Thursday, December 25, 2008
Tuesday, December 16, 2008
UK Drinking Problems
Some chunk of my time gets devoted to researching and writing about traffic safety. One major element in increasing safety is utilizing roundabouts instead of sign or light controlled intersections. When this is done fatalities drop by about 90% and crashes overall by about 40%. Alcohol is another critical element. Alcohol and driving do not mix very well.
Well, alcohol and traffic engineering may not mix very well either. Getting drunk is a popular pastime among many throughout the UK and one which many are beginning to realize has become very problematic. Magic Roundabouts are one apparent result of this abundant drunkenness. If one roundabout is good then a few pints apparently makes 5 seem better and maybe just one more pint makes putting those 5 in the middle of a giant traffic circle the epitome of traffic engineering. Click here for a Google satellite image.
Well, alcohol and traffic engineering may not mix very well either. Getting drunk is a popular pastime among many throughout the UK and one which many are beginning to realize has become very problematic. Magic Roundabouts are one apparent result of this abundant drunkenness. If one roundabout is good then a few pints apparently makes 5 seem better and maybe just one more pint makes putting those 5 in the middle of a giant traffic circle the epitome of traffic engineering. Click here for a Google satellite image.
Thursday, December 11, 2008
Chrysler not good enough for it's owner.
Sen. Tom Coburn pointed out a very important issue this morning. Cerberus Capital Mgmt owns a bit over 80% of Chrysler. If there is any way to save that company, they will figure out a way to do it. They have billions on the line if Chrysler goes down. They'll sell other of their assets in stronger companies in order to get the money to protect their investment in Chrysler. They can do that. That is their option. It's a simple business decision.
If Cerberus chooses not to save it's own car company, why should we. If they do not believe it is salvageable and are willing to loose their billions of investment, what makes us think the government can do better? On this one issue alone Chrysler should be completely out of consideration.
If Cerberus chooses not to save it's own car company, why should we. If they do not believe it is salvageable and are willing to loose their billions of investment, what makes us think the government can do better? On this one issue alone Chrysler should be completely out of consideration.
Iowa: Gay OK, just don't let in any Polygamists
In hearings before the Iowa Supreme Court on Tuesday (in Varnum v Brien), Justices spent some time fixated on fears that allowing gay marriage in the state would open the door to something far worse - polygamy. I assume the Justices aren't Christians since if they were following the Bible they'd allow polygamy long before gay marriage.
Tuesday, December 9, 2008
Bill O'Reilly's Prostitutes
“Amsterdam is a disaster.” Bill O’Reilly said on his show last night, “And they’ve finally realized it.” O’ Reilly pontificated about Amsterdam finally realizing what a failure their city policies are and are finally doing something about it.
O’Reilly promoted an impression that crime and social problems are soaring in Amsterdam, that the city now realizes it, and is closing all of it’s prostitution and coffeeshops. He also made mention of the apparent failure of their safe sex programs for teens.
Well, that’s not exactly accurate. Not even remotely close. Bill must be learning journalism and honesty from his friend Geraldo.
Let’s make sure we all understand exactly what Amsterdam is doing. They plan to close approximately 30% of the prostitute windows in the city center area and 22% of the over 200 coffeeshops. The bulk of these are in the relatively unknown areas of The Singel and Pijp. While they are closing some windows along the perimeters of the more famous Walletjes RLD the city said that they plan to leave at least 200 windows and very specifically said that they do not want to close any more as they believe that a legal industry is better for everyone than an illegal underground industry under prohibition. In total the plan represents about a 4% overall reduction of prostitution locales in the Amsterdam area (windows make up less than 15% of legal prostitution in Amsterdam) though likely no reduction in activity as many of the displaced prostitutes are expected to move elsewhere and continue working. This move by the city is aimed more at simply reducing visibility.
Now, back to Amsterdam realizing how screwed up they are.
As we’ve already discussed, Amsterdam appears, from every report published, to have significantly less human trafficking and underage prostitution than the US. The Netherlands has 1/5 the teen pregnancy rate of the US (34/100k in NL vs. 176/100k in the US) and also has about 1/3 the per capita abortion rate. The US has about 2 to 3 times the incidences of AID’s as The Netherlands and over twice the incidences of other STD’s. (I believe in abstinence until marriage, but the results of safe sex programs in The Netherlands and elsewhere cannot be ignored.)
