Whether it’s due to pure business ignorance, immense ignorance in general, or poisonous malice, our current president, a consistent business failure over the past several decades, is working feverishly to destroy another major US industry — the auto industry.
Before we get into the news, I think it’s important to point out three things about Donald Trump’s business history. First of all, note that Trump was never the head of a public company. He never faced the scrutiny of shareholders, public reporting, or an independent board of directors. As many have pointed out, if Trump faced any actual business oversight, it’s almost a certainty he would not last long at all at the head of his company. Because he was consistently a horrible businessman.
As one shiny example of how bad of a businessman he was, leaked tax documents and some of the nation’s best journalists showed us that not only did Trump lose a ton of money for many years — it seems he actually lost much more than any other American in the early 1990s, if not also the 1980s. That’s not just bad; that’s epically bad. “His core business losses in 1990 and 1991—more than $250 million each year—were more than double those of the nearest taxpayers in the I.R.S. information for those years,” the New York Times writes.
If you’re scratching your head right now because you thought Trump was a successful businessman, there are a few things to know. First of all, Fred Trump, Donald’s father, gifted Donald at least $413 million (in today’s dollars) throughout his life. It is very hard to squander $413 million. Even if you are a tremendously horrible business person, get super unlucky time and time again, and, say, lose $300 million, you’d still have $113 million! Stick it in a freakin’ index fund and you’re set to hobnob with the world’s genuine elites for the rest of your life.
Fred Trump was actually funneling Donald Trump money (illegally) when he was just a toddler. “By age 3, he was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. In his 40s and 50s, he was receiving more than $5 million a year.” Father Trump was avoiding taxes by giving toddler Trump some of his first lessons in fraud.
Fred bailed Donald out throughout his life, according to numerous reports, and it’s reported that Donald’s siblings even did so at times. Just regarding the ongoing help from father, here’s more info from the New York Times story linked above:
“Tax records also reveal that at the peak of Mr. Trump’s financial distress, in 1990, his father extracted an extraordinary sum—nearly $50 million—from his empire. While the Times could find no evidence that Fred Trump made any significant debt payments, charitable donations or personal expenditures, there are indications that he wanted plenty of cash on hand to bail out his son if need be.
“That was what happened at Trump’s Castle casino, where an $18.4 million bond payment was due in December 1990. Fred Trump dispatched a trusted bookkeeper to Atlantic City with checks to buy $3.5 million in casino chips without placing a bet. With this ruse—an illegal loan under New Jersey gaming laws, resulting in a $65,000 civil penalty—Donald Trump narrowly avoided defaulting on his bonds.”
Anyway, no need to beat a
dead horse dumb businessmen, the point is clear: Donald Trump was a horrible businessman who was bailed out by his dad until his dad died and then was apparently bailed out by other super rich people (seemingly from the Middle East and Russia) after his dad died.
The skills Trump did develop effectively were branding, conning people, and entertainment. His hit show The Apprentice was built around making him look like a good businessman (which was apparently quite the headache for producers who consistently had to deal with him making illogical decisions). It’s quite ironic that one of the worst US businessmen of the 20th century became synonymous with “good businessman,” but I guess that’s what can happen in a culture of misleading commercials, “reality TV,” and an obsession with beauty contests and WWE.
How does this all relate to today? We’re getting there. Hold on for one more background topic.
It’s fitting that someone who was elected in a moment of “turn the irony to 11” has given us overdoses of irony with several of his core actions as president. The man behind “The Art of the Deal” (not the writer, Tony Schwartz, but the braggadocios rambler Tony tried to translate) has screwed up our deals with other countries so badly that US taxpayers are now subsidizing American farmers with billions and billions of dollars in bailouts. The problem for these farmers, aside from running face first into business impotence and government handouts, is that even if Trump’s trade war ended tomorrow, it would probably take a decade for the farmers to get the business back that they lost. Not only are these farmers being bailed out today, but this “socialism for agricultural” will likely go on for years or decades as a result of Trump’s horrid deal making. The double dosage of irony here is that 1) Trump is demonstrating again that he’s horrible at business and at making deals and 2) these rural populations are (or were) core Trump supporters.
So, to recap: Donald Trump was a horrible businessman for decades who repeatedly got bailed out by his dad, Fred Trump, and was gifted $413 million from Fred over time. He has also demonstrated his knack for destroying businesses by throwing a sledgehammer into the US agriculture industry.
On to today.
Not content with wrecking one US industry, Trump has moved on to the auto industry.
The US auto industry hasn’t exactly been swimming in success anyway, but Trump is now trying to push it off a cliff (inadvertently, I presume). As you have probably heard by now, California has been allowed to require stricter pollution standards than the US government for decades, basically since the Clean Air Act was enacted. “Most notably, the law prevents states from setting standards that are more strict than the federal standards, but carves out a special exemption for California due to its past issues with smog pollution in the metropolitan areas.” This has not been a controversial policy. California sets higher fuel economy and pollution standards and automakers meet them. Of course, on the state level, there’s always a push and a pull about the specifics, but there’s been no effort I know of to break the US–California agreement of the past several decades in order to try to allow more automobile pollution. Until Trump came along.
