Monday, January 26, 2009

The "Big Three" are sinking and Barack Obama fires a salvo of torpedoes

The "Big Three" are under bankruptcy watch and begging for more bailout money. President Barack Obama thinks this is a good time to appease his environmental base by weighing Detroit down with a new round of environmental regulations. This is horrible timing and it will severely damage the ability of the "Big Three" to return to profitability. The first increase in CAFE will take place by the 2011 model year. Detroit is now preparing to launch the 2010 model year in July. That is when they change their factories over and begin production of the next years model. They will have only a little over a year to prepare for this change. How will they do it? The easiest solution to raise the fleet millage averages would be if people bought more small and compact cars. That is unlikely unless gas returns to $4 per gallon. They will be forced to cut prices on compact cars to induce more of the public to buy them. The problem is they are already losing money on these cars and can not change that unless the UAW agrees to severe concessions. The UAW (see a UAW contract here) is resisting that solution. The other method is to increase the mileage on the same size car. That takes time and money. It takes expensive new technologies to improve engine mileage without sacrificing power. The "Big Three" are working on this, but no major breakthrough will occur in the next year. The other method is to make vehicles lighter. This requires higher tensile steels and stronger alloys. These materials cost more money and may require different manufacturing processes. All these things will make automobiles more expensive for consumers. Consumers are currently not buying cars and trucks. This isn't because they don't want them or need them. They simply can not afford them in today's economy. If they can not buy them now, they will not buy them when the price is increased by a few thousand per vehicle. The decision to let California decree the emission standards will have a similar effect of raising vehicle prices. Barack Obama may have good knowledge of politics, but he is ignorant of the realities of the automotive industry. The bailout of the "Big Three" will fail. We should stop calling it a bailout. Let's be honest. We will have to "subsidize" the "Big Three" for years under an Obama Administration.
Obama May Let States Set Emissions Standards

Monday, January 26, 2009

President Obama is continuing his reversal of Bush-era policies, issuing two memoranda on Monday that promote his clean-energy policy while having a far-reaching impact on the ailing U.S. auto industry.

The first memorandum will order the Transportation Department to work out rules for automakers to improve fuel economy. It will call for the department to notify automakers by March 2009 to increase their fuel efficiency for 2011 model year cars and trucks.

The second memorandum will order the Environmental Protection Agency to reconsider California's request for a waiver from the Clean Air Act -- a move that would allow California, the nation's most populous state, to set tougher tailpipe emission standards than apply nationally. Excerpted from


nyphonejacks said...

Seems like many of your posts are in line with my opinions and my blog. Thanks for stopping by I am sure to return to see some of your future posts..

Connecticut Man1 said...

They will need to undertake a Mnahattan like project - pooling their resources and their top engineers - to achieve the tighter standards. They would be wise to tap into the expertise already out there producing electric and hybrid vehicles at the smaller companies, as well. The technology and expertise is there to do it.

You aren't thinking of quitting already, are you?

Using the UAW as a scapegoat is a failed solution when you need consumers to have money to spend, never mind that the UAW has already given too many concessions.

Try giving industry single payer health care and the auto industry would save tons of money. At the time I wrote this in 2007, each vehicle assembled in the United States cost GM $1,525 for health care; those made in Canada cost GM $197. The savings is likely even more now.

All industry in the USA would see that kind of savings. And it would create a whole slew of high paying health care jobs to kick start the economy. Or, at least, keep it afloat while we fix the "free market run amok."

I appreciate your comment on my Blog since I am always open to respectful dialogs with the far right wing - I don't even mind the snarky fun nor moderate conservatives in the Democratic party - (Honest! I even actually have some GOP Bloggers on my Blogroll) but bear in mind that I really do know what I am talking about with SOME of this stuff. OK... Most of this stuff.

Anonymous said...

great blog you have :)

M. Simon said...

Connecticut Man1,

I like your idea. Tax every one so car buyers can get a better deal. If you ride a bus or a bicycle you can subsidize the guy who can afford $30,000 for some Detroit iron.

In fact that is such a good idea I think we should tax every one so every one can get a better deal on everything. If the taxes are high enough everything could be free.


And yeah the UAW shouldn't be a scape goat. If the auto companies raise their worker's salaries high enough they can buy all the output of the factories they work at.

Then the more they produce the more cars they will own and the richer they will be.

If the auto execs were smart they would force the factory workers to take a pay increase.


Here is another good idea: auto companies should double the pay of laid off workers so they have enough money to buy a new car and a new house.

Auto workers are the backbone of this country and should be treated like the royalty they are. Not like those disgusting meat packers who don't deserve anything.


An Auto Worker Support Tax I think is just the thing.


And for Gods sake - let us get the minimum wage up to $50 dollars an hour where it belongs. For the dignity of the worker. What kind of car can you buy on $7.50 an hour?

See the thing is CM1 I know even more than you do. And I'm not easily fooled by that right wing crap either.

Anonymous said...

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Anonymous said...

Okay let me try this again! Great post! I enjoyed poking around your blog! Will be back!

Anonymous said...

Darn it! After I logged in, I guess it went and posted the first comment!

Connecticut Man1 said...

"Tax every one so car buyers can get a better deal."

You can not get around the fact that the minor amount of taxes is more than offset by huge amount of savings in your everyday out of pocket expenses. The rest of your comment shows that you do not know more than I do, but you are snarky.

James Higham said...

Will he be the messiah or will he be what normal people know will be a disaster?

suemdonk said...

Your comment about needing $4 a gal gas to get people to buy higher MPG cars will soon be a reality. Another part of the plan is to add a federal gas tax of $2 a gal that increases some at a time over the next 2 to 3 years.
As the World (less the US) economy starts to recover later in 2009, demand for oil will go up and after the entire $2 gas tax is implemented,gas will be $7 a gallon in the US.
This will stall any potential economic activity in the US and make the current recession be thought of as the best of times. People in 2012, 2013 will look back and and say, I wish things were as good as 2008 and 2009. Those were the days.

Phil Hoover said...

We should NEVER, not EVER...bail out Detroit...or Wall Street...

Under no circumstances...and I heartily applaud President Obama for being a man of his word.

Anonymous said...

Raise Cafe to a high enough level that we can lower the disparity in sizes of the vehicles reducing deaths caused by a gas guzzler creaming a fuel miser not to mention less pain at the pump from unprdictable oil prices.