We also know that about 50% more kids smoke pot in the US than in The Netherlands. Adult use of pot in the US is higher by an even greater margin.
As O’Reilly pointed out the government says that one reason for taking these measures is to cut down on crime. Let’s get some perspective on this. ALL of the following is based on per capita rates per 100k population as per the World Bank and US Justice Dept. The Netherlands has less than half the theft rate of the US and 15% less fraud. The US has 12 times (yes, twelve) the arrest rate for drug offenses as The Netherlands. The US has 3 times as many murders and 4 times as many assaults, most of these related to our war on drugs that doesn’t exist in The Netherlands. (And these don't include numerous deaths and assaults such as Tarika Wilson.) The Netherlands has 20% fewer robberies. The US prison population is 9 times that of The Netherlands. And The Netherlands has 32% fewer law enforcement personnel than the US. If the FBI, border patrol, state SBI’s are included they have 69% less and if military personnel used for drug interdiction are included they have 82% fewer.
Organized crime is very difficult to measure but according to what I’ve been able to quickly pull together it appears that the US has about 2 - 3 times as much organized crime as The Netherlands. More research is needed on this one though.
What O’Reilly also didn’t mention is that this past summer when Conservatives in the national government were looking at a law to close all prostitution and coffeeshops throughout the country that over 85% of the mayors, including Amsterdam, Maastricht, and all other major cities, very strongly protested this effort saying that this would increase crime and other problems. And many of these mayors are Conservatives. Nor did he mention that they also hope to close over 50% of the mini-marts and souvenir shops.
The ignorance of O’Reilly and his guests on this issue is a new level for him.
An accurate statement is that Amsterdam is very slightly tweaking their already successful prostitution and drug policy in hopes that they can further reduce crime (that overall is already about 1/6 that of the US crime rate) without increasing social problems (that are overall about 1/3 that of the US).
O’Reilly promoted an impression that crime and social problems are soaring in Amsterdam, that the city now realizes it, and is closing all of it’s prostitution and coffeeshops. He also made mention of the apparent failure of their safe sex programs for teens.
Well, that’s not exactly accurate. Not even remotely close. Bill must be learning journalism and honesty from his friend Geraldo.
Let’s make sure we all understand exactly what Amsterdam is doing. They plan to close approximately 30% of the prostitute windows in the city center area and 22% of the over 200 coffeeshops. The bulk of these are in the relatively unknown areas of The Singel and Pijp. While they are closing some windows along the perimeters of the more famous Walletjes RLD the city said that they plan to leave at least 200 windows and very specifically said that they do not want to close any more as they believe that a legal industry is better for everyone than an illegal underground industry under prohibition. In total the plan represents about a 4% overall reduction of prostitution locales in the Amsterdam area (windows make up less than 15% of legal prostitution in Amsterdam) though likely no reduction in activity as many of the displaced prostitutes are expected to move elsewhere and continue working. This move by the city is aimed more at simply reducing visibility.
Now, back to Amsterdam realizing how screwed up they are.
As we’ve already discussed, Amsterdam appears, from every report published, to have significantly less human trafficking and underage prostitution than the US. The Netherlands has 1/5 the teen pregnancy rate of the US (34/100k in NL vs. 176/100k in the US) and also has about 1/3 the per capita abortion rate. The US has about 2 to 3 times the incidences of AID’s as The Netherlands and over twice the incidences of other STD’s. (I believe in abstinence until marriage, but the results of safe sex programs in The Netherlands and elsewhere cannot be ignored.)
We also know that about 50% more kids smoke pot in the US than in The Netherlands. Adult use of pot in the US is higher by an even greater margin.
As O’Reilly pointed out the government says that one reason for taking these measures is to cut down on crime. Let’s get some perspective on this. ALL of the following is based on per capita rates per 100k population as per the World Bank and US Justice Dept. The Netherlands has less than half the theft rate of the US and 15% less fraud. The US has 12 times (yes, twelve) the arrest rate for drug offenses as The Netherlands. The US has 3 times as many murders and 4 times as many assaults, most of these related to our war on drugs that doesn’t exist in The Netherlands. (And these don't include numerous deaths and assaults such as Tarika Wilson.) The Netherlands has 20% fewer robberies. The US prison population is 9 times that of The Netherlands. And The Netherlands has 32% fewer law enforcement personnel than the US. If the FBI, border patrol, state SBI’s are included they have 69% less and if military personnel used for drug interdiction are included they have 82% fewer.
