By on February 4, 2008

mixim1.jpgThe French haven’t had much influence on the car world for some time. Up until the last decade or so, their automobiles have been goofy little nuts-on-wheels from outer space– especially compared to machines from neighboring Germany, Italy or Japan, not to mention Detroit. But now we’ve got a Frog who’s in play worldwide. You want to talk about an internationalist? Carlos Ghosn was born in Brazil to Lebanese parents. The CEO who rescued both Nissan and Renault speaks six languages fluently and divides his time between Tokyo and Paris. If anybody understands the worldwide car biz, it’s Carlos Ghosn.

Ghosn doesn’t sell his Renaults in the USA. But Nissan is a strong player here and that gives him a major say in what goes on in Detroit— which he claims is in deep shit. During a recent interview with the Wall Street Journal, Ghosn said that GM, Ford and Chrysler may very well collapse as the imports seize more and more of their home turf. Ghosn slammed Detroiters, asserting that Motown’s ongoing reliance on pickups, SUVs and large luxury cars will dump them into this ditch.

Ghosn thinks that the little econo-boxes his companies sell elsewhere in the world are the future. He claims that one or all of Detroit’s Big Three will fail as the world switches to tiny machines powered by something other than aged but efficient petroleum-powered internal combustion engines. Without that kind of machine to sell in its home market, someone domestic’s going down.

Of course a lot of the guys in Detroit think he’s nuts. And I’m inclined to agree. Yeah, The Big Three are losing market share. But there are still some very smart guys in the Motor City. You never know what smart people can do when they have their backs up against a wall. And Detroit may be truck heavy in gas-conscious times, but SUVs and trucks still account for around half of the US market. 

Anyway, so what if one of the Big Three goes belly-up?

No matter who wins the race for president, you can be sure the powers in Washington aren’t going to sit around while our auto industry collapses. The industry is too essential not only to the state of Michigan, but all of the other states. Millions of jobs and billions of dollars are at stake. No one at any level of government is going to let Detroit disappear. A federal bailout is a done deal.

And yet Carlos’ prediction of doom and gloom will please the lefties and environmentalist nutcases who hate cars and the domestic auto industry and don’t mind if Detroit falls down— just as long as they force everyone to drive electric-powered cars.

Trust me: as long as bottom line thinkers like Carlos Ghosn remain in power, the world of conventionally-powered automobiles will be a part of our landscape for a long time. That’s where the money is.

That’s not to say Ghosn isn’t serious about developing electric cars. He’s signed-up with NEC to develop a lithium-ion battery for mass market automobiles. Nissan/Renault has also allied themselves with battery maker A123. And they’ve formed a partnership with Israeli entrepreneur Shai Agassi to test the waters for commercial EVs.

Many people say these li-ion-powered electric cars will be good enough for Americans and their short commutes. That remains to be seen, both in terms of actual practice and consumer acceptance.

But even if Nissan develops an electric car with sufficient range, even if America takes to battery-powered zero-emissions automobiles, it’s doubtful our overwrought power grid could cope. Expand the grid? Easier said than done.

Meanwhile, millions of modern automobiles and trucks are linked to a massive petroleum system that is not only efficient, but sustains our economy. Switching away from this system and developing other sources of power for modern vehicles is a huge concept that only a few people (including Ghosn) are prepared to suggest– never mind assault. 

No matter. Mr. Ghosn and many others both inside and outside the car industry are working hard to make their electric dreams come true. Based on Ghosn’s success with two companies, divided half-way around the world, one has to take his efforts seriously.

At best, EVs are a long term prospect. For the near future, this is all chatter aimed at shareholders, regulators and the media. Ghosn has to be smart enough to know that the current automobile— four rubber tires, a steel or aluminum body and the aforementioned gas-powered engine– is here to stay. (Yes, you can add batteries, but it’s still gas-powered.)

If Carlos is right and one of The Big Three files for bankruptcy, it won’t be because they didn’t “go green” and make small, electric-powered cars. It'll be down to the fact that they didn’t make the reliable, comfortable, stylish, reasonably fuel-efficient, gas-powered cars that Americans prefer.

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91 Comments on “Brock Yates: Does Carlos Ghosn Dream of Electric Sheep?...”


  • avatar
    Dynamic88

    "Millions of jobs and billions of dollars are at stake. No one at any level of government is going to let Detroit disappear." They seem to be doing it now. Or at least they're allowing the transfer of the NA auto business from Americans to the Japanese. Detroit's already lost half their market in the US.

  • avatar
    virages

    I think Brock’s analysis is spot on.

    My family bought a Dodge Aspen in 1977 when Chrysler should have sunk. That car was a piece of junk. In spite the lemons that they were selling, they were bailed out by the US govt. This situation is likely to happen again. But that will not change the buying habits of your american suburbanite. Only high priced oil will.

    Funny after the Aspen, our next two cars were Renaults (Alliance), which surprisingly ran fine. French cars will not make a comeback in the US. Their reputation is shot for several generations. However, you will be buying Renaults by proxy as Nissans. Don’t worry, the quality is fine…

  • avatar

    The petroleum system is robust, but not all that efficient. I forget the numbers but much of the energy is lost as heat.

    The auto industry relies on cheap, available oil, and all the major oil producers are exporting less oil than they were before. The gas-powered engine may stay, but it will continue to get more expensive.

  • avatar
    gsp

    The American auto industry needs electric cars and foreign competition stimuli otherwise it is content to produce crap.

    Internal combustion engine powered vehicles need competition not because they are inefficient, but rather because the way we package them (too large, too powerful) is an environmental nightmare. We need to starting thinking differently. As I have said before, the only real solution to this problem is much, much higher gas taxes.

    Battery powered vehicles (from the full life cycle perspective) are currently an environmental nightmare. Also we haven’t seen how long the current crop of batteries will last yet. However, in the future, other high tech industries will solve some of these problems.

    Fortunately, our gas prices are going to rise substantially in the future, it just depends on whether we raise taxes on gas (to subsidize R&D for Detroit?…would the morons in Detroit even support this?) or through the traditional supply and demand curve. Our friends in China and India are guaranteeing increased demand in the future for oil. This will only increase the transfer of American wealth to middle eastern countries and Canada and Mexico. The US trade deficit is already a nightmare. Policy makers in Washington think that the US can defy economic logic forever I guess.

  • avatar
    Jordan Tenenbaum

    Using electric cars for commuting would be ideal, but like Brock said there’s no way our power grid could take that kind of load. Plus, I suspect that in the end the price of electricity would sky rocket.

  • avatar
    KatiePuckrik

    Now don’t get me wrong (A statement like that is ALWAYS asking for trouble!), I have great respect for Mr Ghosn as a turnaround artiste and as a manager. Mr Ghosn, turned Nissan and Renault around beautifully and keeps his managment in check (Recently, Nissan’s management missed a sales target. Mr Ghosn’s response? “Forget about your bonuses!”. Or the time he put his job on the line if he couldn’t turn Nissan around.). If I had a business which needed turning around, Mr Ghosn would be a manager to whom I would turn to. But as a visionary leader? Sorry, but I disagree.

    Firstly, under Mr Ghosn’s continued leadership, Nissan has dropped from Japan’s number 2 automaker to number 3 (Honda overtook them whilst maintaining healthy profits) and Renault is losing marketshare in France at a “Detroit rate”!

    Secondly, Mr Ghosn dismissed hybrids as a “fad” and that they aren’t a sustainable form of growth or a short term answer. Much like Detroit dismissed hybrids. He preferred to concentrate on Renault and Nissan’s “lovely” diesel engines which were “just as efficient as hybrids”. Eventually, Nissan asked for a licence for Toyota’s Hybrid Synergy Drive.

    Thirdly, Mr Ghosn said that Detroit are in deep trouble and that they have an over reliance on pick ups and SUV’s. Two things about this statement:

    1. If proclaiming that Detroit are in deep trouble and that they have an over reliance on picks ups and SUV’s makes one a “visionary” leader, then TTAC and its commentators are visionaries who would put Cassandra to shame!

    2. Nissan are just as guilty of selling stupid amounts of SUV/CUV’s and pick ups. In the UK, Nissan’s line up has totally lost the plot. In the UK, you have the choice of:

    Micra: Small city car.
    Note: Small CUV.
    Qashqai: Big CUV
    X-trail: Big SUV
    Murano: Medium SUV
    Pathfinder: Big SUV.
    350Z: Sports cars.

    If you were in the market for small hatchback (Chevy Cobalt or Toyota Corolla) or a Family sedan (Chevy Malibu or Toyota Camry), Nissan doesn’t offer you a thing.

    Conversely, I agree that GM and Ford (not so sure about Chrysler) do have some World class engineers. One only has to look to the Cadillac CTS and CTS-V (Which “Top Gear” the supposedly “anti-american” show proved that the CTS-V was better handling and faster than an Audi S4) and the Ford Mondeo (3rd Generation) for evidence of this. No-one doubts their technical prowess, it’s the bean counters and managers which we doubt. In their pursuit of profits, they forgot to build a car which will bring them those profits which they sought. And Mr Ghosn is in serious danger of replicating that mistake if the Nissan UK line up is anything to go by. If Mr Ghosn could give any advice to Detroit on how to survive, he should give them some ideas on how to cull or rein in the influence of the managers and accounts and let the engineers flourish and build more cars like the CTS and CTS-V. Just like he did at Nissan and Renault.

  • avatar
    factotum

    Detroit is a ghost city. Starting in the late 60’s after the riots, exacerbated by the oil embargoes of the 70’s, pressured by the imports in the 80’s and 90’s, it has withered and rotted to what it is now:

    32.5% of individuals live in poverty
    23% of all housing units are vacant
    Median earnings for workers older than 25 is $24,904.

    (I lived briefly in Warren. Data taken from factfinder.census.gov, based on latest census and 2006 American Community Survey.)

    Certainly, it is not solely the fault of industry. Corruption, incompetence, and laziness in government contributed to a lack of diversification, investment in infrastructure, and civic resources.

    But to suggest that [a] federal bailout is a done deal is perplexing. Where is the money going to come from? Me. The stretched taxpayer whose dollar is worth less every month. I’m already on the hook for the “War on Terrorism”, national debt interest, social security and who knows where else my tax dollars go.

    I’ll be damned if I allow without a fight my government to bail out a company that has failed me (2 POS GM cars), its workers and retirees, and its hometown. I would approve, however, of economic investment in taking care of the workers: free education, money to raze and rebuild their neighborhoods, money and jobs to improve infrastructure, attraction of other industries: R&D, Green Chemistry, etc.

