What to Do About the Big Three?

Hi Thomas,
In response to your comment in the New Yorker magizine, about the economy being the new 9/11, I'm calling it 7/11. Why? I'm a sculptor and while recently making a piece about the bail out I discovered how many zeros are in 700,000,000,000. Yes that's right 11. Makes a person wonder!
Steve

The primary focus of the issue is how to keep a large number of americans employed in a time of instability. A secondary goal would be to keep those same americans within the same corporate framework to smooth out retirement and medical issues.

1 The federal government should start an immediate replacement of 75-90% of their fleet of vehicles with electricor hybrid only vehicles within this fiscal year.
2 A loan could be made to the Big 3 contigent upon their supplying electric vehicles to the government to repay the value of the loan.
3 The vehicle requirements for the competition should be published within 30 days.
4 A competition should be held 90 days after the release of the requirements.
5 After a 60 day competition the "purchases" against the values of the loans in each vehicle subtype, van, minivan, sedan, truck would be allotted 50/30/20% increments for 1st/2nd/3rd performers.
6 Deliveries would be expected to start within the next 90 days.
7 Subsidies would be offered to state/local government purchases for electric vehicles which they can then choose based upon the federal testing.
8 large natural gas vehicles might also be beneficiall buses, large trucks, garbage trucks or street cleaning vehicles; should also be considered for subsidy.
9 Offer large tax breaks to individuals and companies who buy these cars. We did it for the big SUVs. We should be able to do it these too.

Benefits:
1 money gets to the companies immediately.
2 retooling can begin now based upon expectations of demand for their product. delivery volumes could be modelled along a bell-shaped time curve to allow for low volumes initially and low volumes at the end as the company has completed it's "retooling".
3 current designs can be modified to meet the car requirements without a big marketing campaign. The P51 Mustang is often discussed as an industrial miracle designed in less than 100 days and resulting in one of the premier designs of the war. However, it also used a fair amount of of the shelf technology not the least of which was the rolls royce merlin engine at its heart. This environment must be recreated now; use existing car designs, put existing electric or hybrid technology in them, accept the limitations of the current technology for the primarily short haul vehicle, and skip the expensive marketing campaign.
4 The companies get pushed in the "right" direction for the future with some assistance with a little for everyone and the government still gets their best current design.
5 Familiarity and acceptance for the public with the electric/hybrid.
6 Working lab for the implementation of these cars into the current system to include their repairs and inclusion of their parts into the distribution system.
7 Additional job creation to increase the electric grid infrastructure at and around government facilities to keep the cars charged (which can happen at night by the way to maximize plant efficiency)
8 Assist with the development of the battery industry
9 Spur planning and development of the battery recycling industry.
10 even if a ford or chrsler design wins that doesn't mean they couldn't subcontract out to a GM plant some of the manufacturing. this may be somewhat unrealistic but working long hours to keep the factory open by changing things beats going hungry.

Potential achievements: Job creation or maintenance, decreased CO2 emissions on a daily commuter basis (although the manufacturing of so many new cars will likely be an overall increase), economic inducement to strengthen overall electric grid which also needs help.

Cons:
A lot. Not the least of which is we may end buying a bunch of crap cars compared to what we have been used to for our federal employees.
-the aforementioned overall CO2 increase
-increase in overall waste, especially heavy metals potentially
-increase in spending
-possible delays in manufacturing leading to job loss
-likely will allow for some contraction in the US auto companies

i've been trying to think of ways to get the electric herd to stimulate the economy. the only way to convince them to sink money in is to give them a sure bet of some kind of return in this unsure environment. a final unrelated piece of the plan might be:
10 offer tax breaks to institutional size direct investmentors in the auto companies who are required to hold their money there for 5 years.

How ironic is it for the CEO's of the three big US car makers to take private jets to Washington DC to testify in front of the senate about their financial issues, which they created with the lack of their vision. Now they are claiming they are working on alternative energy cars, which will not be available on 2010-2020 "Too Little Too Late". If we need to save any one these 3 auto manufacturer then it should be Ford, as they are the only one with some vision of alternative energy car. Ford is working on Hybrid cars that combine and electric motor with fuel cells, hydrogen-powered vehicles. We could help Ford financially to buy off the other 2 auto manufacturers, fire all the executives without any incentives, as they don't deserve it. As for their employees getting laid off, I believe it is time for the Union to step forward and help his members. It is one of the reasons to be member of a Union, right? No wonder the Union is on auto makers side, they don't want to come up with the money they made off of these workers over the years. The executives keep getting fatter paychecks and the workers are the ones, who suffer at the end. Time to let the executives go and get some new ones with some vision, I say!