Organized crime is very difficult to measure but according to what I’ve been able to quickly pull together it appears that the US has about 2 - 3 times as much organized crime as The Netherlands. More research is needed on this one though.
What O’Reilly also didn’t mention is that this past summer when Conservatives in the national government were looking at a law to close all prostitution and coffeeshops throughout the country that over 85% of the mayors, including Amsterdam, Maastricht, and all other major cities, very strongly protested this effort saying that this would increase crime and other problems. And many of these mayors are Conservatives. Nor did he mention that they also hope to close over 50% of the mini-marts and souvenir shops.
The ignorance of O’Reilly and his guests on this issue is a new level for him.
An accurate statement is that Amsterdam is very slightly tweaking their already successful prostitution and drug policy in hopes that they can further reduce crime (that overall is already about 1/6 that of the US crime rate) without increasing social problems (that are overall about 1/3 that of the US).
Monday, December 8, 2008
Amsterdam: Messing up a good thing?
Recent news of Amsterdam’s plans to close a number of brothels and coffeeshops (that sell pot) in the central district raise some interesting questions. Their purpose according to the plan is to clean up the unappealing aspects of their city center to make it more appealing to tourists and clamp down on organized crime.
The Netherlands, and Amsterdam in particular, have for decades been known for their very open tolerance towards personal vices that many other countries have, over the past 90 to 100 years, tried various prohibitions against. Many people, particularly religious groups, have been very vocal in criticizing these policies and have for years put pressure on The Netherlands to repeal these policies and institute prohibitions.
The standard critiques have been that The Netherlands policies promote human trafficking and drug use among teens and others.
As far as drug use The Netherlands is actually below average. According to a UNICEF study of OECD countries conducted in 2007 about 21% of 11 – 15 year olds in the Netherlands had smoked pot in the past year while 31% of these kids in the US have. 35% of this age group in the UK have and 40% in Canada. The Netherlands scores equally well or better in other studies. It would appear that the coffeeshops may actually have a bit of a deterrent effect. This sometimes attributed to Dutch teens seeing people stoned in coffeeshops and finding it unappealing or the knowledge that they can always try it later if they want so there’s no need to rush to do it ‘while I have the opportunity’.
On the prostitution front the city’s plans to close down some brothels is even more interesting. Every study I have read on the harmful impacts of prostitution in The Netherlands indicates that The Netherlands has far fewer problems than other countries. Numerous studies by DSP- Groep, WODC, Regioplan Beleidsonderzoek, and Intraval have found extremely low incidences of human trafficking and underage prostitution. Across a broad spectrum of other issues these reports say that continuing the current policy of legal and open prostitution is far superior to the problems caused by prohibition.
Some, including Saint Augustin and Saint Thomas Aquinas, believe that legal prostitution is necessary to reduce problems of rape. Per capita The Netherlands has about 9 rapes per 100,000 people while the US has 33 per 100,000 (all OECD countries with legal prostitution average 11.3). Since Sweden criminalized prostitution in 1999 their incidences of rape have increased twofold. Will this clamping down also ratchet up rapes in The Netherlands?
The authorities in The Netherlands want to trade in a real society that has very few social problems for a veneer that they think will be more appealing to tourists. They want their city center to look better and cleaner and they’re willing to risk their very successful and strong social fabric to do it.
One of the more perplexing aspects of this plan is that Amsterdam is already one of the top tourists spots in the world, particularly relative to its size. People come not just because of the coffeeshops and prostitution, which is for better or worse a popular draw, and not just because of other equally or more popular attractions such as Amsterdam’s architecture and museums or the Anne Frank House. People come to see a society that has so very successfully integrated all of these things. As one travel agent pointed out to me this morning, take away the intriguing Red Light Districts and Coffeeshops and Amsterdam will become second fiddle to a number of other popular tourist cities.
Will a 22% reduction in coffeeshops, which is the plan, reduce or eliminate the apparently positive impact on illicit drug use among Dutch teens? Will clamping down on legal prostitution drive more of the industry underground and increase human trafficking and underage prostitution?