  • avatar
    Gardiner Westbound

    You never know what smart people can do when they have their backs up against a wall. – Brock Yates

    The Detroit-3’s really smart people wear golden parachutes. Their backs can’t touch the wall.

  • avatar
    Martin Schwoerer

    Interesting editorial. The way this is going, I would say we can look forward to many intriguing pieces by BY.

    The reference to amphibians is poorly chosen, but it is good that Brock recognises that Ghosn has some strong points.

    I have a few questions / comments. Firstly, does anybody have a link to the WSJ interview Brock refers to?

    Secondly, I am surprised that there is no mention of Renault’s quite advanced Diesel technology. I have driven two recently – the 2L dcti FAP and the 1.5 L — and both were industry-leading in terms of smoothness, thrust, quietness and economy. Upon introduction of ultra-low sulfer Diesel fuel in the U.S. in coming years, I think this will be a pretty strong competitive advantage for Ghosn’s company (assuming the days of low-price fuel are over).

    Thirdly, Ghosn is to be commended for establishing Dacia. A breakthrough low-cost, high-value brand for high-growth countries like those in Eastern Europe, as well as in Russia and India.

  • avatar
    GS650G

    The next government bailout will come with environmental strings attached as lobby groups get to dictate to the auto industry what to build in return for tax dollars. Once again the consumer will be told what they want to buy with disastrous results.

  • avatar
    jkross22

    Reality is that hybrids that offer significant mileage improvements over similar sized cars have sold very well. The Big 3’s offerings in this category are a joke. No real increase in fuel economy and no real design difference from the petrol stablemate.

    GM, Ford and Chrysler all have such levels of corporate arrogance that they won’t admit they have a problem. They allow their internal fiefdoms and turf protection to supersede the customer/market demand. They deserve to die, or better yet, get bought by smarter competitors and get fixed.

    They are the proverbial blind squirrels and they’re just not finding any nuts.

  • avatar
    SherbornSean

    While Mr. Yates’ editorial is an interesting read, there are a few points that should be clarified: 1. French automakers have indeed incluced the industry lately. I would suggest that one of the two most influential vehicles of the last decade (the Logan and the Prius) is French. And long before the Mini and Smart were around, the Twingo jump started the hip but small car trend. 2. Millions of jobs are no longer at stake if a Detroit automaker goes down. Far fewer work at Chrysler (the most likely prospect in the near term), and now that they have passed from German to Private Equity hands, I don’t think Washington will even notice when they do die. 3. The scaremongering about America’s ability to absorb switching to electric vehicles has already been de-bunked. We can absorb some 160M vehicles recharging at night, when power requirements are low.

  • avatar
    John

    @Martin S:

    http://online.wsj.com/article/SB120148183603521043.html

    It didn’t seem like much of an interview for someone who actually went to the WSJ offices.

    John

  • avatar
    NickR

    The Detroit-3’s really smart people wear golden parachutes. Their backs can’t touch the wall.

    Beautiful.

    And I agree a government bailout of GM or Ford could happen. Chrysler? I am not so sure. It is privately held, and I think that the gov would have little stomach for bailing them out, especially as they never wanted to keep the company in the long run anyway.

  • avatar

    “No matter who wins the race for president, you can be sure the powers in Washington aren’t going to sit around while our auto industry collapses.”

    Are these the same powers who “helped” the big 2.3 by legislating tax breaks for >6000 lb GVW behemoths at a time they had cash and needed to be putting development money into their basic business? Perhaps they’re the same powers who didn’t sit around while our highways and bridges deteriorated into the worst among developed nations. These are the same powers who debated such national security gems as gay marriage, flag burning and prayer in schools while most of our industries were hot-footing it to cheaper climes.

    If we have to rely on “the powers in Washington”, Remocrat or Depublican, to save us or our jobs, or to promote technologies which are truly in the national interest, I suspect we’re lost. These are the same “powers” who watch once again as capital was looted from our system by white collar crooks, and who are once again wringing their hands at the results.

    And if they do “help” as they did with Chrysler, can we look forward to the kind of automotive renaissance Mr. Iacocca demonstrated with the technological wizardry of the K car? Yates may hope for help from Washington, but I’m hoping they stay out of the picture; the only leadership we get out of Washington these days is in advancing poll-taking technology.

  • avatar
    KixStart

    Dynamic88, I’m not exactly Mr. Grammar Person here, but “they’re” looked correct to me.

    GS650G: “The next government bailout will come with environmental strings attached as lobby groups get to dictate to the auto industry what to build in return for tax dollars. Once again the consumer will be told what they want to buy with disastrous results.”

    We could give that a try. It might be an improvement. After all, if Detroit knew what people wanted, I imagine they wouldn’t be blessed with large inventories of unsold vehicles. The nearby Chevy dealer is well stocked with “anniversary specials.” That is, vehicles that have sat on his lot for a year.

    And, of course, how terrible it is that there are lobbying groups composed of people who want clean air and water and a liveable planet.

    Apropos of nothing in particular, I read two articles this weekend about newly discovered groundwater pollution problems.

    And I was thinking about the two rivers that I lived near as a boy; terribly polluted in my youth, they’re both far cleaner now. Industry developed a conscience? Somehow I doubt it. My money’s on meddlesome environmentalists.

  • avatar
    Michael.Martineck

    Whale oil, railroads, steel – the backbone of American industry changes every half-century or so. Each change seemed unthinkable at the time.

  • avatar
    jerseydevil

    I want an electric car. mwybe with a gas motor for backup. I drive 17 miles to work, easily within even current battery technology.

    I HATE commuting. i LOVE cars. Id rather not commute at all with a car- dammit but i have to because there are no bike paths between here and work. 17 miles twice a day would be perfect for me. Can u say painless weight loss -AND blood pressure and colestral control. BUT NOOOOO –

    I want to use my car for pleasure only – god forbid. In the meantime a mainly electric car would fit the bill nicely.

    Brock Yates and Jordan Tenenbaum : about the power grid being overwhelmed – that so much bullshit propagated by those who want u to beleive that you NEED petroleum in your car. I dont beleive it for a second.

  • avatar

    Federal bailout? With what money? They’ve been blowing all our money on wars… wars on drugs, wars on terror, wars on two-bit dictators who pose no threat. Brock I love ya but you are wrong on that.

    Smart guys in Detroit? If they were so damn smart why did they keep on building trucks and SUV’s after 9/11? After Katrina? If they were so smart why can’t they build a car that is suitable only for rental fleets? (and barely that!)

    Short Commutes?? Strike three. I know very few people with short commutes.

    One thing I do agree with Brock on is that electric cars are not the answer. The laws of unintended consequences say that moving an expense from one place to another does not eliminate the expense. Get ready for stresses, upgrades, and pricey power bills as the grid takes the load from the petroleum industry.

    –chuck
    http://chuck.goolsbee.org

  • avatar
    Ken Strumpf

    I also don’t buy the inevitability of a government bailout. IIRC, John McCain refused to commit to government help of the auto industry, which partly explains why he lost the Michigan primary. Yet, he’s the likely GOP nominee. Also, will the millions of American taxpayers who either switched from domestic to foreign cars, or who never owned a domestic car at all, support bailing out companies whose products they won’t purchase, or even look at? Why would they? Should the government bail out Sears?

  • avatar
    SWA737

    The Federal government loves to reward incompetent corporate management in the form of multi $Billion bail outs.

    Just look what they did for the “deregulated” airline industry after 9/11. Over $15B in combined loans and gifts to companies who were in deep doo-doo way before the 9/11 attacks, thanks to the breath taking mismanagement and outright greed of their top execs. The result of the Federal airline welfare program? United, Delta, USAirways and NorthWest all filed CH11, over half the total seat capacity of the industry.

    “Let’s give a bunch of mismanaged companies a lot of money, then let them file CH 11 and continue operating without paying their bills or their employees. They can use the free money and the court system to price their product low enough to hurt the few well run competitors they have, and then the WHOLE industry can be a mess. What a brilliant idea. Now let’s tackle that whole Global Warming thingy!”

    There are a lot of parallels between the failure of the Big 3’s management to adopt to foreign competition and the airline industry’s managements’ failure to adopt to the competition from low cost carriers and the shift in consumer preference to lower priced, but often superior products from “new” players. (Honda, Toyota, Southwest, jetBlue)

    When the government decides to ‘rescue’ the domestic auto industry, $15B will be a drop in the bucket. And nothing will change except the size of the executives’ bonus checks.

  • avatar

    SWA737: “And nothing will change except the size of the executives’ bonus checks.”

    These are the guys the “powers in Washington” are most efficient at bailing out, because they’re the people who “buy” government. After all, imagine what it would do to our economy if they had to take a second mortgage out on the Gulfstream…

  • avatar
    KixStart

    Yates: “But even if Nissan develops an electric car with sufficient range, even if America takes to battery-powered zero-emissions automobiles, it’s doubtful our overwrought power grid could cope.”

    DoE

    Summary: We could support a switch to a 73% electric vehicle fleet with the current grid (spot issues might arise).

    It took me about 15 seconds to find that. If some random yahoo had written what Yates wrote, it wouldn’t have bothered me much and my response would have been “I’ve seen a link somewhere…”

    However, Yates’ voice carries some weight and for him to say things that are flat wrong, then I have to go and find something with a little authority.

    Never mind the common sense angle; anybody who’s the slightest bit familiar with electricity would have noticed that A/C loads are reduced at night, people don’t typically cook after 8:00pm, don’t typically use lights, TV, radios, power tools, etc, when sleeping and that the demand on the grid consquently slackens at night (so we could do something else with it if we liked, like charge cars at off-peak rates). In fact, electric utilities would be delighted to amortize the capital expense of the current grid by working it more extensively at night.

    And I think it’s a little bit annoying that I find such egregious – and easily researched and corrected – errors in something for which TTAC paid a premium.

    So, my decision on Yates is this, I didn’t read him in “Car and Driver” and I don’t need to read him here. I hope I’m not forced to read him for fact-checking purposes.

    Chuckgoolsbee, very short commutes are rare. Sub-40 mile commutes are less so. With an extended EV-range Prius (coming) or a Volt-like vehicle with on-board generator (coming?), the electric benefit is a matter of degree, not an absolute. This will happen gradually and there will be some time to adapt. If Detroit and Japan switched to 100% pure EV production, it would still take 20 years to change the fleet over. That ain’t gonna happen.

  • avatar
    BuckD

    Speaking as a “leftie environmental nutcase” who happens to love cars, I personally don’t gloat on Detroit’s decline. I’d love to buy American, if only they’d make a car I wanted to buy.