Trump is now trying to break the deal and make it illegal for California to require cleaner cars than the US government. To show you how absurd the whole situation is, even the automakers don’t want this kind of intervention. They have reportedly told Trump they don’t want the law changed, and several automakers have announced that they’d just voluntarily comply with California’s standards no matter what the US government does under Don “the failed businessman” Trump. (Side note: Trump’s administration is now threatening to sue these automakers with a nonsensical antitrust complaint. #Winning) California Governor Gavin Newsom (who was actually a CleanTechnica contributor when he was a much younger politician, a decade ago) explains the situation well in this recent interview with MSNBC:
There are a few reasons why automakers don’t want Trump interfering with California law. One is that businesses like certainty. While Trump seems to think chaos is good, it is well known that businesses like certainty, clarity, and stability. Business planning and development can take years. Knowing what exactly to plan for is often critical. With California’s regulations, automakers knew what to plan for. Trump’s decision to throw everyone on a high-speed carousel results in automakers not having a clue what to plan for. Even if the Trump administration somehow won the case in court, it would take ages to resolve, with excruciating limbo in the meantime. Also, once Trump gets booted from office, it’s highly likely the next president would just bring us back to the policy of the past several decades. So, what should automakers plan for? The answer seems clear, which is why they were lining up to voluntarily comply with California’s regulations.
There’s another important point, though, one I see even good media coverage routinely ignoring. The world is moving the auto industry forward, requiring cleaner cars and SUVs. Europe and China have much stronger emissions regulations than the US, which have already led to higher (or, in some cases, much higher) electric vehicle market share in those regions. California is at a fairly high level itself, especially thanks to Tesla’s leadership producing the best vehicles on the market and the state ZEV mandate requiring other automakers put in at least a half-decent effort. The latter part of that could be in jeopardy if Trump does indeed push the state (and country) backwards — his incessant focus, as promised. But an important thing that would mean regarding the US auto market is that it would get even more out of whack from other major auto markets. The vehicles and powertrains automakers would be producing for China and Europe wouldn’t fit in the US market. The vehicles that would fit for the US market would be more or less useless for those other major markets. It’s not a good situation for automakers to be in.
What’s going to be the result of this internal US trade war? No one really knows. But nothing good as far as the eye can see. One possible scenario, though, is that “businessman” Trump will shatter another major US industry. Perhaps that’s what happens when you put a multiple-bankruptcy veteran who spent much of his professional life being bailed out by his dad in charge of the country.
Maybe China could bail the US auto industry out. Or maybe Chinese automakers will just wait for Trump to blow out of town, wait for US automakers to be sitting on the ropes with inefficient vehicle lineups, and then start importing a large variety of cost-competitive electric vehicles.
Well, at least we’ve still got Tesla.
Side note: The following video from MSNBC regarding this Trump–California news is pretty good quick coverage of the topic, but I’ve got three gripes that I think need to be aired. One is that the NBC News correspondent calls Obama’s fuel economy regulations “very stringent,” when they’re really not stringent at all. They were a fairly soft compromise and could, technologically, be met years ago.
My second gripe is that the correspondent doesn’t put any of the news into a global context, doesn’t point out that Europe and China have much more ambitious requirements, and doesn’t point out that if the US becomes a bigger and bigger laggard, that’s likely to hurt US automakers’ competitiveness around the world. Eventually, it’s also likely to hurt US automakers’ competitiveness at home, since the future is electric and leaders who grab hold of the new market in other regions will be most ready to capitalize on openings in the US market (theoretically, at least). We’ll see how it all plays out, but it would have been nice if this MSNBC coverage had at least mentioned that China and Europe have much stricter standards than the US.
My third gripe is that the NBC News correspondent states, “The administration, President Trump, thinks that electric cars are too expensive and says that we should have cheaper internal combustion engine cars.” This is the one that irritates me the most. The correspondent says nothing to debunk that assumption. She does not explain that electric vehicle technology costs (especially battery costs) have been coming down rapidly, that they will continue coming down, and that the Model 3 is already hyper-competitive with (or more competitive than) other vehicles in its class. She doesn’t point out that there’s no fighting the technology trend — electric vehicles are indeed the future. Trump’s thoughts on this are ignorant, and simply repeating them without debunking them is a disservice to both the profession and society. Reporting on the telephone market in 2003 and equally presenting the opinions that “the future of phones is cell phones” and “the future of phones is landlines” would have been bad reporting. But hey, when has it ever been problematic to report Trump’s idiotic opinions without immediately smashing them as idiotic?
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