Automotive Bailouts: The Neverending Story

With GM now having elbowed its way to the front of the queue, The Detroit Three—with barely a burp or a thank you for the $25 billion they were just given to cajole them in the direction of cars efficient enough to perhaps help them survive—are back at the government nipple.

GM claims, with some credibility, that it has only months to live if it doesn’t get another cash infusion and fast. The combination of pathos and avarice is fascinating. I’m reminded of that sweet little plant in Little Shop of Horrors—the one that needed human blood (oh just a LITTLE more) to survive.

I don’t think many civilians, myself included, know what the bankruptcy of one or more of the Detroit Three would look like (I’m seeing more and more publications adopt this over Big Three, for obvious reasons).

Speculation ranges from a hardnosed: not much; Toyota would buy the viable factories and the number of vehicles sold, and auto workers employed, in the US would remain more or less the same.

To. . . apocalyptic: The. World. Will. End.

I don’t have any philosophical problem with government intervention. Within reason, and under the right circumstances, I don’t have any problem with government loans or subsidies. I have a great deal of sympathy for the plight of the line workers, both those directly employed by the industry and in the ancillary industries that domestic auto manufacturing supports. All of that said, it isn’t clear to me who, if anyone, would be meaningfully helped by another bailout or series of bailouts.

It has been alleged that almost a third of health care spending in the US every year goes to the last thirty days of life. Granted we don’t have little readouts on our foreheads that tick down those last thirty days; one could go through fifteen days of expensive and intensive intervention and then live another twenty years in decent condition; a good percentage of the time, however, that money and those efforts end up being thrown at people who clearly have no meaningful chance of recovery, and no meaningful chance of a decent quality of life if they do recover.

Similarly. . . Well going back more than thirty years now, the American automobile industry reminds me of those cancer patients still smoking by holding the cigarettes to the holes in their throats. Doesn’t make sense to give them money for cigarettes; not clear that having them on oxygen is good for them or for anyone within the blast zone either.

David Halberstam pointed out one evocative example more than twenty years ago, in “The Reckoning: How Japan Beat the United States in the Auto Industry War and Rewrote the Rules of International Business Competition.”

The short version is: In 1958 Ford invented E-Coat painting technology (give paint a positive charge; give auto body parts a negative charge; you get full coverage in every nook and cranny and substantially increased rust resistance). This quickly became the industry standard, foreign and domestic. Ford, however, took until 1975 to get the technology into *half* of their factories; it wasn’t until 1984—more than 25 years later!—that they finally upgraded every one of their plants.

Can American industry innovate? Yes. Are they willing to invest in the future at the expense of this quarter’s profits? Detroit hasn’t been much inclined in that direction for quite some time now.

Airlines mostly keep flying through bankruptcy; retail chains also, for the most part, remain in business as they work through Chapter 11; not clear why the same would not be true of the Shrinking Three.

I oppose capital punishment and can’t therefore in good conscience advocate for executing a large swath of the American Automotive Nomenklatura (although we might consider this a form of euthanasia). If the federal government is to step in (which seems all but inevitable): 1. Executives should have their epaulettes torn from their shoulders, their ill-gotten gains stripped from their Swiss bank accounts, and be shown the door—Lead Parachutes for Everyone! 2. Everything possible should be done to safeguard the pension and medical benefits of retirees. 3. The government should have its loans secured by the companies’ assets. 4. There should be ironclad fuel economy standards imposed on the industry.

President-Elect Obama says he wants to rejuvenate the American Economy by getting us off imported oil and facilitating the growth of a sustainable transportation and industrial infrastructure. Well, Green Power to him! He’s likely to be involved in an automotive bailout even before he takes office. If he does what he’s said he wants to do, I’ll be very happy.

Ban the ‘Vette?

I read a review of the forthcoming 2009 Chevy Corvette ZR1 Sunday morning. A mere $105,000; 638 horsepower; and a side order of GM has been talking about merging with either Chrysler or Ford, as they (pretty much all) burn through their remaining cash at an accelerating rate.

Why combining several hidebound, sclerotic, failing companies into a larger (hidebound, sclerotic) company would be a good idea is a mystery to me.

How producing another gas vaporizing vehicle—turn on the stereo in this thing and you’ve burned at least half a gallon—is going to help one of the Shrinking Three US automakers is also a little opaque.

