[DeTomaso] My solution to the automaker problems

[msm at portata.com]

Yet again we are seeing the same thinking about the automaker bailouts
that we have seen in the past with other companies that have made a mess
of their finances.  It seems as if there is a sacrosanct approach in
Washington to handling these deals where profits are private but debt is
public.  It leads us along the tried and false paths:

* Throwing taxpayer money at the problem
* Quick solutions to problems that have been building for years
* Debt for equality (Socialism)
* Yet more regulations in the name of protection and oversight
* More pork e.g. built a factory in my district, get my vote
* Unrelated requirements e.g. environmental issues

We are already seeing problems from this year's mortgage bailout.  We
quickly approved $800 billion then wondered out loud how we are actually
going to spend it.

Several alternatives have been proposed for the automaker bailout.  They
have their advantages and disadvantages.  Some of them are based on
little more than wishful thinking.

I am proposing my own solution.  It is some wishful thinking perhaps,
but it is a solution that avoids all of the aforementioned problems
while generating few new ones.

In my solution the Federal government would place an order with GM for
100,000 Volt cars.  The Volts cars are plug-in electric cars which can
run 40 miles on a change and have an on-board engine for generating
electricity so that they can be driven any distance.

The Federal government needs vehicles for its day-to-day business, so an
order for 100,000 Volts is not just some make-work spending.  Any excess
Volt cars could be given to social workers or other state and local
employees would make frequent, short-haul trips.

The cost for 100,000 Volt cars is $4 billion at full retail but may be
around $3 billion and change with quantity discounts.  This would
immediately provide GM with liquidity and make it easier for GM to get
bank loans.  It would save American jobs at GM and their myriad of
suppliers.  It would get auto workers doing what they do best --
building autos. It would be a boost for the UAW and other unions.

A large part of the cost of designing and manufacturing any vehicle is a
fixed cost.  An order for 100,000 Volts will cover a sizeable piece of
GM's fixed costs which will help reduce prices for other consumers
buying Volts.  It will also improve GM's margin.  (Cars typically
produce a few hundred dollars in profit verses several thousand from
SUVs, so a higher margin Volt could help tilt the balance.)

The Federal government would not have to take ownership.  There would
not be a need for new regulations.  Legislators and lobbyists would not
be able to steer the deals in their pork barrels.  They would not be
able to tack on legislation for their own causes.

For the environment and for American's energy independence, the 100,000
Volts cars would displace 100,000 petroleum burning cars.  That is more
than 50 million gallons of gas per year that we would not have to
import.  That is a billion pounds of CO2 that we would not put into the
air each year.

The same solution could work with Ford who makes the Escape Hybrid, a
four door SUV that gets better mileage around town than a Smart car.  

Chrysler is more of a problem.  May be it would be best to let the free
market do what needs to be done.  GM and Ford could then pick up the
pieces and higher the former Chrysler workers.


That is my solution.  What do you think?