge cash mountain of $23 billion, enabling it to buy up its weaker rivals. European manufacturers depend on US economic growth to sell their cars – they doubled their sales to America in the 1990s.

Paradoxically the capitalist boom sped up the mad worldwide chase for markets. Productive capacity now exceeds vehicle sales by 21 million cars a year. That’s equal to the production of 80 modern assembly plants.

So, on a capitalist basis, these 80 plants could be mothballed and the remaining productive capacity would meet all the world’s present car demand. Western Europe has nearly 40% of the world’s excess capacity.

BMW, which is losing out to its rivals, fears a takeover from Ford or VW. BMW is now desperately retreating to its home base.

Fear of a Ford take-over led BMW to buy Rover in 1994. They hoped to become mass producers of middle-range cars rather than just producing up-market models.

Their plans failed, mainly due to massive over-capacity in an industry based on private ownership of the means of production.

Capitalist firms are in business to please their shareholders through high profits and high share values. BMW made £663 million profits last year but their share value fell.

When a company hits difficulties, its share values fall making them vulnerable to takeover bids as rival companies try to remove them from the market and cut excess capacity.

Where do car workers fit into this scenario? For the capitalist owners, frankly they don’t. If we want to change that, we need to change the system.