What is the point of helping the auto industry out, which continues building SUV's and large autos that people are not willing to buy? Now some dealers have the 2 for 1 buy plan where a person, who buys an SUV gets a second used car for free (very smart, ya right). If they have such a huge inventory of SUV's and trucks, why are they still manufacturing them? This to me should be demand/supply 101. Pretty basic!

What the auto makers need above all is sales. If the U.S. government sent a voucher to every American family to buy a car made in AMerica in the next six months, it would represent a tremendous economic stimulus throughout the economy and perhaps make progress to reenergizing a citizenry that has lost confidence and fears spending money.
One million additional sales would equal $4 billion. If the automakers expect sales of ten million vehicles in the next year, half a year would represent 5 million for total cost of $20 billion. An additional one million sold would be a 20% bump, not to mention buying a better car, etc.
One could tie the program to certain reforms in the auto industry as well.

Yes, we need a bigger boat!

Mr. Friedman,

I have read and pondered and read some more about the bailout plan for the financial institutions along with the proposal for the Big 3. Having read "The World is Flat," I understand and agree with your ideas on government intervention with regulations in a free-market society, yet it raises a question for our current situation. Just for a quick example, we all know AIG was a bit decadent with a portion of the bailout money they received while maintaining "We recognize the need to be sensitive about all company expenditures." Personally, I know there is nothing I can do to stop corporations and executives from over compensation or spending large sums of money on needless weekend trips, but with the economy in shambles, it brings about a rage in the minds and hearts of the American people. My question is "how" or "can" the government regulate where the bail out money is spent or invested? Simply throwing money at a company does not ensure that it will be used in the best interest of stakeholders. If we bail out the Big 3, I know incentives will be given for those who invest in green technology along with other perks, but incentives are not enough. I believe to give the bail out plan its best chance for success is to regulate how the money allotted to each is spent or invested. Also, it may serve to alleviate that rage felt by Americans because it would at the very least ensure the money loaned was not being wasted on the personal luxuries of some CEO.

I would appreciate any and all feedback when you have a chance! Also, I am currently a student at Salisbury University majoring in Information Systems. I know it is a long shot... but I will ask anyway. If you were available in the spring of 2009 to make a visit to the Eastern Shore, I hope you might consider bringing some insightful ideas to the campus! Can't wait to begin reading "Hot Flat and Crowded"

I understand that these three automakers represent a lot of American jobs, but the real reason that they will be bailed out, whether we think it is a good idea or not, is that our government has been propping them up so much already, that to let them go under would cost the government more than to prop them up.

What we should be focusing on is nurturing start up businesses in technology markets. It would be most productive to focus energy and funds on startup companies in technology markets which will create new jobs. Every person that makes a conscious choice to take responsibility for our shared experience -- to support the innovations, conversations, and organizations which improve our survivability as a whole -- makes it easier for all of us to succeed.

This situation shows a complete lack of planning by these companies the small exception is Ford who at least is making an attempt to ditch the baggage and produce cars that people actually want to own. (That does not mean they are not responsible here too by any means).

My problem with a bailout is simple: I like many other consumers choose not to purchase one of the big threes' products because I do not believe in the companies on the whole (for good reason it seems)

However I and all the other tax paying citizens are being imposed upon to buy the product anyway.

That is not how business or free enterprise works.

You do not run your company into the ground and then hold a gun to people's heads with threats of an economic crisis if they don't help you.

You had your chance to change your strategies and you decided to be complacent about shifting your paradigm.

Do not turn this around and blame the consumer for choosing not to buy your sub-standard product and any subsequent economic shortcomings that follow your failures. You all can bear the burden of your failures on your own. You can accept the responsibility for the loss of jobs and the destruction of your companies. After all it was you and your executives and union leaders that made the poor decisions in the first place. You are the ones who squandered all of the money in high risk ventures fueled by nothing more then your ego's and personal financial gains.

The result of the mess you have created is good hard working people loosing their livelihood - that is not the fault of the tax payers - that is the fault of your companies and the unions that are affiliated.

Re-structure your companies under bankruptcy protection, re-negotiate with these unions and find a way to be competitive in your market place.

The simple addage: "Change or Die" That is the credo in the car business and has been for many years.

Maybe it is time to get back to basics and focus on producing cars that people actually want to buy.

The consumer's have spoken for many years with their wallets - shame on you for trying to make your failures their problem.