I'm in no way a supporter of prostitution or illicit drug use, but I do believe in a certain level of pragmatism, especially when the harms of policies such as social prohibitions are so detrimental to societies.
Stay Tuned…
The Netherlands, and Amsterdam in particular, have for decades been known for their very open tolerance towards personal vices that many other countries have, over the past 90 to 100 years, tried various prohibitions against. Many people, particularly religious groups, have been very vocal in criticizing these policies and have for years put pressure on The Netherlands to repeal these policies and institute prohibitions.
The standard critiques have been that The Netherlands policies promote human trafficking and drug use among teens and others.
As far as drug use The Netherlands is actually below average. According to a UNICEF study of OECD countries conducted in 2007 about 21% of 11 – 15 year olds in the Netherlands had smoked pot in the past year while 31% of these kids in the US have. 35% of this age group in the UK have and 40% in Canada. The Netherlands scores equally well or better in other studies. It would appear that the coffeeshops may actually have a bit of a deterrent effect. This sometimes attributed to Dutch teens seeing people stoned in coffeeshops and finding it unappealing or the knowledge that they can always try it later if they want so there’s no need to rush to do it ‘while I have the opportunity’.
On the prostitution front the city’s plans to close down some brothels is even more interesting. Every study I have read on the harmful impacts of prostitution in The Netherlands indicates that The Netherlands has far fewer problems than other countries. Numerous studies by DSP- Groep, WODC, Regioplan Beleidsonderzoek, and Intraval have found extremely low incidences of human trafficking and underage prostitution. Across a broad spectrum of other issues these reports say that continuing the current policy of legal and open prostitution is far superior to the problems caused by prohibition.
Some, including Saint Augustin and Saint Thomas Aquinas, believe that legal prostitution is necessary to reduce problems of rape. Per capita The Netherlands has about 9 rapes per 100,000 people while the US has 33 per 100,000 (all OECD countries with legal prostitution average 11.3). Since Sweden criminalized prostitution in 1999 their incidences of rape have increased twofold. Will this clamping down also ratchet up rapes in The Netherlands?
The authorities in The Netherlands want to trade in a real society that has very few social problems for a veneer that they think will be more appealing to tourists. They want their city center to look better and cleaner and they’re willing to risk their very successful and strong social fabric to do it.
One of the more perplexing aspects of this plan is that Amsterdam is already one of the top tourists spots in the world, particularly relative to its size. People come not just because of the coffeeshops and prostitution, which is for better or worse a popular draw, and not just because of other equally or more popular attractions such as Amsterdam’s architecture and museums or the Anne Frank House. People come to see a society that has so very successfully integrated all of these things. As one travel agent pointed out to me this morning, take away the intriguing Red Light Districts and Coffeeshops and Amsterdam will become second fiddle to a number of other popular tourist cities.
Will a 22% reduction in coffeeshops, which is the plan, reduce or eliminate the apparently positive impact on illicit drug use among Dutch teens? Will clamping down on legal prostitution drive more of the industry underground and increase human trafficking and underage prostitution?
I'm in no way a supporter of prostitution or illicit drug use, but I do believe in a certain level of pragmatism, especially when the harms of policies such as social prohibitions are so detrimental to societies.
Stay Tuned…
Saturday, December 6, 2008
Are Texans Simply Unconscionable?
While one hand was busy taking nearly 500 children from their parents at the YFZ ranch, disabled citizens in it's care were dying by the other hand, according to the US Justice Department's division on human rights. This is the 3rd similar report by the US Justice Department in the past 3 years looking in to severe problems in Texas' state run schools for the disabled. The report, issued this past week, noted over 500 allegations of abuse, neglect, and other mistreatment of residents over a single 3-month period in July through September of this year. The report said that there were 50 deaths that are normally considered routinely preventable.
"We have concluded that numerous conditions and practices at the facilities violate the constitutional and federal statutory rights of their residents." wrote Grace Chung Becker, an assistant attorney general in the civil rights division of the US Justice Department.
Violating people's human rights is becoming routine for Texas authorities.
Could the $14 million wasted on the YFZ raid have helped prevent these needless deaths and incidences of abuse? Could some of the resources used on the YFZ raid possibly have been focused instead on real problems in Texas? The folks in Texas really need to get their priorities straight. Focusing on their own petty bigotry while their citizens are in harms way is unconscionable.
