Truth be told, most big companies, banks, state and government organizations are prone to corruption, mismanagement, larceny, fraud and waste.
But a time comes when some no-nonsense folks start looking beyond vested interests and ask where the line of responsibility and penalty must be drawn.
The sheer lack of accountability and travesty of justice in the business arena in Iran is no more conspicuous than in its dysfunctional car manufacturing industry.
When it comes to this local industry, the least that must be said is that it is broken. And mind you, this is not the type that can be taken care of soon in the economic interest of the common man. It is beyond repair.
Iran’s carmakers have long been a clear and present liability for the economy.
In the case of secondhand cars, the situation is much worse. Though a growing number in the low-income bracket go for used cars, this small but growing sector of the economy remains disorganized and in disarray.
“Who can blame these guys,” one observer said, “when our main auto producers with all the heavy subsidy baggage they carry are so inefficient and irresponsible.”
Few if any auto expert or market analyst can tell you what is really going on in this huge, but crisis-plagued and loss-making industry that gulps down millions of dollars in subsidies every year but continues to sink in red ink.
Something is wrong somewhere up.
Insofar as the dejected car owner is concerned, over the past several years, prices have continued to rise from one day to the next.
Those in charge of trade and industries, as well as the army of state-affiliated bodies and ombudsmen will never ever give you a convincing answer why this “problem” keeps on getting worse.
Notoriously Expensive
One cannot help but get the awful feeling that owning a car here is a crime. If that is not the case, how can the government, which is the biggest shareholder in the two major auto companies, explain the notoriously poor quality and high price of cars manufactured by its companies?
SAIPA and Iran Khodro–the two names that pop up the minute one decides to buy a domestic car–have been dangerously immune and do whatever they deem fit. There is no judge or jury to use the full force of the law against the unruly auto managers, so it seems.
Going through the maze of official, published and unpublished data, we realize the scale and scope of the auto sector disaster. I’m giving two small examples of price gouging by the two local companies and leave the rest to the wisdom of the reader.
Since its inception in 2014, Financial Tribune has regularly covered the auto industry for which it now has a special page (page 7) on alternate days.
So, by compulsion, we have delved enough into this matter and have seen at close range how this key industry (reportedly the third largest after oil and petrochemicals) has moved from one crisis to another.
Time and again, the two major carmakers have begged for state or government handouts and bailouts–a largesse granted to no other. One premise that the negligent and shoddy automakers, plus their protagonists in the halls of power, base their flimsy argument is the “huge size of this industry”.
The “too-big-to-fail” argument reminds us of a similar nonsense not very long ago. In the 2007-08 financial crisis, many US banks failed and lined up for bankruptcy. Word soon spread that the lenders must be salvaged for no reason but because of their huge size.
The US Federal Reserve’s boss at the time, Ben Bernanke, defined the term in 2010: "A too-big-to-fail firm is one whose size, complexity, interconnectedness and critical functions are such that, should the firm go unexpectedly into liquidation, the rest of the financial system and the economy would face severe adverse consequences."
He continued: "Governments provide support to too-big-to-fail firms in a crisis, not out of favoritism or particular concern for the management, owners, or creditors of the firm, but because they recognize that the consequences for the broader economy of allowing a disorderly failure greatly outweigh the costs of avoiding the failure in some way.
“Common means of avoiding failure include facilitating a merger, providing credit, or injecting government capital, all of which protect at least some creditors who otherwise would have suffered losses. If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved."
Safe Haven
Getting back to the auto sector, one disturbing, but hardly surprising, factor rarely mentioned is that many Iranians see buying cars as a business opportunity.
They line up to buy new cars and even pay in advance to be able to protect the value of their money and make a fat profit at the end.
A recent poll showed that 60% of the people who bought brand new cars did so only for their premium and resale value.
It is worthy of mention that this so-called necessary evil and “business mantra” is not the sole function of the tempting auto sector.
The same theory also often applies to other safe havens, namely foreign currency, gold and real estate, not to mention the avaricious middlemen, black-marketers and rent-seekers in the habit of hoarding and price gouging.
The latest example of their illicit trade exposed last week was in relation to masks and disinfectants that simply disappeared from drugstores and prices went through the roof with the breakout of the deadly coronavirus in Iran and 60 other countries.
With respect to the buying and selling of cars, supporters of this trade keep pressing one point and that is the sorry state of the national currency.
Value of the rial, for example, has been tanking at terrible speed. In 1979, one dollar cost 70 rials, today it is worth 153,000 rials.
Under the conditions, carmakers have gotten an open field. If the people are so ardent, they presume, to buy their poor quality and highly-priced gas-guzzlers, and when there is no competition, why should they waste time, money and energy on improving quality and be fair with the skyrocketing prices?
This alarming mindset has prevailed for decades despite pleas from consumer protection groups that are rarely given time on state radio and TV to explain the doom and gloom of car buyers and demand that car companies be brought to task.