Part of the problem with the auto industry and Detroit is their refusal to face the truth. One example is a recent article in The Detroit Free Press by SARAH A. WEBSTER • FREE PRESS BUSINESS WRITER • NOVEMBER 18, 2008 titled "Rampant auto job losses seen"

In this article Ms. Webster states Ford has 245,000 US employees. Actually Ford has only 87,700 US employees, a fact which is easily checked. This example illustrates the myopic view of reality which pervades Detroit and the media that refuse to say the emperor has no clothes.

Who Killed the Electric Car? is a film that opened my eyes to the evils of lobbyists, big oil companies, big auto company wastes and all that is bad in America. The American auto companies make a bad product that is bad for America. It's like a big drug dealer. Technology exists to put electric vehicles on the road which will meet the needs of 80% of America's daily driving needs. One way to look at this is from the backwards way we have approached this in the past: 1) Fearful that by replacing the current, outdated industry with clean, long lasting electric vehicles that don't have the need for other junk that comes with it; air filters, oil filters, spark plugs, mufflers... Fine- take those resources and create an industry that builds factories to make solar panels (or better low cost PV films) and equipment to harness the wind. Re tool the factories and then retrain the workers for this new economy. This would be a positive way to spend our tax dollars.
We have been living in the age of cheap oil and ruining our planet. Gas prices are low this minute, but it would be idiotic to relax. We must stop sending $700B to the oil producing countries. That same $700B will go a long way toward harnessing natural energy (I have stopped calling wind and solar alternative) Natural renewable energy has to be our future. Tom F's book nails it. It's a matter of national security. If we are not retooling while oil is cheap, how will we retool when it is expensive oil. Expensive like we haven't even seen yet. (See Peak Oil)
We could lie in the bed we've made, or we can get up and fix it. Neither will be easy, neither can be accomplished without sacrifice, but the later is a choice we can live with and eventually thrive with. The former will lead to the end of the USA.

Wednesday, November 19, 2008, USA

The World Needs a New Industry

The Big Three USA North American Operations (NAO) Auto Industry, General Motors Corporation, Ford Motor Company and Chrysler Company have reached the end of its Incubation stage of Industrialization. They will merge, retool and successfully give birth to a new industry. This industry will exceed the development of both The Manhattan Project and The NASA Moon Landing.

The World is about to see how American Know-How in the USA can pull together to create a better World. The NAO Automobile Industry will continue to work under a bankruptcy clause. It will be allowed to make parts for previously built vehicles. The industry will begin to merge and eliminate product lines. This will allow the old way of doing business to fade away. It will emerge from bankruptcy with a new intent for humanity’s success. NAO Auto Industry will go for the works or it will be oblivion.

Homes, not cars will be built for Global distribution and retrieval. Eco-technical homes and Tri-Townhouse Omni–Inclusive Cities will be created to raise the living standards of all humanity.

The USA NAO Auto Industry will pull us out of our Global Economic Crisis and create a sustainable economy for centuries to come.

Dr. Michael A. Grand, Futurist / Visionary
Critical Path Educational Services
StarSpace Structures: Controlled Living Environments
Intellectual Integrity Project Director
Boynton Beach, Florida USA

All the biggest problems we face (the economy, the auto industry, oil dependency, global warming, the Iraq War) have one common solution, and it is actually the opposite of a carbon tax:

MAKE ALL GREEN ENERGY TECHNOLOGY 100% TAX FREE.

It is that simple. No sales or income tax on revenue from clean, renewable energy or technology (like plug-in, flex fuel hybrids) that radically decrease oil consumption. No capital gains tax on companies stocks and dividends in proportion to the percentage of their revenue that comes from green energy technology. That simple policy will supercharge private investment in clean and renewable energy technologies... on the order of $300 billion dollars per year, or more. That includes new investment in the US auto industry, as investors see a path towards a increasingly tax free auto industry. It will encourage oil and coal companies, and utilities, to voluntarily go green, in order to escape taxes.

It will keep the cost of energy as cheap as possible by lowering the price of green energy, creating massive new green energy competition that reduces demand for oil and coal. Cheap energy will in turn stimulate every other sector of the economy.

And NO FEDERAL SPENDING IS REQUIRED. It does not cost one dollar upfront. A focussed tax cut on this one sector of the economy can lift all others by keeping the price of energy low for all, and producing massive domestic employment. A tax cut here will produce a massive tax revenue surge from the rest of the economy. Tax freedom for green energy will make the US the world leader in green energy investment in Obama's first term -- in fact, most world green energy investment will go through the US for the tax advantage.