  • avatar
    guyincognito

    I think a bailout is likely based on the leading candidates for president. I’m not a big fan of corporate bailouts but I believe that the economy would be much better off if we did than if we didn’t, as the auto industry does still account for a significant portion of the GDP (directly + indirectly). Of course this assumes that the bailout would work.

    I also have to agree with Mr. Yates. The ICE is here for a long time. It is still by far the most efficient and cost effective mode of powering vehicles. While taxing the bejesus out of gas could change this, I don’t see that as realistic. It would be far too politically unpopular as the people who would suffer most under these taxes would be the poor.

  • avatar
    BlisterInTheSun

    While the national power grid may or may not currently be sufficient to support projected energy requirements if there were to be a major change in the way we power our vehicles (from dino juice to coal and nuclear energy) the fact is that oil is plentiful, cheap and available.

    Yes it is.

    The switch cannot be that easy, and would give foreign entities who don’t make a similar change a huge competitive advantage in terms of the costs of industrial output over North America (and presumably Europe) which would directly affect overall development for the next half century.

    That doesn’t mean we shouldn’t do it. As a true-blue American, I say we take up this challenge and reduce the national reliance on inefficient internal combustion technology and the machiavellian nations whom we rely upon to provide the means to power our gas burning rides. But I also think we need to be honest with ourselves about the timeframes and costs involved in making such a monumental change – GM may or may not be able to produce an electric vehicle for the masses in a short timeframe, but even if they do I personally believe that it will be decades before such technology would have a meaningful impact on our reliance on foreign oil producing nations.

    Nice op-ed piece, BTW. I like BY’s writing style.

  • avatar
    gsp

    guyincognito : While taxing the bejesus out of gas could change this, I don’t see that as realistic. It would be far too politically unpopular as the people who would suffer most under these taxes would be the poor.

    Give the poor a tax credit to offset the gas tax. Stop giving all the tax credits to multi-millionaires. People should not have a “right” to drive. Driving is a privilege to those that work hard and can afford it.

    Besides, as I said before, the price of gas is going up anyway. Oil futures are priced high right now partly because nobody sees America making an effort to change bad energy policy. If America did make an effort and send a clear message, oil prices would ease.

    Exxon makes record profits because of misaligned American foreign policy should be the outrage. Since when did America give a shit about the poor anyway? I’ve driven through too many US cities where the poor live in third world conditions to buy that one.

  • avatar
    Pch101

    I’ll put aside the issue of electric cars for the moment, and address this point about the bailout. I agree with Mr. Yates that a bailout would be forthcoming. But that bailout won’t do any good, so ultimately, the issue is moot.

    I seriously doubt that the Feds would infuse cash into the Big 2.8, but that hasn’t been the style in Washington for the last few decades. Instead, you could expect to some regulatory relief (a relaxation of CAFE, for example), combined with some loan guarantees and some cooperation with the major banks to float more credit. The automakers still hold enough power to pull off those sorts of stunts, and the pols would call in a few favors with their banking buddies to get it done. (And truth be told, the banks would want to do it, lest all of the paper already provided to the Big 2.8 default on them in one disastrous fell swoop.)

    Be that as it may, the automakers will ultimately still need income to survive. Income comes from revenue, and revenue comes from selling cars. So ultimately, it leads back to the same old problem — Americans increasingly prefer other products, which they go and buy, which does not help to generate that revenue.

    When the feds bailed out Chrysler, the market was much different, with the domestics still having the upper hand with the buying public. Today, there is far more competition, and the gap in desirability between the transplants and domestics has widened, not narrowed, in favor of the transplants. If Chrysler tried to sell updated K-cars today, not only would they fail, but they would be ruthlessly mocked six ways to Sunday.

    So a bailout will be tried, sure, but it will fail. It will only delay the inevitable, not prevent it. The only hope is that in buying time that Detroit will use that time to initiate a renaissance that leads to a sales-driven turnaround.

    But if history means much, then I suppose that it will be viewed as a well-earned breather that will effectively subsidize more bad habits and bad products. These guys are failure junkies, and they never seem to stop craving their fix.

  • avatar
    jthorner

    And where is Detroit’s answer to the Honda Fit, The Mini and the Nissan Versa? Nowhere to be found.

    How about Detroit’s answer to the super efficient small box Honda Element and Scion xB? I guess the Chevy HHR is close ?????

    Where are the credible Detroit alternatives to a Corolla, Civic or Sentra?

    Ghosn is right. Detroit got fat on the truck/SUV boom and is now in the process of trying to play catch up to the cars it ignored for so long.

    Chrysler looks to be the first to go down for the count. After helping to push a supplier into bankruptcy (Plastech) and sicking the lawyers on them Chrysler is now faced with massive factory closures. Boy those GE/Home Depot/Hedge Fund guys sure know how to run a company!

    http://biz.yahoo.com/rb/080204/chrysler.html?.v=2

  • avatar
    HEATHROI

    Perhaps they’re the same powers who didn’t sit around while our highways and bridges deteriorated into the worst among developed nations. These are the same powers who debated such national security gems as gay marriage, flag burning and prayer in schools.

    Edgett, you left out investigating steroid use in baseball.

  • avatar

    Heathroi – I’m guilty as charged. I also forgot spending half a trillion dollars in the middle east while failing to find the one guy we went there to get.

    On that one, I’d guess the Russian mob would’ve taken him out for $25 million or so, and if we asked them to just wipe out al Qaeda, would’ve done the whole bunch for under $100 million complete with heads-on-sticks.

    Maybe “we the people” could tick off a little box on our tax returns to start a “None Of The Above” political contribution which would send the whole bunch packing; they might be useful on roadgangs to rebuild our infrastructure.

  • avatar
    guyincognito

    “Give the poor a tax credit to offset the gas tax. Stop giving all the tax credits to multi-millionaires. People should not have a “right” to drive. Driving is a privilege to those that work hard and can afford it. ”

    I don’t think a strategy like this would work either. The likelihood of a tax rebate (many poor peole don’t even pay taxes to begin with) effectively offsetting higher gas prices is slim. First of all, the variability in driving needs would make the refund calculation complex and prone to abuse. Second, making sure the refund was allocated to fuel purchases would be impossible and without any such regulation it would be unlikely that the money would be spent that way, ref Katrina FEMA checks.

    I also don’t think it would be good for the economy to take lower income drivers off the roads and thus make them less able to maintain employment and thus more dependent on government subsidies.

    The fact is we could take a huge percentage of drivers off the roads right now by increasing incentives and/or requirements for telecommuting and we would do that simple and immediate thing if people really were concerned about this issue and not about pushing some other political agenda…

  • avatar
    geeber

    Government bailout? It depends on which automaker goes belly up first.

    If it’s GM or Ford, I can see the government taking some sort of action. Whether such action does any good in the long term remains to be seen.

    If it’s Chrysler…the government may not be so inclined to mount a rescue effort.

    Realistically, if Chrysler goes under, it helps GM and Ford, as a certain number of people will only “buy American,” and if Chrysler goes out of business, their available choices were just reduced by 1/3.

    My concern is that all sorts of groups will start weighing in on what ails Detroit, and their pet root cause usually has more to do with pushing a particular agenda than actually curing the problem.

    Detroit’s problem isn’t that it doesn’t offer enough hybrids, or has failed to produce a viable electric car, or that it offers V-8 engines.

    Does anyone think that bureaucrats are going to demand that, say, GM close down unncessary divisions and thin out its dealer ranks? (Fat chance – dealers will lobby heavily to stay in business.)

    Can Washington correct the sort of executive suite thinking that led Ford to launch the Five Hundred with dull styling and an uncompetitive engine, then fix the drivetrain but not give it enough of a thorough restyling, then let the revamped car rot on the vine through lack of advertising? (This would assume that any of the current crop of presidential candidates has enough management savvy to spot the problem. Not from what I see.)

  • avatar

    Once again I feel like a broken record, but, much as I love my internal combustion straight–no stinkin’ hybrids or electrics for me–as a policy matter, we need more efficient vehicles, whatever the technology, so that we quit sending billions (or is it trillions) of dollars to nasty dictatorships, and keep the money in the USA.

    The notion that it will hurt our economy to switch energy sources–especially to domestic ones–is laughable, although I suppose it could hurt the Halliburtons and the rest of the Daddy Warbucks crowd.

    And as another poster already stated, we can certainly handle refueling a full fleet of electric cars at night. In fact, that would make our electrical generation much more efficient, which is why the Electric Power Research Institute favors electric cars.

  • avatar

    And as for references to French cars, the ’65 Peugeot 404 in which I took my first legal drive was far better than anything American that was available at that time, and Citroen has been incredibly innovative, if perhaps in the sense of Cugnot, the Frenchman who build the world’s first automobile in 1969. (It was steam powered.)

  • avatar
    quasimondo

    Where are we going to plug in these electric cars? I don’t think my landlord woud like me hanging extension cords out the window.

  • avatar
    Landcrusher

    Brock’s last paragraph is certainly true. We can argue all day about why, but it is true.

    And while Gardiner’s point about parachutes was quite funny, I don’t think Mr. Yates was referring to upper management when he said “smart people.”

    I hope that unions, government, and lousy management has not found a way to rid all the companies of people who can fix the problem. If not, then it’s just a matter of whether or not the management will get out of the way in time to let the “smart people” build the products and get them to market before the cash is gone.

    Also, it is looking like the political bent in this country will allow bailouts. It’s wrong, stupid, and damaging to the country, but we will need a NY over NE style upset to stop it.

  • avatar
    Jordan Tenenbaum

    Brock Yates and Jordan Tenenbaum : about the power grid being overwhelmed – that so much bullshit propagated by those who want u to beleive that you NEED petroleum in your car. I dont beleive it for a second.

    Possibly, but I still cannot wrap my head around electric being the sole reliable source for powering our cars in the future. Still too many variables in the equation. Could vandals easily disconnect the cord charging up the car while it’s parked on the street? I mean, how would you explain that to your boss? What about long term power outages? Maybe I’m just splitting hairs here, but in the end I believe the answer is not in one option for powering cars, but multiple. Electric cars with little gas or propane engines in case of dead batteries, etc. Ideally, all electric would be wonderful, but I don’t think it’s feasible; not yet anyway.

  • avatar

    I think EVs will work fine for short trips in moderate climates, but in those conditions pedaling a very light vehicle would be the cheaper, and more eco-friendly option for able-bodied folk.

    I think plug in hybrids make a lot of sense. Use electric for short hauls and gasoline for whenever you run out of juice. But while small outfits like Calcars and Lion will do conversions to PHEV, the big companies seem reluctant.

