Tuesday, December 2, 2008

Common Sense Automaker Bailout

This automaker retooling proposal is based on the currently allocated $25 billion bailout already promised to the American automotive industry.

Give the big three automakers $3 billion each for retooling American plants to produce efficient electric cars priced under $15,000. With an additional $1 billion awarded to the first automaker producing the new vehicle. No outsourcing all work and parts done at American plants creating new jobs.

The remaining $15 billion will be used to give a $15,000 coupon to anyone wanting to buy a new electric car or small truck. This will afford the people economical small vehicles. If you want a nicer electric car go to the bank and borrow for the rest of the money. The car coupon is your down payment.

$15 billion is enough for 1,000,000 car coupons. The coupons can only be used on American made electric cars or trucks. Weighted treatment goes to lower income individuals in urban and rural areas. Small cars will alleviate the problems caused by shrinking mass transportation systems and heavy pollution caused by auto exhaust. The coupons will be awarded over the course of 4 years from the beginning of production. Coupons must be redeemed within 2 month or are forfeit.

This method will guarantee that our tax dollars are not sent to upgrade plants in Brazil and Mexico. Everyone wins, we greatly reduce our dependence on foreign oil, replace old gas guzzling monsters with clean electric cars, create possibly millions of new clean industry jobs and jump to the technological front of the alternative energy industry wave.

Compared to the massive banking bailout this modest proposal will actually work towards an economic rebound by creating good middle class jobs and off industry opportunities.

GM had a great electric car in the 90's. It was killed off by oil and car lobbies. This is a documentary that explains what happened...Who Killed The Electric Car?


Anonymous said...


Why would I pay to support an industry that has ripped us off for years? Screw 'em and the unions too.
Bankruptcy and start over.

There is a guarantee our tax money won't be used out of this country.

And, just where is this electricity going to come from??

BigBear said...

I am not against bankrupting them. Let them reorganize then take up the deal. They are going to get the money anyway we will not be able to stop it. It might as well do some good for American workers rather than overseas slave laborers.

Nothing except new jobs will turn the economy around. It is just that simple.

I was thinking about the power. Do the same sort of thing with nuclear power or solar technologies. That is a true infrastructure investment that would create jobs.

Mayberry said...

Big Bear, there are a few problems with this idea. For one, being a former power plant control room operator, I can tell you that the infrastructure is not there to support a fleet of electric cars. The "grid", in most places, is already running at 90% or more, and in the summer is near 100%.

Second, most electricity is still generated via fossil fuels, be it natural gas, fuel oil, or coal. All electric cars will do is to shift the pollution source to the power plants instead of the cars. By the time you charge an electric car, the energy efficiency cancels it's self out as compared to the internal combustion engine.

Electric transformers are about 95% efficient. Electricity to your home goes through at least 4 sets of transformers before it reaches your home: main step up transformers at the plant it's self, sub station transformers to the regional grid, more sub station transformers in your immediate area, and step down transformers in your neighborhood, to your home.

The newest power plants run at about 55% efficiency or a little more per BTU fuel input. Then subtract 20% more for transformers and line losses, and you are now equal to (or less than) the 35% (or more)combuston efficiency of automobile engines......

BigBear said...


Then we do the same plan only using a fuel efficiency standard of 60 mpg.

boodaman said...

The funny thing is, the automakers don't force people to buy cars. I work for one of the Detroit Three. We make and sell what people want to buy. Period. Making blanket statements like "all vehicles must be electric" or "all vehicles must get at least 60 mpg" is absurd.

First, the Detroit Three are full line manufacturers. That means they make vehicles for all market segments, not just the small, uber fuel-efficient car market. That means they will always make and sell large cars, large trucks, SUVs, whatever. If they don't do it, someone else will because there are people that want to buy them even when gas is $5 a gallon. Remember...Toyota makes the Prius AND they just got done spending $1 billion to build a plant in Texas to make BIG TRUCKS.

Second, if any one of the Detroit Three declares bankruptcy or fails completely, this country is probably done. We're talking about millions of jobs. Yes, millions. Maybe you're prepared 100%, but sooner or later your preps will run out. Then what?

Third, if they declare bankruptcy, YOU the taxpayer will be stuck with a mega-billion dollar bill anyway, because all of the Detroit Three's UAW pension obligations will simply revert to the Pension Benefit Guarantee Corporation which is entirely taxpayer funded. So rant about bankruptcy, go for it, but if it happens, you'll be paying for it anyway and you'll have millions of unemployed people on top of it.