I do understand the appeal of muscle cars—though more the Mustang than the ‘Vette.

But I have to admit that my first, nanny-state, impulse was “this shouldn’t be legal.”

You could tax the hell out of this car; push it from $100K to $200K.

You could put a governor on it—sell people a muscle-bound, mid-life crisis sports car with the speed capped at 55MPH.

But why not: Just. Say. No.

Kind of un-American, I know.

But we do ban things now and again, and often that’s a matter of degree: most people would put a muzzle-loaded, black powder musket under the Second Amendment’s “right to bear arms.” Very few (there’s a couple in every bunker, of course) would extend this to cover personal ownership of a full auto, sixty caliber machine gun.

I can see why you might want to shoot the occasional goose, using the musket; I don’t recognize the right to shoot down an entire flock of geese (or even the irritating 80s band, A Flock of Seagulls) using the machine gun.

Interestingly (and, as far as I’m concerned, appropriately) there’s more and more regulation of engines on the (very) small end of the spectrum. The EPA is finally going to force lawn mowers and the like to comply with more stringent emissions guidelines. And, in an increasing number of places, gas leaf blowers are being outright banned (more often for noise than for emissions, but both issues are being discussed—as is the banning of gas mowers).

We know, of course, that the best, safest, most efficient thing to do is to regulate markets as little as possible—preferably not at all.

That always yields the greatest result for the greatest number of people right?

Just look at Wall Street!

Oh wait. . .

Cry for U.S.: We’re Argentina

Through about the middle of the last century, Argentina was one of the wealthiest countries in the world. In the post war period, however, the country went from riches to rags; not the direction you expect, or hope, to see such changes take.

In significant part, this slide was the result of poor economic decisions (too much borrowing, not enough repaying; sound familiar?), a bloody series of coups, and a military more concerned with internal rather than external enemies (they began disappearing and torturing alleged enemies of the state in secret prisons; sound familiar?).

But the other key piece is that the products that had made the country wealthy—the export of beef and grain at the top of the list—slid in value as competition increased. The country needed to diversify and invest in changing key sectors of the economy.

It didn’t.

Not soon enough. Not fast enough.

Sound familiar?

We wrote that $25 billion check to the American automobile industry a few days back—another loan.

But Congress was only able (finally!) to renew the anemic tax breaks that have (intermittently) sustained the alternative energy industry in the US, by folding it into this week’s bailout of Wall Street, and adding a “sweetener” that provides support for “alternative” energy sources like oil sands and liquification of coal.

Meanwhile, Warren Buffet just bought a chunk of a Chinese company that manufactures lithium ion batteries for electric cars. They’re looking to bring both the batteries and the cars here.

I’ll confess that I haven’t read Tom Friedman’s “Hot, Flat, and Crowded.” But the subtitle, “Why We Need a Green Revolution—And How it Can Renew America” tells me everything I need to know.

We’ve wasted decades stuck in the idiot conviction that “we can’t afford alternative energy technology.”

Whether that was ever true or not, it’s not true now: we can’t afford not to pursue alternative energy technologies.

And while we dither, squabble, and chant about offshore drilling, China and India are moving to develop these alternatives:

Buffet isn’t investing in China to make a philosophical point; he’s investing to make money.

Our recent appeasement of India’s nuclear industry is unfortunate; China’s rising militarism is worrying; but the greater threat is that we will end up buying rather than selling the technologies that will make possible our surviving (start with that) and hopefully prospering into the next century.

The Squirrels Don't Want Solar!

There was a piece in the New York Times this morning: “A Houston Refuge for a Hurricane’s Tiny Victims.”

A heartwarming story about children being taken care of in the wake of hurricane Ike?

Not quite: “Residents are finding tiny refugees in the leafy debris left behind by Hurricane Ike: baby squirrels. More than 1,000 of them, some less than three inches long, have been brought to the Society for the Prevention of Cruelty to Animals, which has set up the equivalent of a squirrel neonatal unit.”

So. . . let me get this straight.

We can’t care for the HUMANS in New Orleans.

But “Volunteers, who have come from as far away as Los Angeles and Minneapolis to care for animals displaced by the hurricane, sit around a table drawing formula into nipple-tipped syringes, which allow them to deliver a small stream of liquid into the baby squirrels’ mouths.”

Earlier this week, the Times noted, in “Solar Projects Draw New Opposition,” that one obstacle to industrial scale solar facilities in the California desert is—wait for it—opposition by the defenders of the Mojave ground squirrel.