  • avatar
    maxspivak

    Electricity doesn’t go on trees. It must be generated first before it can be used to power everything from you TV to you EV.

    To everyone advocating that move to EV will reduce oil consumption — get your heads out of the sand! Oil is used for electricity generation and many, many powerplants. Your car may not be dyno-powered directly, but indirectly. Moreover, these batteries are an environmental nightmare if not properly, and expensively recycled. There is no free lunch.

  • avatar
    AGR

    As a society we need to move away from fossil fuels as the energy of choice to fuel our automobility.

    If electric vehicles are not the answer, the continued reliance on fossil fuels is not the answer either.

    But wait, China and India will take care of that, as they progress towards automobility for the masses, accompanied by increased competition for fossil fuels. We in North America will see the price of gas inexorably rise.

    Who is going to bail out North American society, automobility, suburbia?

  • avatar
    pdub

    Yates’ ideas are old and worn out. We need to invest in new technology and alternative fuels as well as public transportation alternatives. Petrol and personal vehicle dependence will decrease as these alternatives become cheaper and more popular. At the end of the day, every new vehicle is a failure if it fails to increase gas mileage or offer an alternative to petroleum.

    KixStart is completely right in his post.

  • avatar
    Dynamic88

    Average commuting distances came up. I didn’t spend much time on this, I just grabbed the first readable thing I cam accross. The data is 3 years old.

    Looks like the average distance is 16 miles. Avg time, 26 minutes.

    ” Life for commuters can be heaven or hell. They report an average one-way commute time of 26 minutes (over an average distance of 16 miles). But the variance is huge: On the best days, the average commute is 19 minutes; on the worst days, 46 minutes. That means traffic, at its worst, can double the average commute time, adding 27 minutes each way.”

    http://abcnews.go.com/Technology/Traffic/story?id=485098

  • avatar

    @Jordan Tenenbaum
    I don’t expect to see an all electric fleet any time in the next 15 years, if ever. But I could imagine half electric some time in the next 15 years. And we may never again have an all anything fleet. And I don’t know how soon electrics will really be feasible.

    @maxspivak
    It’s far more efficient to use the oil to generate electricity to power the car than to power the car directly. My recollection is 2-3x as efficient.

    As for intelligence in Detroit, I’ve met the top people on the Volt and they seem VERY intelligent.

  • avatar

    I’m inclined to agree w/ Brock’s last paragraph, except that it may ultimately be green upstarts that deliver the killer blow to one or more of the Big 3. But Brock is certainly correct about what has so weakened them.

  • avatar

    David Holzman: As for intelligence in Detroit, I’ve met the top people on the Volt and they seem VERY intelligent.

    The problem does not lie with any lack of talent or intelligence in Detroit. If you look behind the SUV/Pickup curtain, you won’t find a single engineer or scientist who was pushing to retain the old technology, old safety standards and old powertrains. You WILL find a dedicated accountant who was working to maximize short-term profits, fully believing that the “product” of GM, Ford and Chrysler was money. The engineers, the scientists, the dedicated folks on the line all know that the product is personal transportation in the form of (reasonably) light vehicles. And in the pecking order, as with most of American business, the people who actually DO something (like produce a product) are not the ones who make decisions.

    And to the idea that electric vehicles will not make a serious dent in our transportation scenario, the same argument was posed at the dawn of the automobile and the dawn of the computer. “Interesting toys”, but impractical for mass consumption. In 1950 the futurists said that a few computers would be sufficient for the entire world, and it is likely that Yates was there nodding in agreement.

  • avatar
    Adamatari

    We need to rebuild our public transport infrastructure and resdesign our living areas. It may be uneconomical now, but if gas prices continue going up, the oil economy will wither. It’s going to hurt very, very badly, but if the price goes up then the “uneconomical” alternatives will start making sense.

    Mr.Yates, you seem to think that it will keep going as is forever. However, a look at the past shows that wood was once the fuel of choice. Now it’s oil. Tomorrow it may be something else – in fact, probably will be (what with all the negatives of an oil economy). It may take 30 years or it may take 100, depending on those prices.

    The Prius and the popularity of cars like the Yaris, Versa and Fit show that times are changing. We got a brief reprieve with the 90’s oil boom but now things are back to normal. With China and India together competing with the West for oil, there’s no chance of the same old, same old working out.

    No amount of bailout will help companies that can’t make the machines needed for the future.

  • avatar

    @edgett
    I agree completely

    @Adamatari
    I don’t think, given current development patterns, that we could possibly ever be very dependent on public transit. (by that I mean more than, say, 5-6% of the population, if that.) We’d need at least 50 years of very stringent zoning requirements to make public transit a viable option for most people.

    Having said that, I still support maintaining what we have, and maybe even expanding it some, because some people need it, because they can’t drive, and because without it, traffic would be that much worse.

  • avatar
    ktm

    kixstart, before lambasting someone over your “in-depth “research”, it helps to actually READ what you posted. There are so many caveats in that paper that it is unrealistic to say the least.

    It assumes that those regions that are underutilizing their power will transfer it to regions that are in need. The Pacific Northwest and California/Nevada comprise 19% of the vehicles in the US, yet they have far lower available power and would require these transfers.

    Before you go off about “egregious – and easily researched and corrected – errors” it helps to be rright yourself.

  • avatar
    KixStart

    ktm,

    I read it. Some of the assumptions are extremely conservative. It has been quite some time since I worked in the electric power industry but this is all familiar to me and seems quite reasonable. Electric power will follow money and it will take decades to move to a largely electric fleet.

    I stand by what I wrote. Yates is spouting uninformed and erroneous hyperbole.

  • avatar
    Redbarchetta

    The thought of bailouts for Detroit disgusts me. What a way to waste our tax dollars, especially with the amount of debt we have now. Giving them a handout doesn’t force them to change they will just continue down the same path they are now with our money. And it gives them an excuse to keep coming back to the trough when they have screwed up yet again.

    A change in our cars to all electric is a long time away and I think very poorly planned they way these government clowns have ideas. A crazy idea to most of you but they should reevaluate our entire infrastructure from power generation and distribution, personal and public transport and road infrastructure. And then gear everything to a workable solution 50 years in the future. Standardization where it can make the most benefit and then let the consumer dictate the less critical details.

  • avatar
    USAFMech

    @ David Holzman: The French didn’t invent a steam-powered car until 1969? Those cheese-eating surrender monkeys need to get it together.

    @ Whomever suggests that raising taxes will solve our problems, I have a question: “By how much extra do you overpay the IRS every April?” Thought so.

  • avatar
    BKW

    PCH101: Where does the automakers REAL profit come from?

    Not from vehicle sales…if automakers relied on the profit from vehicle sales, most if not all, would be out of business.

    Parts sales is where the most of the profits comes from.

  • avatar

    Martin Schwoerer: Ghosn “established” Dacia? I’m not sure which sense of the word “established” you’re looking for here, but just in case it’s “founded”: No he didn’t.

    Dacia has been around for ages; they built 70’s Renaults in the 80’s, and probably 60’s Renaults in the 70’s.

    Martin, you’re German, right? So go and find an old copy of the “Auto Katalog” by A,M&S and look it up.

  • avatar

    Katie P: Are you seriously trying to claim Nissan don’t sell the Primera in the UK? Waitasec… [goes to http://www.nissan.co.uk to check] Apparently she is not just claiming this, but what’s more: She seems to be right!

    Wow, that’s weird. Wonder why — it can’t be the trouble of moving the steering wheel over to the wrong side, can it, since they have it there in Japan too? Utterly weird.

  • avatar
    Martin Schwoerer

    CRConrad: You are quite right about Dacia. Why, I actually had the honor of receiving two managers from Dacia in 1985, when they came to my office looking for possible co operation partners from the Far East. They were very pleasant gentlemen and I thus remember them well, but alas we could not find a common financial ground.

    On the other hand. Before Ghosn, Dacia was a very sad company, with crummy products and crumbly plants. They had neither a future nor a particularly distinct history to build upon. My point was supposed to be that Ghosn made Dacia into a runaway success, because he has the ability to understand long-term trends, and to implement product accordingly. Which other manager comes close?

  • avatar
    vg928GT

    @USAFMech : The car is called the Fardier and was actually made by a Mr Cugnot, french military engineer, in… 1769 (and rebuilt by a museum in 1969).

    Now talk about historical perspective, huh ?

    And please oblige me, avoid referring to other people as “cheese eating surrender monkeys”, especially when some of them are fighting presently in Afghanistan. Some mignt be even be reading you. With pity.

  • avatar
    SCMTB

    I’m a liberal (apparently that’s impossible since I like the auto industry) and I find it comical that a conservative (Mr Yates) is vaguely suggestion a bailout of the auto industry. Didn’t the arrogant idiots in Detroit bring this upon themselves in a captialist/free market/free enterprise/etc. system? How dare the feds help out in any way!

    If it wasn’t for the blue collar people working within these organizations I’d pray that the self-serving C level and exec level idiots crash and burn all three companies into the ground and not get a dime for ANY of their pathetic “leadership” I just don’t understand how the Wagoners(sp?) of the world get credit for any turnaround while they were the ones at the wheel while they steered it into the abyss. It is freightful what the business world considers good leadership or how they reward these people with salary and bonuses that are no way representative of their performance. I’m disgusted by the unions as much as anybody but I’m not sure how these people’s salaries/bonuses aren’t easily just as disgusting. I dont’ begrudge people making money but SOMEONE needs to ask if they’re really worth it after a couple years.

    And Mr. Yates, I tend to agree with most of what you say… Please continue!

  • avatar
    greystone

    Mr. Ghosn clearly speculate and points the finger at Ford as the company that maybe going belly up.

    Is he right? or wrong? no one knows for sure – I also do not like the atitude of being backed to the wall thenafter coming out swinging – this maybe a failed strategy.

    He is also right the big three or the three blind mice could not see corolla, civic, sentra, accord, altima, camry and Maxima taking the lion share of our market in addition he is correct whose fault is it? the underlying message it is not Japanese.

    He is positioning himself and the companies he controls to be a major player in the future, I have to give him credit for that – he is bright and smart – he is advising the three little pigs to follow his lead – my guess the three blind mice will always be blind.

  • avatar

    NOTE:

    TTAC’s posting policy is clear: no flaming the website, its authors or fellow commentators.

    You are free to highlight any mistakes or misinformation you perceive in Mr. Yates’ work. You are free to explore these “issues” in whatever depth you choose, with as much passion as you like. I would expect nothing less. BUT–

    There will be no dissing of Mr. Yates’ right or ability to make his assertions.

