JBL: Ford, GM Will Lose This Game of Chicken

I have been in Bangkok all week wrestling for the WWE (WWE Quote). Growing up in Sweetwater, Texas, I never dreamed I would be riding in a rickshaw in Bangkok. Since I weigh almost 300 pounds, the poor driver probably hoped I never would be either.

That said, the big news here is not the president's speech but rather the bilateral talks between Thailand and the U.S. These talks present more problems for the carmakers in the U.S., and another reason to stay away from GM (GM Quote) and Ford (F Quote).

The U.S. wants Thailand to open up its banking system to foreign banks. In return, Thailand wants a repeal of the so-called chicken tax, which is a tariff on pickup trucks coming into the U.S. Thailand is the world's second-biggest producer of pickups, at 500,000 per year.

The current tariff, instituted in 1963, puts a 25% tax on light trucks imported into the U.S., compared with a 2.5% tariff on cars. Many in Congress, at the urging of the auto union lobbyists, oppose the elimination of the tariff. Their claim is that countries such as Japan, South Korea and India will use this as a backdoor for entry into the U.S. light truck market.

Ford and Mazda have sensed the opportunity and have a partnership in Auto Alliance that produces 120,000 light trucks in Thailand now, and Ford has announced a $500 million plant expansion there.

This does not bode well for U.S. automakers. I believe GM is going belly-up anyway, and I believe Ford is a stock to avoid. With an administration that advocates free trade, these talks will most likely progress despite opposition and are another reason to avoid the American carmakers.

With an average wage less than that of Mexican workers, Thailand could become a major player in manufacturing of autos and light trucks. Even if the U.S. carmakers can stay afloat, they will have to use their excess money on union-related costs and will not have any for the much-needed R&D.