"We have concluded that numerous conditions and practices at the facilities violate the constitutional and federal statutory rights of their residents." wrote Grace Chung Becker, an assistant attorney general in the civil rights division of the US Justice Department.
Violating people's human rights is becoming routine for Texas authorities.
Could the $14 million wasted on the YFZ raid have helped prevent these needless deaths and incidences of abuse? Could some of the resources used on the YFZ raid possibly have been focused instead on real problems in Texas? The folks in Texas really need to get their priorities straight. Focusing on their own petty bigotry while their citizens are in harms way is unconscionable.
Wednesday, December 3, 2008
The New THE BIG 3
THE BIG 3 US auto manufacturers are asking for $34 billion from taxpayers. That’s about $92 for every man, woman, and child in the US. Instead, how about each of us swing by our local GM or Chrysler dealer and give them $92 cash. A family of 4? Give them $368 cash. This so that the unionized UAW workers won’t have to reduce their take home wages from their current $81,000 per year.
First let’s realize that the auto companies are in the positions they are in not because of the slumping economy but because of their own mismanagement. US Manufacturers have been steadily loosing market share to non-US manufacturers for 3 decades and had ceased being profitable long before the economic downturn. The slumping economy only accelerated what was already taking place.
The 3 US manufactures erred in a number of critical ways.
1) They didn’t manage they union labor force effectively. Whether this should be blamed on the unions or the corporate management is difficult to determine. In any case, a union company forced to pay it’s workers $73.26/hr in wages and benefits and forced even to pay them for years on end in job banks for not working cannot compete with a non-union company paying $53.20/hr, still a very good wage, and then only for workers who actually work.
2) They either mistakenly allowed the quality of their vehicles to decline or did so intentionally as a method of using planned obsolescence to generate higher future sales. All of these future sales though went to Toyota, Honda, Volkswagen, and others.
3) They did not produce the vehicles that consumers wanted either in terms of design or quality.
The situation the auto manufacturers find themselves in is of their own making. Note though that Ford has done the best job of the 3 in turning themselves around and will likely make it through without any government assistance.
The 3 US auto manufacturers came begging to the government because banks and other investors won’t lend to them and wouldn’t even before the current economic downturn. Investors don’t consider the 3 as good or viable investments. They do not believe that the 3 auto companies, or at least GM and Chrysler, will be successful even with funding. Why then should we? The auto companies have vigorously fought declaring bankruptcy saying that consumers won’t buy a car from a company in bankruptcy because of fears that the company will not be around for the life of the car. I’m not sure a government bailout will change that very much, especially if the government says that this $25 billion (or $34 billion) will be the last. Perhaps we need a new bankruptcy chapter – government bailout.
If we were going to lend any money, and I don’t’ think that we should, Congress should at a very minimum require that they first; 1) Obtain cash from divesting as many extraneous assets as possible including subsidiary brands such as GM’s Opel, Hummer, Vauxhall, Saab, Saturn, Holden, and Daewoo, and 2) Obtain union contracts that immediately put their labor costs (wages, benefits, work rules, and job banks) on par with or below competitors.
GM’s proposal to Congress indicates it plans to be on labor cost par with Toyota by 2012. Can it really afford it’s current high wages for another 4 years? They’re already deep in the hole and cannot afford to continue going deeper for another 4 years. GM and Chrysler (and Ford) need their labor costs well below Toyota’s for a number of years just to dig out.
Looking at the other side of their businesses, my brother-in-law recently made an interesting observation. In our metro area we have 7 Toyota dealers (including Lexus) and 28 GM dealers. Based on this an average Toyota dealer sells and services about 5 times as many vehicles as the average GM dealer. Which dealer network will be the healthiest and which will be able to provide the best service? Ford touts a cut of 16% in their dealer network and GM a planned reduction of 35%. Perhaps it should be more like 50-75%.
Finally, and more importantly, we need to look at the BIGGER picture. If any of THE BIG 3 US manufacturers fails it will not be the death of the US auto industry. Even if all 3 of them were to fail it wouldn’t be. We can’t forget about the new THE BIG 3 – Tesla, Fisker, and Miles.