They’re defending more than that, of course—there’s a tortoise and an owl involved as well, a veritable Aesop’s fable worth of endangered species, and the fierce desert dweller’s “why can’t you just leave us alone?”

I’m a little more sympathetic to endangered exotic squirrels than I am to backyard rat variety squirrels. But all of this is more than mildly insane.

I *think* it was New York mayor Ed Koch who came up with the acronym NIMBY (Not in My Backyard!) to describe the problem of where to site important but unpopular facilities. The new acronym—from I know not where—is BANANA (Build Almost Nothing Anywhere Near Anyone).

I get why you would not want a coal company to take off the mountain top next door. I understand why you wouldn’t want an oil refinery on your block. I am less sympathetic to the idea that people don’t want windmills spoiling their view. I can see the need to protect desert habitat, but if we don’t take radical action, and soon, we’re going to have a lot more desert habitat than we know what to do with.

If we maintain this “no one wants to give up anything” attitude, everyone’s going to lose everything.

And then who will take care of the baby squirrels?

The Volt is Coming! The Volt is Coming! (Maybe)

General Motors continues to emit a steady stream of—mostly the same—information on the forthcoming (late 2010, they’re still saying) Chevy Volt: four door, plug-in, *“up to”* forty miles on a full charge, pure electric drive train, the onboard gasoline/E85 engine is just a generator to recharge the batteries.

So why am I not happy and excited?

I suppose, first and foremost, I’ll believe it when I see it.

In the software world, you refer to a much promised, oft delayed, product as Vaporware. It’s off there in the mist somewhere, glistening, perfect, and not quite touchable. It seems to be moving toward you, but it’s hard to tell in all that fog.

And GM has fogged us over before.

Paging the EV1! Paging the EV1!

Having a prototype up and running concretizes things a little, but not much: there’s a world of difference between building a $1 million one-off that will run smoothly for a one hour press junket versus building a $20,000 mass market car that a million consumers will still swear by (rather than at) a year after it’s been put into full service.

And in this case, well. . . Show me the battery.

All the hybrids extant run on nickel metal hydride batteries. The Volt is supposed to run on lithium ion packs. Twice the energy in half the weight, and every now and then your laptop bursts into flame—that’s where you’ve heard of lithium ion batteries before. That’s also why a lithium ion pack large and powerful enough to run a car is a little nervous-making. (Not saying this is not a good technology, not saying it won’t eventually be made to work, just saying I don’t know that I want to be the first on my block to test this out and roast the carpool kids, my own included.)

We keep hearing about battery breakthroughs. Again, I’ll believe it when I see it.

Meanwhile, over at the bank. . . GM is at the front of the line, as the American automobile industry asks Uncle Sugar for $25 billion or so to help break (or is it cushion, or is it continue, I get confused) its addiction to trucks and SUVs.

We need to produce vehicles that get higher mileage! Well who coulda predicted that would ever happen? I mean we’re not clairvoyant here in Detroit, y’know!

In the fine print of the Volt hype, GM has been saying, rather more sotto voce: we’re not really going to make many of these.

Here’s the short answer to bailing out Detroit: no.

The number of auto manufacturing jobs has actually remained relatively stable in the US for several decades. They’ve just shifted from “American” companies (like Ford of Mexico and Korea), to “Japanese” companies (like Honda of Marysville, Ohio).

The Japanese build better cars.

They also pay more, pay more for, (and pay more attention to) engineers instead of the obscenely inflated salaries that American execs pay themselves.

If the Volt eventually appears, is a well made product that works as advertised, I’ll buy one and congrats to GM.

I’ll believe it when I see it.

Earth Lessons 101

Galveston, Texas is a skillet-flat island, “protected” by a seawall 10 miles long and 17 feet high. Nestled between Lake Pontchartrain and the Mississippi River, New Orleans is a bowl, half of it below sea level. Fly into or out of Los Angeles, and look down; what you see is an oven, a desert that is home to more than twelve million people, America’s most populous metropolitan area.

None of these places is really year-round habitable for large populations in any kind of a sustained way.

I grew up taking for granted the idea that we could do whatever we wanted to do: meaning not just Americans, but people in general—or perhaps, more clearly defined, Industreo-Sapiens.