So forget Obama's $150 billion federal "investment" over 10 years -- that is PEANUTS compared to what is needed and what the private sector can do if we make green energy technology tax free. And puh-lease forget the stupid carbon tax and cap-and-trade proposals that do not really work and will only raise the price of energy, and further depress the economy. A carbon tax is economic suicide, and entirely unnecessary when you can get the same tax differential, and accomplish the same shift with an entrepreneurial boom by making green energy tax free.

A 100% tax cut for renewable, clean energy technologies is the cheapest and most effective stimulus we could provide right now for our struggling economy in general, and for the auto industry in particular. And it is the absolute best and fastest way to achieve our goal of creating a clean, green economy.

But enough. If you wish, read more at GreenEnergyTaxCuts.com

Mr. Friedman:

I don't think it's fair to say that GM is without innovation or that they are a foe of energy innovation. Did GM make a mistake in investing in large SUV's at the expense of small cars earlier in this decade? Sure. But there is hope on the horizon. Have you heard of the Chevy Volt (runs in lithium-ion batteries)? Or the new Chevy Cruze (new small-car with lots of research $)? GM is shifting it's portfolio to small cars. You should also note that GM has pulled the plug on continued development of the next-generation large SUV (Tahoe, Sierra, Escalade) so these vehicles will be removed from the market within the next 5 years. GM gets the picture. They've improved products significantly within the last 5 years. The new Chevy Malibu has received mostly positive reviews from industry journalists, GM now has many hybrids available, and the CTS was the 2008 Motor Trend Car of the Year. Yet GM bashing continues to be a national sport, probably because many Americans still haven't forgiven GM for the crummy products it manufactured during the 80's and 90's.

As far as labor costs go, there's hope on the horizon there too. In 2007, GM negotiated lower wages for new incoming UAW members and moved the health care burden onto the UAW (effective later this decade) that will save GM billions if they can survive.

On the subject of bankruptcy, would you buy a car from a company in bankruptcy? If you were a lender would you give a loan to a bankrupt auto maker with negative news in the press? I strongly disagree that bankruptcy is a viable option.

Then too, what about all the American engineering jobs that would go down the tube should the American auto industry fail? Would it not be a huge blow to American engineering as a whole, leaving America even less competitive in the global market?

Here's an idea. Why don't we give the $25 billion to Tesla? They seem to have the right idea. Let's reward innovative thinking rather than giving more money to those fat guys who keep going back to the race track, and keep asking us for money.

Our Automotive Industry Cannot be Allowed to Fail.

There are critics that suggest that the industry and its leaders are themselves to blame for lack of innovation, for foot dragging on fuel economy standards, for blatant disregard of global warming issues. These critics are reluctant to entrust any bail out money to the same management teams responsible for the current state of affairs.

A number that I hear suggested as an appropriate amount to tide the industry over until the economy improves is $50 billion.

Now at today's stock prices the whole of General Motors And the Ford Motor Company can be bought for $6 billion.

If some enabling legislation were passed the government could buy out General Motors and Ford Motor Company. They could then change management, change out the Board of Directors and change out the product mix of these companies to a mix of electric, hybrid electric, hybrid and high mileage gasoline, and natural gas powered heavy trucks. In addition lithium-ion battery manufacturing could be added

The same enabling legislation could require that the government divest itself of all shares of these companies in five years. It is almost certain that the government would make sufficient profit on these transactions to pay for whatever stimulus packages had to be implemented. Even considering that the unsolicited takeover may result in a somewhat higher buy out price.

The aerobus consortium in Europe is in part a GSE. We allow it to bid on United States military projects at the expense of our own defense industry and their citizen employees. So in a sense we support the concept of government owned industry.

The Bonneville Power Administration is a government owned industry peddling hydropower to the northwest. Also note the BPA was the result and product of a severely depressed economy.

Robert Hodgson

Are we all Americans? Are you? Answer the question before reading further. OK. Why would you want to see truly great American companies fail and just hope everything works out? Is that what we really want?

They want a LOAN...NOT a handout. A LOAN to get by...to get back on track...to survive the mess in the entire world not just in the US...to make ends meet. The US Federal government MADE IN INTEREST $300 million by loaning $1.5 billion to Chrysler back in the early 1980's. That was so they could get by in times of need with the recession then. Remember the K-car Tom? Remember who started the minivan Tom? I bet you've even have owned a minivan in the last 25 years, and paid for it with a LOAN.

The crack comment? Absurd.

Be American. Support the companies and support giving them a LOAN. I'll get my hands out and root them on. Most of us have needed a loan a time or two. Most reading this probably have one right now. What would you do with out it?