    Them’s the rules. If you wish to discuss them, email [email protected]

  • avatar
    jerseydevil

    Jordan Tenenbaum:

    i will let u know. the first decently equipped moderately priced (sorry tesla) and warrantied electric sports car with a backup engine will be mine!

  • avatar
    windswords

    I am surprised that someone as well regarded as Mr. Yates and some of the commentors here on TTAC, which are usually several cuts above the avg blog would keep referring to “government bailouts”, especially in the case of Chrysler. As I have pointed out before in a post (that now seems like a years ago – but was probably about 1 year ago) there was no bailout. There were no taxpayers harmed. Not one penny of taxpayer dollars were used to “save” Chrysler. How could this be? All the journalist, pundits and the man on the street say it was a bailout.

    Simple. They were government guaranteed loans. The loans were not made by the government, they were given by private banks. If Chrysler had gone chapter 7 then the taxpayers would have been on the hook for the money. But the loans were paid back – to the banks.

    The savings and loan fiasco was a bailout. A direct transfer of tax money to an industry. So we could see the same scenario again. The critics will say it’s a ‘bailout’, but it won’t be. It all depends on who is fronting the money. As I see it the most likey candidate is Ford. Their mkt share is collapsing faster than a snowball in hell. They don’t have any hot products – just some good ones (fusion, edge, mustang), and no “game changing” products about to come out (I don’t see the Flex as being the next minivan, ponycar, or 4 door SUV kind of vehicle). They have mortgaged every thing and don’t have anything left to sell except for Volvo. GM’s mkt share loss has been less dramatic and they have come out with some interesting new vhecles. Chrysler has lost less mkt share than any of the domestics (you wouldn’t think so but it’s true). They have just redesigned and re-engineered their two biggest selling vehicles. They have a lot of work to do but they also have a parent with money who has staked it’s reputation on turning them around. They are also the right size to be aquired by someone (hence the reason for Ghosn’s tale of gloom and doom for Detroit). Ford is too big for anyone to swallow – if they wanted them in the first place. IF – we have a recession this year or next – and I don’t think it’s inevitable – GM will make it thru, although it could be painful. Ford won’t – unless it gets government backed private loans or a real honest to goodness bailout.

    I want to add as an addendum that Lee- you know who – in his autobiography stated that Chrylser was on it’s way to being profitable again as he put his people and programs into place – without anyones help. What sent them over the edge, teetering on the abyss was the expulsion of a certain leader from an obscure country in the Middle East. When the Shah of Iran was overthrown it caused another “evergy crisis” and overnight new car sales fell off a cliff. So it was due to an international event thousands of miles way that forced Chrysler to seek out gauranteed loans. Thankfully this did not happen again after the invasion of Kuwait or 9/11 but it still remains a danger to all the domestic makers.

  • avatar
    Landcrusher

    Windswords,

    You are incorrect. There is a cost to guaranty a loan. Just because the guaranty was never collected on, this was still a government bail out. Otherwise, it would make sense for the government to guarantee all loans because it would cost nothing.

    Finally, if your company is not healthy enough to survive the impact on the market caused by a revolt in an unstable country, your company should be allowed to fail and make room for new and stronger players.

    One could make an argument that the cost of the guaranteed loans to Chrysler is the continued failing of the American auto industry. Had Chrysler gone away, Ford and GM might have got on the stick and started working harder to survive.

  • avatar
    Skooter

    Stop with the taxes already! The first thing government does is throw a tax (or tax increase) to “fix” any type of problem. Enough!

  • avatar
    hansbos

    I feel like I’m late to the party, but I just wanted to add that having a large number of electric vehicles charging at night and plugged in during the day (but not charging) could actually help to stabilize the grid in the case of a severe heat wave or other local strain on the grid. With smart software, a plug-in vehicle could be taught to give up a small percentage of its electrical charge to help stabilize the grid in case of a problem. I believe Google is working on this concept at their campus in Mountain View.

    Also, I think it is interesting in the context of the original article that France derives 76 percent of its electricity from nuclear plants. With the exception of naturally blessed countries like New Zealand or Switzerland (where they have ample hydro power), there are few countries whose electricity is so independent of fossil fuels. Here is an interesting frontline article on the French reliance on nuclear power: http://www.pbs.org/wgbh/pages/frontline/shows/reaction/readings/french.html

  • avatar
    windswords

    Landcrusher,

    We’ll have to agree to disagree about the loan guarantees. The government saved a lot of money by guaranteeing those loans. Otherwise we the taxpayers would have had to pay for the 150,000 employees, the employees of numerous suppliers, and the employees at numerous dealerships. In other words the ripple effect would have been felt all over the country.

    “Finally, if your company is not healthy enough to survive the impact on the market caused by a revolt in an unstable country, your company should be allowed to fail and make room for new and stronger players.”

    That seems really cold to me. But also I must point out that job 1 for a government is to provide security for it’s people. That includes economic as well as military. There is no way a government will let key industries fall because of instability in a region of the world that affects a basic commodity, be it oil or banannas.
    And I am as conservative as you can get.
    Hell, we don’t even let people who got bad mortgages that they knew they couldn’t pay for suffer for it. If we can be kind to foolish individuals how can we not do something for major industries that provide us our standard of living?

    Also it should be pointed out that Chrysler was on the mend, but was not yet fully recovered. If the Shah had been overthrown later they might have been able to weather the resultant oil shock.

    “One could make an argument that the cost of the guaranteed loans to Chrysler is the continued failing of the American auto industry. Had Chrysler gone away, Ford and GM might have got on the stick and started working harder to survive.”

    It was shown to congress that if Chrysler had gone down the imports would have captured the lions share of the missing volume in the marketplace. The vast majority of dealers (who survived) would have gone to imports because there were already Ford and GM dealers in the area. So Ford and GM would not have been made stronger.

  • avatar
    Landcrusher

    Windswords, we can agree to disagree, but you just made one of my favorite arguments for me so I have to keep going.

    You pointed out how smart a move the loan guarantees were because the cost of all the unemployment and pension obligations would have been really big. In other words, the government had to interfere because of the obligations it made when it interfered in other areas where it also had no good business being. The answer should be to get rid of the other obligations! Perhaps if chrysler had not had all the government interference in the first place, the loans may not have been needed either.

    And my statement was anything but cold. Do you think all those people will not get better jobs if a better companies are allowed to prosper? Is that it? The stronger the economy, the less damaging a job loss will be. In a really strong economy, job losses often result in an increase in pay! No, the cold, uncaring, and fearful attitude is that of the government control freaks who will keep everyone down.

    Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.

    Your final statement is amazing, especially for a so called conservative. Seriously, if Congress was trying to avoid all those things by bailing out chrysler, then they sure did do really well didn’t they? Now we have 3 manufacturers on the brink. If numbers of dealers made a difference, the domestics would still be winning. The imports all got dealers anyway, and they sell more per dealer which makes them more efficient. GM is trying really hard to GET RID of dealers. I was not saying Ford and GM would have been stronger from less competition, I am saying that they would be made stronger because everyone would have seen that they were a business, NOT A SOCIAL PROGRAM.

    The bail out worked like most government attempts to “fix” economic outcome. Some measurable short term results allowed them to take credit while hard to see moves by the invisible hand made the net effect negative. You can’t fight the invisible hand. It WILL slap you upside the face, and you WON’T see it coming.

  • avatar
    windswords

    Landcrusher,

    “In other words, the government had to interfere because of the obligations it made when it interfered in other areas where it also had no good business being.”

    You can be a Libertarian about this if you want to but the cats out of the bag already. I would like to do away with Social Security and go to private investments but it’s just not possible, politically or otherwise.

    “Perhaps if chrysler had not had all the government interference in the first place, the loans may not have been needed either.”

    We are in agreement. It has been my opinion that if the money spent (and the engineers time) to comply with government mandates for safety and emmisions in the 70’s had been spent on product developement instead we might have seen a different outcome for the domestics, even unto this day. But as I said the cats out of the bag already.

    “And my statement was anything but cold. Do you think all those people will not get better jobs if a better companies are allowed to prosper? Is that it?”

    Yes, that is it. Every analysis at the time said those jobs were not going to be replaced. Maybe the children of the workers would find better jobs, but you kiss a generation goodbye from earning anything near what they did – hence the increased costs to us the taxpayers.

    “Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.”

    Student loans. Freddie Mac. Fannie Mae. Overseas Investment Corp., when it was used to expand markets for US businesses, now it just seems to be used to transplant US manufacturing to low cost countries. Free Enterprise Zones. All of these are guarantees or contructs of government policies to help promote business. And don’t get me started on state governments. First time home buyer programs anyone?
    There is a strange dichotomy in your reasoning. I would assume that you think military security is valid function of government. What are wars fought over? Does one country get up in the morning and say hey lets go attack that other country? Wars are about economics and resources. You cannot separate foreign policy, military policy, from economic policy. The only exception to this is the current WOT, because the enemy is not a nation and therefore does not have an economic interest (although it’s not surprising that they chose as a target one of the economic centers of our economy). But look at the last war. Iraq invaded Kuwait. So? We were not getting any oil from them. Who cares? Why get involved? Two reasons: Saddam would not have stopped at Kuwait, he would have eventually gone in Saudi Arabia, and we get lots of oil from them; and Kuwait was a major supplier to Europe and Japan. If those economies go in the toilet, what do you think happens to us? That’s why Europe and Japan were all for intervention in the Gulf. Even France sent troops!!! And Japan sent money. There was no economic interest for Europe to support us after 9/11, on the contrary it was in their economic interest to oppose us. If you think France was against overthrowing Saddam based on some gradiose ideals of national sovereignty, the UN, etc. you are naieve. It was about the money. You cannot divorce economic security from military security.

    “Your final statement is amazing, especially for a so called conservative. Seriously, if Congress was trying to avoid all those things by bailing out chrysler, then they sure did do really well didn’t they?”

    Yes they did quite well. Chrysler 1.) stayed in business and contiued their recovery, 2.) Made billions of profit all thru the 80’s and the 90’s 3.) Paid millions or billions in taxes and fees, 4.) It’s employees, dealers, and suppliers paid millions or billions in taxes and fees, 5.) the employees of same paid billions in taxes. 6.) All this money rippled thru the economy dozens of times.
    All this economic activity occured over a period of almost 20 years (if you want to arbitrarily stop at the point where Daimler “merged” with them). Cost to the US government? Zero or an amount so miniscule in comparison to the above that it wouldn’t even show up in an excel spreadsheet graph.

    “The bail out worked like most government attempts to “fix” economic outcome.”