Fourth, building cars is HARD. If you think it is easy, look at the recent startups that haven't been able to do it. Like Tesla, for example. Everyone got all excited about a $100,000 electric car, but guess what? They can't even fill the orders they have!

Fifth, there simply aren't enough batteries to build millions of electric cars overnight even if there were people to buy them.

Sixth, the Detroit Three have been cutting and cutting for years. My employer just got done cutting almost 20% last July...firings, not layoffs or buyouts. We're doing another 10% right now. That's on top of the tens of percents we've cut since 2001.

Seventh, it takes about $750 million-$1 billion and THREE years to bring a new vehicle to market. Anyone who says it takes less than that is high on drugs. Remember, we're talking about hundreds of thousands or even millions of units, all needing to be 100% safe and reliable, not some shadetree mechanic doing an EV swap in his backyard.

Eighth, the Detroit Three have been spending BILLIONS over the last few years on new technologies. Ford has hydrogen-powered vehicles available right now for example. Anyone who thinks the Detroit Three have just been chilling out and laughing on their way to the bank the last 10 years or so is high on drugs.

Ninth, if it wasn't for the Detroit Three (GM especially), this country would have been in a recession 7 years ago, and likely would still be in one. It was the Detroit Three that jumpstarted the economy after 9/11 with special pricing deals, often LOSING MONEY on every vehicle.

Man, I could go on and on. Sorry for the rant, but people coming up with over-simplified "solutions" and sweeping generalizations about what should be done almost certainly have no clue what they're talking about and it drives me crazy.

boodaman said...

And tenth, don't forget that the Detroit Three have been spending tens of billions of dollars in the last 10 years upgrading their plants right here in the US. Where's the credit for that? We NEED heavy manufacturing infrastructure in this country. What if there's a full scale war? Who's going to build tanks and planes? Circuit City? Sam's Club? Costco? In WWII (1941), about 170 B-24 bombers were built in a year. By the end of the war, Ford was building a B-24 every 63 minutes.

People just have no clue whatsoever how critical the auto industry is to America from an economic standpoint, a national security standpoint, and even a morale standpoint. It is really, really sad that there are so many people willing to jump ship.

BigBear said...

boodaman, I think you have been drinking the GM Propaganda Kool-Aid

All ten points aside. What they are doing does not work and frankly they need to fail. There has been no innovations no leaps forward since they started make the cars. They know how to make an internal combustion car and it cuts into profits to change the design.

And three years minimum for a new model is crap. During World War II we had war planes and military hardware going from BLUEPRINTS to production in a couple of months. But at that point the industries were not quite as fixated on profit margin.

Yes it will be hell WHEN they fail. Unless they dramatically change the business model then we are simply socializing the industry.

One last note your preps are not to live on forever. Your preps are there to hold you over until you can start producing food on your own.

boodaman said...

I am not drinking kool-aid, I am living the recession every day and have been for 5 years. I live in Michigan...we've been in a recession long before the whole country or any other state. I see the effects of no jobs every single day. I see the effects every day of tens of thousands of people leaving the state.

WWII was nothing like building cars. Take a look at just what something like a B-24 bomber was...it was a metal shell with some engines welded on and some guns. That's it. You could make one in your backyard. If you made cars the same way, they'd be metal boxes with an engine in front and a couple of seats. Think WWII-era Jeep. Would you drive on the freeway in a WWII-era jeep? Would you drive on the freeway in one with your three kids? Would you drive one or buy one after you find out they get 6 miles to the gallon?

Like I said, building cars is HARD. It takes massive amounts of high-tech research and development to get 60 mpg regardless of engine type. Achievements like that only happen with massive amounts of high-tech. High-tech (and expensive and relatively rare) metals for the body, high-tech manufacturing processes (welding, coating, etc) to cut down on weight, high-tech computer farms to calculate structural design, crash zones, aerodynamics, etc. I see the massively parallel computer farms every day. All of this stuff takes money.

I'm not saying there aren't problems. The primary one is the union. HOWEVER, anyone who thinks building cars is easy, car companies have this magic technology that they're hiding in a grand conspiracy with the oil companies, or that any car company could switch overnight (as in 5 years from now) into building only 100 mpg cars is high on drugs.

Remember, Honda, Toyota, and Ford have been building hybrids FOR YEARS. Yet total hybrid sales are a fraction of a percentage of total sales. If the car companies could build a 100 mpg car tomorrow or even in the next 5 years they would do it and they'd be blasting the airwaves with the PR and marketing about it.

Even Chevy can't do it...the Volt is a joke. It is going to cost $45,000 and Chevy is going to lose money on each and every one. How is that a sustainable business model?

