Friday's Random Thoughts

[chris_gerrib]

I will be attending Windycon this weekend, and am on programming. It's a new hotel, so hopefully people can actually find the programming without fighting the maze of the old place. Before I go, I do have a few random thoughts:

Big Three Automaker Bailout

As I mentioned the other day, I am generally in favor of some kind of bailout. Now, I've seen this discussed on various right-wing sites, and the anti-bailout crowd's rallying cry is "remember British Leyland! For those not up on auto manufacturing history, British Leyland was what happened in 1968 with Great Britain nationalized and force-merged the two British automakers.

Nobody can argue that the resulting company managed to become a competitive automaker. It did not - not that the bailout plans so far involve a forced merger. However, what Leyland did accomplish was prevent a sudden collapse of the British auto industry, with the resulting fire-sale of assets. By keeping the factories running, Leyland was able to sell off assets in an orderly fashion at a decent price, and unwind its workforce. So, if nothing else, Leyland succeeded at cushioning the blow. I submit that a US auto industry bailout would be at least as successful.

ETA Read this article which points out that the Big Three are already well into the kinds of reforms they need to make.

US Foreign Policy

Over on Jim Wright's blog, he's got an open letter to the Obama administration regarding foreign policy. All I can say is "amen." It's a bit long, but well worth the read.

Comments

[sinthrex.livejournal.com]

I thought this WSJ article (http://online.wsj.com/article/SB122628230122212449.html) was appropriate.

I agree with preserving American industry as possible. Rewarding bad behaviour when a punch in the nose is more warranted is out.

[chris-gerrib.livejournal.com]

Management and the UAW are not without blame here. Although the Big Three were making a lot of money selling big cars and SUVs to Joe Sixpack, so Joe's got to take some blame as well.

[sinthrex.livejournal.com]

I'm torn on that one.

You can make the rational consumer argument, but it takes hits when the company exerted most of it's effort to alter the market in it's favour. The consumers just made their choices based on the status of the market. Now that the market is unfavourable to the degree that those artificial limits no longer work, it's a failure on the part of the manufacturers that they are incapable of meeting market demand.

It's obviously possible. No one is saying Honda, Volkswagen or even Porsche are going out of business.

[chris-gerrib.livejournal.com]

All of them are hurting - the issue is that the Big Three burned a lot of cash trying to restructure, which the other companies did not have to do.

Another Stimulus Package????

[a-c-r.livejournal.com]

It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn't have any real effect.

This time it's the car industry.

While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable - so this time let's target unemployment, create AMERICAN jobs and pump up the economy all at one time.


Consider the following:

Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that's not all direct but due to suppliers. GM alone has over 1300 suppliers. (That's a lot of jobs!)

1 in 10 Americans makes all or part of their income due to the automobile industry.

Money turns over 5 times in a year.
Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
(This isn't magic, it's simply how the economy works.)

Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
Foreign competitors have worked off-shore collectively to meet various US gov't. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

Make no mistake; it’s no surprise that once again government has been a major part of the problem.

Here's the solution.

Instead of either shipping cases of cash off to car makers; or sending us all another check:

Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that's domestic. (Civic = 70% Ford Explorer=80%)

Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

This would bail out the car industry without giving them a dime directly
Further it would reduce the overall age of the nation’s cars which would in turn;
increase overall fuel economy & decrease pollution.

Strengthen the dollar!

Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported ...like gas!


Jobs

Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
That would give the economy good swift kick right where it needs one!

Pays for itself!

Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
What is the income tax on 65,000 anyway?
(Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)


Another Stimulus Package? (http://authentic-connecticut-republican.blogspot.com/2008/11/another-stimulus-package.html)

I'm sure you'll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV's usually made in Malaysia or some such place.

Re: Another Stimulus Package????

[chris-gerrib.livejournal.com]

That's an interesting argument.

[sinthrex.livejournal.com]

Thought Wesley Clark's Op-Ed (http://www.nytimes.com/2008/11/16/opinion/16clark.html?_r=1&oref=slogin) on this was interesting.

[chris-gerrib.livejournal.com]

The General has a point.