    Not a bailout. See my first post. You are right the government cannot fix economic outcome. But that was not this situation. Chrysler could well have gone under and the government would not have intervened. All they were going to do was gaurantee the loans. If guaranteed loans from your local bank are a “bailout” what was the S&L rescue? No loans from private finances involved. Just a direct transfer of taxpayer funds. By your definition student loans are a bailout.

    “You can’t fight the invisible hand. It WILL slap you upside the face, and you WON’T see it coming.”

    We’ve been playing with the invisible hand since the 1930’s and the rise of Keynesian economics. Before we had a depression. 30% unemployment. Not just a US, but a worldwide catastrophe. Since then nothing like that. I’m still waiting for the big slap, but it’s been 75 years already.

  • avatar
    Pch101

    There is a cost to guaranty a loan.

    There is only a cost if the loan defaults. It’s the institutional equivalent of one of us co-signing a loan for a friend or relative.

    Otherwise, it would make sense for the government to guarantee all loans because it would cost nothing.

    Not at all. The default rate across the pool of borrowers is not zero percent, so the guarantor would be on the hook for those loans that did default. Hence, blanket guaranties are generally a bad idea; as a guarantor, you need to choose your borrowers carefully.

    Selective guaranties can provide a net benefit if (a) the borrower doesn’t default and (b) keeping the borrower in business creates a net benefit. And I’m sorry, but if you want to understand this, then you’re going to have abandon the theoretical world of libertarianism for the reality of how the world works.

    Unemployed people create burdens on the society that will cost the taxpayers money, either directly (feeding them, clothing them) or indirectly (arresting and jailing them when the unfed, unclothed winners of the Libertarian Award show their thanks by stealing your car and robbing your cornerstore to pay for the food and clothes that you don’t want to pay for.) None of the available choices are free of negative consequences, it’s a matter of deciding which basket of benefits and pain that you prefer.

    The problem with the loan guarantees is that they don’t come with enough strings attached to assure good performance by the borrower. If the feds were to help the Big 2.8, fine, I can almost live with that. But in that case, the Big 2.8 should be required to provide a effective business plan that shows how they will be able to repay the loans and improve their future performance so that they don’t come back later to grovel for more. Since they apparently aren’t accountable to the consumer or the shareholders, perhaps the guarantor should be the one to straighten them out.

  • avatar
    Landcrusher

    “You can be a Libertarian about this …”

    Is that an ad hominem argument? I get your point, but my point was that once you have enough government interference you can then justify anything. We will have to point out this fallacy everytime government tries it if we ever hope to stem the tide.

    As for the jobs not coming back, the analysis of the time was stupid. Those people would never make the same money again? Perhaps THAT was what was causing the failure? Seriously, this is all socialist rhetoric when you expose it. It is based on economics of scarcity. If you believe that crap, you might as well go back to tariffs to protect everything. At best your argument says that government pushed the problem to the next generation. My proposal is to let the market work so that you take your hit up front, and let the lessons learned have an effect. The Market provides information after all. It was telling us that Chrysler was weak. We didn’t listen. It may be telling us again.

    Economic security – None of your evidence is anything close to providing economic security. Economic support, but not security. The closest thing they would come to security might be analagous to small poles in ones yard in lieu of a fence. None of them will keep people from going broke.

    Military security- Apparently I am no more a libertarian than you are a conservative! Here is the basic bit you, and so many others, seem to miss: The ideal government policy may not work in a world where there is more than one government. One of the primary desires I have of our government is to protect me from OTHER GOVERNMENTS (and pirates/brigands/terrorists). Ron Paul and the libertarians just don’t get this. To me it is key.

    “Yes they did quite well…” You now want to point out that there were positive effects. So what? I said that is the problem. They point to some identifiable short term benefits and calim victory. If this is such a free ride, where is my billion dollars in secured loans to start a business? My point is that they did not avoid the things you say they were trying to avoid: loss of market share to imports and loss of jobs. The problem seems to have bounced back with a vengeance. The jobs are mostly gone. Had the market been allowed to work, I say, less pain would have been had overall. I say, the other domestics would have woke up earlier and started winning. Many of the Chrysler employees would work for them today, Detroit would not be on the verge of collapse. Or, perhaps all auto manufacturing could have gone overseas. The most basic economics course tells us that is a good thing. Why does everyone want THIS to be an exception? It’s okay for my consulting company to go broke, but big manufacturing companies have to get rescued? WHY? Companies go belly up EVERY DAY, and it’s okay. But if a smaller amount of jobs are lost at an auto company than are lost in the SMB market on a regular basis then we all have to cry about it.

    “Not a bailout” Yes, a bailout, see MY post. But seriously, let’s call it an “intervention”. I don’t care. And yes, student loans are a HUGE intervention on behalf of academia. They do not help the students at all. Quite the opposite.

    “We have been playing…” And has it been a good thing? NO! Even Keynes claimed he was not a Keynesian. Government needs to ensure that everyone plays by the rules. There is a need for intervention in order to keep the market place fuctioning properly. (We should have the fed, but they need to be less aggressive).

    I am not a TOTAL laissez-faire dreamer. However, Chrysler is a good example when intervention was not called for. They could not weather a common international occurence and it’s effect on a commodity price. Too bad. Had they been the victims of market manipulation designed to target THEM, then fine, maybe something needed to be done. That is where I draw the line. Their competitors survived it, so they should have to. That is how the market gets rid of the weaker players to make room for the stronger ones.

    Detroit, both the city and the auto industry, are based on the thinking you espoused. That is why they are rotting, failing, and dying. It will not change until they embrace the market.

  • avatar
    Landcrusher

    PCH,

    Actually, there is a cost even if the loan does not default because you cannot be sure that the loan will not default. You pretty much agree in your second argument. You accuse me of being in a theoretical world, but in what world do you get to have hindsight to assign values to risk?

    What we are down to is a fundamental disagreement on whether there is a “benefit” in keeping a company afloat that cannot swim on it’s own. I say there is not. See above for exceptions. If they were not cheated, or somehow the victim of some perfect storm, I say there will be more harm than good. I am sorry that you claim to not understand this, because I KNOW YOU DO.

    Why is it that you want to apply one standard to Chrysler, and another to my consulting company? If I close shop tomorrow, why is there no bail out or intervention? If I am unemployed tomorrow, why do I not get benefits?

    It is possible that unemployment insurance will work outside of government. It is not a government function, and should be privatized. That would help a lot.

    What won’t help is having government look at business plans. You might want to think about that one again. OTOH, some string attachment would be nice. How about we put all the people running the place along with the union on notice that they are personally liable for a small part of the loans? These people just lost all the stockholders’ and creditors’ money. If they think this puppy can fly, they need skin in the game.

    Lastly, I am no perfect world libertarian, see above. Accusing me of such does not make it so, and trying to pigeon hole my positions does not change them into something else nor invalidate them. If we want to start calling names, let’s call this belief in a governed market place what it really is – Fascism.

    If you want to disagree with the idea that letting the market work rather than saving failing companies with government money is wrong, then fine. No worries, but do accept the idea that it is not a free lunch, and that there are bad effects that are just harder to connect to the intervention. You could give a few million dollars to many small business men and watch them put their competitors out of business. Rarely would anyone be able to prove the connection. You know this, but do you really agree that the Chrysler intervention was without cost?

  • avatar
    geeber

    Pch101: The problem with the loan guarantees is that they don’t come with enough strings attached to assure good performance by the borrower.

    As I recall, the Chrysler bailout did come with some strings attached. The UAW had to agree to wage and benefits concessions (Iacocca already had agreed to accept a salary of $1 per year). The company also agreed to stop making its big-block V-8s (which were pretty much only used in trucks, full-size vans and the motorhome chassis by that point, and in the wake of the 1979 fuel shortage, everyone thought gas guzzlers were going to die a quick death).

    Chrysler also had to give up the corporate jet, which, judging from Iacocca’s reaction, was akin to making him sacrifice his firstborn child.

    Right now the company most willing to make significant changes is Ford, as Mullaly appears to be revamping the corporate culture. Quality improvements begun under William Clay Ford, Jr., are taking hold, and Mullaly refrains from UAW bashing (in public, at least).

    So Ford may be a good candidate for some sort of government help, although, ironically enough, it has only made these changes because of the looming threat of bankruptcy. A guarantee that the federal government would ultimately ride to the rescue would have reduced the company’s sense of urgency…

  • avatar
    Pch101

    Actually, there is a cost even if the loan does not default because you cannot be sure that the loan will not default.

    The cost is incurred only if the loan defaults. Obviously, it’s not optimal for the guarantor if the loan does default, but the cost isn’t actually incurred if the loan is repaid. And in the case of Chrysler, it did make good on its repayments. The lesson: if one is going to guaranty loans, a lot of cherry picking and covenants are required.

    What we are down to is a fundamental disagreement on whether there is a “benefit” in keeping a company afloat that cannot swim on it’s own. I say there is not.

    The fundamental flaw in your arguments is that you put on your ideological hat and run everything through it with that pre-determined taint, instead of just assessing the facts and reaching a conclusion based upon those facts.

    If Company X is on the brink of failure and could be saved with loan guaranties, then Alternatives A (bailout) and B (leaving them alone) will each carry certain benefits and drawbacks. It’s horribly simplistic to claim that one of those choices is marvelous and wonderful, while the other is horrible and evil — BOTH alternatives have their pros and cons, and the decision making process should account for all of these.

    If Company X provides a lot of employment and those jobs can’t be replaced for those workers, then the government will bear the cost in the form of higher transfer payments and lower tax revenues. Now, you can pretend if you like that unemployment creates no burden on the system, but it does, whether or not your ideological stance allows you to see it.

    Does that mean Company X should be bailed out? Not necessarily. However, it’s reasonable to assess the pros and cons, and unreasonable to pretend that the hands-off option carries with it absolutely no negatives.

    Why is it that you want to apply one standard to Chrysler, and another to my consulting company?

    Because Chrysler creates a lot more benefit to a lot more people and businesses than does your small consulting company. When you have tens of thousands on the payroll and buy materials that help to keep a lot of other businesses afloat, then you’ll have more leverage, too. Until then, them’s the breaks.

    As I recall, the Chrysler bailout did come with some strings attached.

    My point was that the product needs to improve, and since the decline that led to the need for bailouts was largely the result of bad product that this should be priority one before any guaranties are provided.

    Chrysler never really addressed the long-run problem of second-rate product, despite repaying the loans. The inherent problem was never ultimately fixed. The shame of it is that they had the opportunity, but didn’t do it when they had the chance. We’ll see soon enough whether or not it’s too late.

  • avatar
    geeber

    Pch101,

    I’m not disagreeing with your larger point, just noting that there were some strings attached to the Chrysler bailout. Whether they were the right strings is certainly a subject for discussion.