The new THE BIG 3 are, by all appearances, well ahead of the old THE BIG 3 when it comes to newer and alternative energy vehicles. The new THE BIG 3 also appear to be far more efficiently run and better managed than the old THE BIG 3. If GM or Chrysler fails the new THE BIG 3 will take up some of the slack on the employment side. Much as the old THE BIG 3 took up slack from the original THE BIG 3 – horseshoe, saddle, and buggy makers. And many of the workers displaced from GM or Chrysler will start other new companies.
Let’s not forget that while the old THE BIG 3 can’t sell their vehicles, both Tesla and Toyota can’t keep up with demand for their electric and hybrid products.
The same investors who rightly fear putting any money in to the old THE BIG 3 are investing in the new THE BIG 3 as well as a number of growing competitors such as Phoenix, Commuter Cars, e-ride, Wrightspeed, Venturi, Lightning, ZAP, Think, AC Propulsion, and others. Half of these companies are on par with the old THE BIG 3 with development of electric and electric/hybrid, and the other half are way ahead!
While very few of us will be going out and buying an all electric vehicle from one of these companies next year, we very well may within the next 3 to 5 years. We’ll still buy a Toyota or Ford as our primary family car but our second may very well be an all electric or electric/hybrid from one of these up and coming companies.
Is it really rational to think that dinosaurs like GM or Chrysler will be able to compete with these companies that are not only already well ahead but also smaller, more nimble, and more efficient? If GM and Chrysler are allowed a natural death we may well find that instead of 3 declining US auto manufacturers who only get further and further behind the rest of the world, we end up with half a dozen who are leading the world. We could very well find ourselves once again at the forefront.
What will congress do? I think they all know that funding the old declining US auto industry is a no-win proposition and, except for those in Michigan and Ohio, will find it politically unpalatable. If any of the 3 fail their opponents will paint them as having wasted billions of taxpayer dollars on a failing industry. Even if all 3 survive, which is extremely unlikely, they will get painted as having bailed out a bunch of union workers who make nearly twice the US average and who, instead of reducing their own wages to save their own jobs and companies, demanded that taxpayers, most of whom make less than they do, bail them out.
Not a pretty picture. The average union worker will loudly tout how they supported the government bailout of the auto unions but will vote in private against those in Congress who took money from them to pay people making much more.
Edit: The auto companies and their supporters throw out a lot of numbers about how many people will loose jobs if any of them go under. We must keep in mind that a chunk of these people will loose their jobs anyway. Even if all 3 companies survive.
Edit 2: Neil Cavuto on Foxnews made an interesting point today that when AMC was in trouble and openly being shopped around before going under that people kept buying cars and Jeeps from them. EG, going through chapter 11 shouldn't stop consumers from buying cars.
First let’s realize that the auto companies are in the positions they are in not because of the slumping economy but because of their own mismanagement. US Manufacturers have been steadily loosing market share to non-US manufacturers for 3 decades and had ceased being profitable long before the economic downturn. The slumping economy only accelerated what was already taking place.
The 3 US manufactures erred in a number of critical ways.
1) They didn’t manage they union labor force effectively. Whether this should be blamed on the unions or the corporate management is difficult to determine. In any case, a union company forced to pay it’s workers $73.26/hr in wages and benefits and forced even to pay them for years on end in job banks for not working cannot compete with a non-union company paying $53.20/hr, still a very good wage, and then only for workers who actually work.
2) They either mistakenly allowed the quality of their vehicles to decline or did so intentionally as a method of using planned obsolescence to generate higher future sales. All of these future sales though went to Toyota, Honda, Volkswagen, and others.
3) They did not produce the vehicles that consumers wanted either in terms of design or quality.
The situation the auto manufacturers find themselves in is of their own making. Note though that Ford has done the best job of the 3 in turning themselves around and will likely make it through without any government assistance.
The 3 US auto manufacturers came begging to the government because banks and other investors won’t lend to them and wouldn’t even before the current economic downturn. Investors don’t consider the 3 as good or viable investments. They do not believe that the 3 auto companies, or at least GM and Chrysler, will be successful even with funding. Why then should we? The auto companies have vigorously fought declaring bankruptcy saying that consumers won’t buy a car from a company in bankruptcy because of fears that the company will not be around for the life of the car. I’m not sure a government bailout will change that very much, especially if the government says that this $25 billion (or $34 billion) will be the last. Perhaps we need a new bankruptcy chapter – government bailout.