The idea that weather, of whatever kind, would stop us from doing what we felt we needed to do was silly. I can recall one or two blizzards that brought my world to a standstill—a cool kind of snow globe effect—that’s about it.

Wind? Rain? Water?

That was Three Little Pigs stuff.

We didn’t live in houses made out of straw or sticks.

If rivers were in the wrong places, or didn’t behave civilly, they would, of course be moved. If we wanted to live someplace where there wasn’t water, water would be brought to us—endless water at no real cost, gushing from the tap whenever we wanted it.

Roads went over or through mountains or we just took the mountains down.

For a good hundred and fifty years or so, from the end of the Civil War to the end of the 20^th Century, industrialized countries had their way with the world, remaking it, just one big sandbox to play in.

And now the world seems inclined to restore (dis)order and go back to business as usual, which is the planet having its way with us.

What allowed us to control the sandbox, of course, was the freewheeling use of relatively cheap energy. That era is coming rapidly to a close. At the same time, the environmental bill is coming due for the atmospheric impact of that energy use:

Galveston’s seawall isn’t going to do well as the oceans rise; ditto New Orleans levees, arrayed against an increasingly surly climate; LA is heading for the opposite problem—it’s going to be drier than prohibition ever made it.

I’ve never been particularly comfortable with the “live in harmony with Mother Earth” strand of environmentalism. It isn’t that I much disagree with the principles; rather, I find it too easily merges into a judgmental stance that treats the way we live as “sinful” rather than “unsustainable.”

We can put together equations to argue about sustainability (I hear LA has five years of water left, then comes the real crisis). Arguing about who or what is sinful is rather more nebulous and a lot more personal.

I’m under no illusion that people are going to begin—calmly, rationally, and in organized fashion—migrating away from the (very popular) parts of the country that are increasingly unsafe or where the population levels are unsustainable.

But part of growing up is learning that you can’t do anything you want to do. And mostly, unfortunately, that’s a lesson learned the hard way.

Mayor Bloomberg and the Utility of Futile Proposals

I didn’t start out inclined to like New York City Mayor Michael Bloomberg.

Billionaire Biz Guy basically buys mayor’s manse—and then doesn’t live there because it isn’t swank enough. What’s to like?

But I’ve come to a position of grudging admiration. He’s a bland technocrat, but he focuses on getting things done. And, unlike his fellow Republicans (elected as a RiNO—a Republican in Name Only—now identifies as an Independent) he actually matches rhetoric about balancing budgets with—gasp!—consistent work to actually balance budgets, including raising taxes (!) when that’s what’s required to provide the services that people demand, without running a deficit.

What I especially admire, however, is Bloomberg’s willingness to move forward in the face of resistance and/or failure, particularly with regard to energy and environmental proposals.

In April of 2007—for Earth Day—he rolled out 127 proposals for “greening” New York City, from Brownfield cleanups to energy efficiency programs to park expansions.

He proposed congestion pricing for automobiles in mid-Manhattan—modeled on the program that London put into place in February 2003, and expanded in February 2007.

Most recently, he has focused on expanding wind energy production in and around New York City, on bridges, skyscrapers, etc.

Congestion pricing was shot down by the politicos in Albany who exercise unconscionable authority over what the city can and cannot do.

In at least some quarters, urban wind energy is being derided as everything from impractical to dangerous.

Bloomberg is right about congestion pricing; and alternative energy sources should be pursued wherever and whenever they can be—if they don’t prove out in certain contexts, they should be abandoned.

But it’s particularly laudable that Bloomberg is willing to FIGHT for things he believes in; it’s easy enough to give people what they want or to do things that enjoy broad and uncritical support. It’s more difficult, particularly for politicians, to buck trends.

American politicians and activists have often been at their best when they took those risky but principled stands: That’s what the anti-slavery movement did for decades; that’s what women’s rights movements have done going back at least as far as the founding of this country; that’s what mainstream politicians today (like Maverick McCain and Changeling Obama) seem to have so much trouble doing.

“We are AGAINST drilling offshore drilling!” they both told us.

Oh. . . public opinion has changed?

In that case. . .

From Obama: We are willing to look at drilling.

From McCain: “Drill Here! Drill Now!” Drill, Drill, Drill!!

Perhaps Bloomberg would be the same (constructively intransigent?) if he were only a millionaire politician—like McBama. But it looks more like it takes billions for a politician to actually stand firm.

Sad.