    It does make me wonder just how effective the government can be at forcing corporate culture change. The loan guarantees and the success of the minivan got Chrysler out of the woods, but, as you noted, by 1986 it was business as usual…no real brand differentiation, no real improvements to the product (the K-car platform hung around for way too long), and no real improvements in quality.

    Ford is making real changes now, and those changes, even if government aid does arrive, will be what ultimately ensures the long-term success of the company.

  • avatar
    Pch101

    I’m not disagreeing with your larger point, just noting that there were some strings attached to the Chrysler bailout. Whether they were the right strings is certainly a subject for discussion.

    We agree here. I guess my point is that if Uncle Sam is going to play nanny here, then we should see long-term benefit and have a right to demand it. Obviously, not every company received government bailouts, and I think that the hurdle for getting them should be set at a high level.

    It does make me wonder just how effective the government can be at forcing corporate culture change.

    It’s very difficult. For one, our federal government itself doesn’t provide a benchmark for how a corporate culture should be, so it’s fair to question how competently they can be expected to administer such a process. The trend these days is toward private-public partnerships, and one can hope that this could provide a possible alternative.

    Ford is making real changes now, and those changes, even if government aid does arrive, will be what ultimately ensures the long-term success of the company.

    Absolutely agree. Among the 2.8, Ford seems best positioned to fix the core management problem. We’ll see whether they have time to deliver the product that will be needed to go along with it.

  • avatar
    Landcrusher

    “The cost is incurred only if the loan defaults”

    If it is free, then where is mine? Where is my loan guarantee? If it has no cost to the government to supply it, we should all be getting it, no? Under your logic a lottery ticket is free, because you get more money back than it costs to buy. If Chrysler’s ability to pay back the loan was a sure thing, then the government would not have been needed to intervene. Furthermore, even in hindsight we are incapable of calculating the costs. If it were possible, we would all be speaking Russian or Chinese by now.

    “The fundamental flaw in your arguments is that you put on your ideological hat and run everything through it with that pre-determined taint, instead of just assessing the facts and reaching a conclusion based upon those facts.”

    No argument is flawed due to it’s source. An argument can only be flawed based on it’s lack of logical validitiy (the conclusion does not necessarily follow) or because the premises are false. If you want to say you do not believe that there are costs that are not being measured because they are hard to find then fine. At least show me the big benefit. Chrysler was saved, and now are entire domestic auto industry is on the brink of failure. We have lost market share, and jobs (not that jobs actually have much value, but people of your ideological taint seem to think they do).

    “It’s horribly simplistic to claim that one of those choices is marvelous and wonderful, while the other is horrible and evil — BOTH alternatives have their pros and cons, and the decision making process should account for all of these.”

    It’s only evil in that it was decided to use the governments power to support the failure of one group of people at the expense of many, many more. So ya, I guess it is sort of evil. I would rather say foolish, or stupid, but whatever.

    “If Company X provides a lot of employment and those jobs can’t be replaced for those workers, then the government will bear the cost in the form of higher transfer payments and lower tax revenues. Now, you can pretend if you like that unemployment creates no burden on the system, but it does, whether or not your ideological stance allows you to see it.”

    The assumption that the jobs cannot be replaced is clearly false, even under socialism the jobs can be replaced. If you just want to make up jobs, then do it. Furthermore I do not claim that unemployment has no cost, nor the failure. My point is that the cost of the intervention is actually higher for many many reasons. One of the main reasons is that it did not work. You want “facts”, and the fact is that it didn’t work. 20 years later after much upheavel, the whole thing is going south again, only it’s now the whole industry along with much of the state.

    “Because Chrysler creates a lot more benefit to a lot more people and businesses than does your small consulting company. When you have tens of thousands on the payroll and buy materials that help to keep a lot of other businesses afloat, then you’ll have more leverage, too. Until then, them’s the breaks.”

    Right. Without even knowing what kind of consulting company I refer to, you ASSIGN a lower social value to it than that of Chrysler. It’s not about value at all, just about keeping the money moving around among BIG businesses that provide LOTS of jobs (once again, you should reevaluate the “value” of jobs). If I only bet 200k on my business, then so what. OTOH, if someone is betting 200MM on a company then they should not be allowed to fail? And I have to compete against them for workers, and resources? Don’t you think all the other advantages they get are enough?

    Finally, I note you skipped to geeber rather than dealing with my final paragraph. I suppose because it is correct. There is undoubtedly damage done by these sorts of interventions, and we should not let government get away with hiding those while claiming to have been a great benevolent force. Certainly Chrysler was not the worst ever, but ignoring the costs IS evil. It’s that sort of thing that will get us more Keynesian schemes, and New Deals that will simply keep people in ACTUAL poverty.

  • avatar
    Kevin

    Brock Yates
    If Carlos is right and one of The Big Three files for bankruptcy

    I find myself arguing with you TTAC writers a lot lately, which is not really my intent upon coming here. Hell I link to you on my own blog’s roll. BUT, in the WSJ interview, Ghosn did not say that he thought one or more of the Detroit 3 would go bankrupt. What he said is there may come a point when there are no longer 3 independent US automakers.

    There are a variety of ways to get from here to there; actual failure and bankruptcy are not required. For example, perhaps Ford and GM would merge, and Chrysler gets wholly bought by … I dunno, Tata — and Tata eliminates the Chrysler brand and calls everything Nano. The Grand Caravan Nano. At that point we’d say: there is one independent US automaker. Yet we could get to that point without a single bankruptcy. I could name you tons of companies that disappeared without ever going bankrupt, and those are just the stocks I’ve bought in my IRA.

    Ghosn may think they’re all going to go tits up, but if so he was careful enough not to actually SAY that — despite what I keep reading here. If you are inferring that he was implying that … that’s just an opinion, that’s not straight reporting.

  • avatar
    Pch101

    If it has no cost to the government to supply it, we should all be getting it, no?

    I’ve already covered that. If you cherry pick the deals that you guaranty and you end up with a default rate of zero, then there is no loss suffered as a result of the guaranty.

    Obviously, if the pool is expanded, the marginal risk of failure goes up. That explains why these things are done selectively and generally only when there is a lot at stake if the interventionist option is avoided.

    Since the Big 2.8 provide more immediate benefit to a larger pool of Americans, they get higher priority. As a resource allocation exercise, it does make sense for Uncle to care more about the fate of the Big 2.8 he would about a smaller entrepreneurial venture. So GM gets help that Tesla and Vector will not — s**t happens.

    One of the main reasons is that it did not work. You want “facts”, and the fact is that it didn’t work. 20 years later after much upheavel, the whole thing is going south again, only it’s now the whole industry along with much of the state.

    It provided a couple of decades’ worth of benefit, so that’s inaccurate. There were many thousands of people employed by the company itself and its suppliers, as well as others in their communities who receive indirect benefit from it, who were all helped as a result.

    The shame of the Chrysler bailout was not that the bailout was undertaken, but that it wasn’t more extensive and that it didn’t address the root causes that necessitated the bailout in the first place. They fixed the financial problem, but not the managerial failure that helped to create it in the first place. So we relieved the patient’s symptoms and gave him a longer life, but we didn’t rid him of his cancer. That was a “C” effort, when we should have been shooting for an “A.”

    If I only bet 200k on my business, then so what. OTOH, if someone is betting 200MM on a company then they should not be allowed to fail? And I have to compete against them for workers, and resources? Don’t you think all the other advantages they get are enough?

    The failure of a large firm creates more drawbacks for the economy than does the failure of a small firm. If we are to bail one out, as we are apt to do on occasion, then we should be doing it for our own sakes, not for theirs. It’s not an ideological choice — we don’t owe them anything — but a pragmatic, self-serving one.

    Finally, I note you skipped to geeber rather than dealing with my final paragraph. I suppose because it is correct.

    No, it’s because I owed Geeber a response, and because I’d already touched on it. Clearly, I don’t believe that it’s a “free lunch” — I specifically pointed out that both alternatives had their own costs and benefits.

    What I did is correct two of your basic errors. Firstly, I pointed out that there is no financial loss from a guaranty placed on a loan that does not default. Secondly, you act as if there is no cost incurred with a laissez faire approach, when clearly there are.

    It’s fine to debate the virtues and flaws of bailouts, but it is wrong to claim that bailouts are costly and that laissez faire comes free of charge. You can oppose bailouts as you like, but it’s disingenuous to argue that a hands-off approach can’t also be expensive. Failing to act is still a form of choice, and with it can come consequences.

  • avatar
    Landcrusher

    “I’ve already covered that. If you cherry pick the deals that you guaranty and you end up with a default rate of zero”

    Right, so long as you are prescient. The reason the market works better than socialism is because no one is smart enough to make this prediction. Even if they go to Harvard. Once again, we are not speaking Russion – QED, it don’t work.

    So now it’s just a matter of priority? So we would do it for everybody but we can’t so we only do it for the “important” ones. Once again, if it is “free” this argument makes no sense. And, for godsakes, S**T happens? So, even if it’s wrong, too bad?

    In the end that is part of the problem, it is immoral unless it is free. If it is free, then it should be free for everyone, or once again, it’s immoral. Life isn’t fair, but the government has an obligation to be fair. I don’t expect them to level the field, just not to tilt it on purpose.

    “It provided a couple of decades’ worth of benefit, so that’s inaccurate. There were many thousands of people employed by the company itself and its suppliers, as well as others in their communities who receive indirect benefit from it, who were all helped as a result.”

    A couple decade’s worth, and now the problem is bigger. So we have to do it again? The free market is only in effect 19 out of 20 years? None of these people were helped by the way. They worked or invested to get back a return. They helped themselves. The fact that many of them were chosen by the government as the winners is the problem. It’s immoral.

    “The shame of the Chrysler bailout was not that the bailout was undertaken, but that it wasn’t more extensive and that it didn’t address the root causes that necessitated the bailout in the first place. They fixed the financial problem, but not the managerial failure that helped to create it in the first place. So we relieved the patient’s symptoms and gave him a longer life, but we didn’t rid him of his cancer. That was a “C” effort, when we should have been shooting for an “A.””

    Yes, that is always the problem with interventions, we always just KNOW that we can get it right next time. BS! It’s wrong 999 times out of 1000. Even then, it’s just wrong.

    “The failure of a large firm creates more drawbacks for the economy than does the failure of a small firm. If we are to bail one out, as we are apt to do on occasion, then we should be doing it for our own sakes, not for theirs. It’s not an ideological choice — we don’t owe them anything — but a pragmatic, self-serving one.”