If we were going to lend any money, and I don’t’ think that we should, Congress should at a very minimum require that they first; 1) Obtain cash from divesting as many extraneous assets as possible including subsidiary brands such as GM’s Opel, Hummer, Vauxhall, Saab, Saturn, Holden, and Daewoo, and 2) Obtain union contracts that immediately put their labor costs (wages, benefits, work rules, and job banks) on par with or below competitors.
GM’s proposal to Congress indicates it plans to be on labor cost par with Toyota by 2012. Can it really afford it’s current high wages for another 4 years? They’re already deep in the hole and cannot afford to continue going deeper for another 4 years. GM and Chrysler (and Ford) need their labor costs well below Toyota’s for a number of years just to dig out.
Looking at the other side of their businesses, my brother-in-law recently made an interesting observation. In our metro area we have 7 Toyota dealers (including Lexus) and 28 GM dealers. Based on this an average Toyota dealer sells and services about 5 times as many vehicles as the average GM dealer. Which dealer network will be the healthiest and which will be able to provide the best service? Ford touts a cut of 16% in their dealer network and GM a planned reduction of 35%. Perhaps it should be more like 50-75%.
Finally, and more importantly, we need to look at the BIGGER picture. If any of THE BIG 3 US manufacturers fails it will not be the death of the US auto industry. Even if all 3 of them were to fail it wouldn’t be. We can’t forget about the new THE BIG 3 – Tesla, Fisker, and Miles.
The new THE BIG 3 are, by all appearances, well ahead of the old THE BIG 3 when it comes to newer and alternative energy vehicles. The new THE BIG 3 also appear to be far more efficiently run and better managed than the old THE BIG 3. If GM or Chrysler fails the new THE BIG 3 will take up some of the slack on the employment side. Much as the old THE BIG 3 took up slack from the original THE BIG 3 – horseshoe, saddle, and buggy makers. And many of the workers displaced from GM or Chrysler will start other new companies.
Let’s not forget that while the old THE BIG 3 can’t sell their vehicles, both Tesla and Toyota can’t keep up with demand for their electric and hybrid products.
The same investors who rightly fear putting any money in to the old THE BIG 3 are investing in the new THE BIG 3 as well as a number of growing competitors such as Phoenix, Commuter Cars, e-ride, Wrightspeed, Venturi, Lightning, ZAP, Think, AC Propulsion, and others. Half of these companies are on par with the old THE BIG 3 with development of electric and electric/hybrid, and the other half are way ahead!
While very few of us will be going out and buying an all electric vehicle from one of these companies next year, we very well may within the next 3 to 5 years. We’ll still buy a Toyota or Ford as our primary family car but our second may very well be an all electric or electric/hybrid from one of these up and coming companies.
Is it really rational to think that dinosaurs like GM or Chrysler will be able to compete with these companies that are not only already well ahead but also smaller, more nimble, and more efficient? If GM and Chrysler are allowed a natural death we may well find that instead of 3 declining US auto manufacturers who only get further and further behind the rest of the world, we end up with half a dozen who are leading the world. We could very well find ourselves once again at the forefront.
What will congress do? I think they all know that funding the old declining US auto industry is a no-win proposition and, except for those in Michigan and Ohio, will find it politically unpalatable. If any of the 3 fail their opponents will paint them as having wasted billions of taxpayer dollars on a failing industry. Even if all 3 survive, which is extremely unlikely, they will get painted as having bailed out a bunch of union workers who make nearly twice the US average and who, instead of reducing their own wages to save their own jobs and companies, demanded that taxpayers, most of whom make less than they do, bail them out.
Not a pretty picture. The average union worker will loudly tout how they supported the government bailout of the auto unions but will vote in private against those in Congress who took money from them to pay people making much more.
Edit: The auto companies and their supporters throw out a lot of numbers about how many people will loose jobs if any of them go under. We must keep in mind that a chunk of these people will loose their jobs anyway. Even if all 3 companies survive.
Edit 2: Neil Cavuto on Foxnews made an interesting point today that when AMC was in trouble and openly being shopped around before going under that people kept buying cars and Jeeps from them. EG, going through chapter 11 shouldn't stop consumers from buying cars.
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