If it was easy, Tesla would already be selling them. That's my point...everyone has these magical solutions, opinions and theories, but guess what? None of them work. Seriously, if a 100 mpg car were possible in mass quantities that was met all of today's safety laws and regulations, don't you think someone like Toyota or Honda would be building and selling them??? But they aren't. Why not? Even if you hate the Detroit Three, ask yourself why Honda, Toyota, Nissan, BMW, etc are not doing it. Talk about a crushing blow to your competitors...and yet nobody is doing it. Why not?? Think about it.

Car companies (all of them, not just Detroit) sell what people want to buy. Period. There's a reason Toyota sells big trucks right alongside the Prius. There's a reason Honda built and sold SUVs as well as the Insight. There's a reason the Prius isn't a plug-in hybrid. There's a reason Tesla can't even meet demand for people who have already paid for their cars.

As far as innovation goes, I could easily and successfully argue that the Detroit Three are some of the only companies in America who are truly innovating. Coming up with a new website or blogging tech is not innovation. Name an American manufacturing company other than a car company that is truly innovating. 3M? Agreed. Dow? Maybe, but I bet most of their innovation is tied to the auto industry (advanced plastics, etc). It takes serious amounts of R&D and innovation to build a car these days. We have whole complexes devoted to R&D and testing. Hundreds of millions of dollars is spent on fuel research, metallurgy, etc.

Again, apologies for the rant, but very few if any of the people who have magical solutions, theories and opinions about what the Detroit Three are or should do are actually building cars every day.

Anonymous said...

boodaman -
had a recession begun seven years ago we would not be facing a far worse one now - we would have avoided the insane run up in housing, along with the IOU's being passed as something of value.

Automakers are stuck in the paradigm of new, different cars every year, despite not providing any substantive improvements, unless one counts additional cupholders. And, the idiocy of $75 per hour overall compensation for rank & file WILL come home to roost.

Won't much matter if the Pension Benefit Guarantee Corporation takes over - after bankruptcy much of the benefits will bo greatly reduced if not outright eliminated.

The Urban Survivalist said...

boodaman has it right. Look at the smart car. This company is making tiny little two seater cars that barely get 40 mpg and they're selling them for $12k. How much do you think it would cost them to improve that to 60 mpg? How much would it cost to make it an electric car that gets similar or at least usable range? As it was already said the volt will cost $45k. The only people that will be buying it will be rich idealogues who probably live close enough to work that they could take a bus or ride a bike (if they work at all). People buying the volt will be doing it to make a statement. They won't be doing it because it's a good investment or because it's a better value. Normal people who are just trying to make it can't make big decisions like that based on idealogy no matter how much they'd love to sit back, point their finger and say "I'm doing it, why can't you?"

Voide said...

wow so many insightful comments. At first I really agreed with your post BigBear, but the others are right too. One one hand, all of your suggestions are really good, I especially like the coupons going to poor urban peoples first.
However, I dont want to pay for their mistakes. Im poor. They are rich. Even if they are about to collapse.
If we want the economy to survive, I think its something that has to be done .. And your ideas are great for that.
On the other hand ... im not sure i want it to survive. Maybe its cuz us valley folk are secluded and sheltered from the rest of the world and know we could make it out, but .. I think we need a serious shift in our fundamental way of thinking and living as a society if we are to make it another 100 years. And the sad truth is, people dont change unless theyve hit bottom and have no other choice but to change. Thats how its done with alcoholics, and the rest of us really do have the same mentality for the most part. We need a distaster.

I think an economic collapse is the least harmful over all, instead of say a nuclear war or rampant disease. Tho again, overpopulation is probably the biggest problem of all. Every other problem is magnified 500 billion-fold because of it. Still, I like people. I dont want them (or me) to suffer and die.

So.. I think a huge economic collapse will suck ass, but in the long run big picture, it will make things much better.
By the way, nice to meet you. I moved to Antonito not long ago and am starting a small self sustained farm from scratch. Its cool to hear about what others are doing and thinking progressively.
I really enjoy reading your blog.

BigBear said...

Welcome Emily,

I hope you are enjoying the valley.


ETLTBlogger said...

a) 2 of the big 3 invested massively in overseas production (Russia and China respectively) in new factories at the same time they were looking for handouts.

b) When you include the pension deficit, Ford has lost more money in history than it has made in profits. Henry Ford had an unprofitable concept in retrospect. Many of my relatives worked at Ford and made a good living, benefiting them, and me, but those benefits were only borrowing against the future. Ford's creditors are the losers. We can pretend Ford had a profitable idea or we can liquidate his company quickly to salvage what we can for its pensioners.