    Yes, but which selves are getting served? Certainly not me. I had no stake in that game except to see a bunch of poor managers and over paid union laborers get bailed out of their own mess while everyone around, including them, didn’t get the message that their ways don’t work. Now, we have THREE companies in trouble. The only good thing is that they have less employees now than then because we taught them that there were no consequences to everyone in the company looking out for themselves rather than the customers.

    “It’s fine to debate the virtues and flaws of bailouts, but it is wrong to claim that bailouts are costly and that laissez faire comes free of charge. You can oppose bailouts as you like, but it’s disingenuous to argue that a hands-off approach can’t also be expensive. Failing to act is still a form of choice, and with it can come consequences”

    Ah, so you agree there are costs to the bail out? What were they please? You seem to disagree with all the ones I point out.

    Here are some of the costs of letting Chrysler fail: Financial hardship for workers, lost value in property near the plants, increased cost of capital for the industry, etc. They are all easy to see which is why there is an impulse to stop them.

    Here are some of the benefits: Most workers will get better jobs (even if they do not pay better), the industry will learn from the error and gain efficiency, the government MIGHT actually learn something and change regulations in a good way, a bunch of union hacks will be forced to get real jobs, better cars at better prices for the entire frigging world, and, lastly, we would not be seeing them about to fail now. We now have a whole new generation of workers who bought into the big lie. They were defrauded, weren’t they?

    A company is just a sheet of paper. The people move on. They learn. They grow. They live. End the cycle of suffering, stop the interventions.

  • avatar
    Pch101

    Right, so long as you are prescient. The reason the market works better than socialism is because no one is smart enough to make this prediction. Even if they go to Harvard. Once again, we are not speaking Russion – QED, it don’t work.

    It did work in the case of Chrysler back in the ’70’s. The inherent risk minimizes the use of these bailouts, there is no broad portfolio of government-sponsored corporate bailouts at which you can point. Clearly, it’s seen as a last-chance occasional stop-gap measure, not as a standard practice.

    So now it’s just a matter of priority?

    Yep. It’s actually a breath of fresh air to see the feds formulate priorities that have some grounding in reality, instead of some twisted political ideology that corrupts clear thinking.

    Ah, so you agree there are costs to the bail out? What were they please?

    The primary cost was the opportunity cost — the time and effort invested in it could have been otherwise allocated. But in this case, the return was positive and probably one of the wiser uses of the feds’ time at that time, so the bailout made sense, given the payoff to the treasury and the US economy.

    Here are some of the benefits: Most workers will get better jobs (even if they do not pay better)

    No, they won’t. The workers who were raised to work on an assembly line will not leap headlong into some wonderful alternative trade. Most of those individuals will see a decline in their compensation, and limited opportunities thereafter.

    In any case, you seem to miss that one of the prime beneficiaries of the bailout were the banks. If the automakers evaporate, so do their previous loans, which creates widespread pain through the economy.

    I suppose that we could follow the example of Herbert Hoover, whose failure to intervene led to a deepening of the Great Depression, or of the French monarchy prior to the revolution, whose hubris led to the loss of their heads. But I would prefer that we learn from the past, and appreciate that hyperbole that equates management of the monetary system with Hitler and Stalin is more than a bit off the mark.

  • avatar
    Landcrusher

    There are definitely more costs than opportunity costs. There is the moral cost if nothing else, which affects all the players in the market somewhat, and those in that individual industry profoundly.

    Why would those workers not be able to find other manufacturing jobs? First, the demand for autos did not dissappear, nor did the demand for parts. The real losers would be middle managers and professionals, not labor. Those people simply move away and start again, they do not go hungry.

    Those who decide to rot cannot be helped. I say that is a small percentage. I don’t believe they are as incapable of growth as you do, but if they were, why would you want to create another generation of people like that? So the left could stay in power?

    Seriously, what kindness are you showing to these people if you move the problem from them to their children? How about all the other laborers who should have gotten the message and raised their children with more skills? You just taught them not to worry. Their kids can get a better job than a college graduate down at the factory, and the government will ensure it keeps going and going. That is the message.

    Many of them might have ended up working for the American car company that is number one and growing, the one that did not grow out of Chrysler’s ashes. We can’t point to it because it was aborted by the intervention.

    Lastly, this is not a case of monetary policy. Nice try, no cigar. Completely different, sorry. When you pick winners and losers (outside the currency game) you are no longer talking about monetary policy. We certainly are not talking about monarchies.

    You cannot have the benefits of capitalism and remove the pain. The pain is part of what makes it capitalism. If you remove too much of the negative outcome, you destroy capitalism. The cost of the “insurance” against pain has past the point of it being a good cost benefit ratio.

    Are we really just arguing about how low we should set the safety net? I can see from your perspective how the intervention was simply brilliant. It was a bargain of a safety net.

    Let’s say that you think the net should be at point A. Also, you predict the net would reach point B by 2025. If I told you we could get the net twice as high by 2025 if we lowered it today by 50%, would you take that deal? You think I am crazy with my ideology. Wait till you hear this. By the end of this century, people will no longer need to do manual labor.

  • avatar
    KixStart

    Landcrusher,

    I happen to agree with you. There IS a cost. This was your best argument:

    “If it is free, then where is mine? Where is my loan guarantee? If it has no cost to the government to supply it, we should all be getting it, no?”

    The way we did it, it could also be expressed as an assumption of risk. A careful one, to be sure, but this could have had an ugly outcome. We were lucky and, last time I checked, you can’t put lucky in the bank.

  • avatar
    geeber

    Chrysler is too far gone at this point for a government bailout. Plus, Mr. Nardelli is no Lee Iacocca.

    In 1980 the Big Four WERE the domestic automobile industry. Now we have the transplants increasing their administrative, engineering and production presence in the United States, so the argument to save Chrysler becomes less compelling.

    Ford is making the changes necessary for long-term survival NOW, because of the threat of bankruptcy, which, ironically enough, makes it a better candidate for some sort of government aid. I just hope that it doesn’t come to that. The company has escaped death twice before – in the immediate post-World War II years, and once again in 1980-82 – so I hope that it pulls through for the third time…vehicles like the Verve and the Flex give me hope.

  • avatar
    Pch101

    There is the moral cost if nothing else

    Fortunately, most of us reading this live in the United States of America, not Landcrusher’s Monarchy of Morality. The role of our government is not to prop up your version of morality, but to balance the needs and interests of its constituents.

    In 1980 the Big Four WERE the domestic automobile industry. Now we have the transplants increasing their administrative, engineering and production presence in the United States, so the argument to save Chrysler becomes less compelling.

    This is very much on point. Not only is the industry and job base within the US more diversified today than they once were, but so are the investors and creditors. Instead of dragging down the US banking system, defaults would hurt multinationals, which would distribute the pain globally and less of it within the US itself. Since these bailouts are about self-preservation, not charity, it’s of lesser benefit to us to help the automakers today than it would have been in the past.

  • avatar
    Landcrusher

    PCH,

    First, I live in a Libertarian fantasy world, and then a Monarchy of Morality? Which is it?

    None of this name calling and categorizing is a refutation at all is it? And what kind of bunk is this:

    “The role of our government is not to prop up your version of morality, but to balance the needs and interests of its constituents.”

    The first part is just spite, the second part plain wrong.

    Is it your belief that it IS the governments role to pick winners and losers in the market? Because that is the contrary to my position which is that it is NOT the role of the government to pick winners and losers in the market. You may not think it is stealing for the government to do so, but it is still wrong.

    Lastly, is it your position that the intervention addressed a “need” or “interest” of the American people? Both? There are three possible answers unless you want to retract or reclarify your statement.

  • avatar
    Stephan Wilkinson

    Does anybody else think Landcrusher and PCH need to take this offline, or maybe just out in back of the bar? In the first place it’s stunningly boring and bandwidth-using, in the second it’s getting nasty.

  • avatar
    Landcrusher

    Stephan,

    You are likely right, it has gone on a while hasn’t it?

  • avatar
    Pch101

    None of this name calling and categorizing is a refutation at all is it?

    It’s not a function of “name calling”, but of pointing out that your assessment is driven by your personal morality, not by facts and data.

    Ideologically, I take no position on bailouts. My view of them is strictly self-serving — if one occasionally helps the country, then I can support that odd event, even if I’m not particularly thrilled about it.

    Your approach to this is remarkably devoid of any sense of self-interest or a willingness to assess individual circumstances. Instead of performing a cost-benefit analysis, you instead leap to this morality/ Libertarian-uber-alles position, as if all of us are supposed to embrace this worldview just because it works for you.

    On the whole, I find Libertarian ideology to be horribly naive, a sort of political religion which is easy to cite as gospel because there is zero chance of putting it to a real world test. There is a reason why this theory doesn’t make it into practice — because on the whole, no matter how well-meaning it may be, it just doesn’t work.

  • avatar
    Landcrusher

    Dear PCH,

    As per Stephan’s suggestion, I am dropping the argument. I am sure; however, that some Libertarian out there will find your remarks insulting. Having found out that I am not a Libertarian, I can only take umbrage at your mislabeling me as one.

    I have made remarks that I have come to regret, and having learned a lesson, let me share it with everyone. Telling someone their idea comes from a [insert label here] belief system is possibly insulting them while doing nothing to counter their idea.

    I enjoy discussions with you, PCH, and am not going to stop enjoying them because of this thread, but I think you went of the track a while back on this one.

  • avatar
    Pch101

    I enjoy discussions with you, PCH, and am not going to stop enjoying them because of this thread, but I think you went of the track a while back on this one.

    I enjoy jousting with you as well. I am pointing out that when you make statements as polarizing as this…

    Furthermore, governments are certainly NOT supposed to provide economic security. They are not capable of doing so, and it has failed every time it has been tried. There is NO SUCH THING as economic security. None, zero, nada. Trying to create it will DESTROY an economy. Please point out where you think that actually worked.

    …that it is pretty clear that enter the discussion with a highly specific political agenda that shapes your interpretation of the issue before you’ve even begun to assess it.

    Essentially, you’ve already stated that you are adamantly against any sort of bailout on principle. So of course you would oppose this one, no matter what the facts were, because your philosophy doesn’t allow for you to ever see them as having any merit.

    A clear analysis would require one to take the facts and review them in context with one another, before reaching a conclusion based upon those results. If you are going to come to the table with a predetermined, hardened belief that regards all bailouts as unacceptable forms of governmental intervention, irrespective of the circumstances, then it’s obviously not possible for you to take a more neutral approach.

  • avatar
    Stephan Wilkinson

    Oh god, it’s like trying to dam the leak in the Zuider Zee with the Dutchboy’s finger. There’s no stoppin’ it.

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