Automotive Bailout

blatantninja said:

Then listed nothing but investment banks in that post. You said it elsewhere apparently, but that's a pretty damning statement the way you wrote it in that post.

Click to expand...

Apparently a Nobel Prize winner in economics Paul Krugman agrees with me: http://www.nytimes.com/2008/12/19/opinion/19krugman.html?em

zahratustra said:

Apparently a Nobel Prize winner in economics Paul Krugman agrees with me: http://www.nytimes.com/2008/12/19/opinion/19krugman.html?em

Click to expand...

So what? I can like a dozen op-ed's that talk about the broad inputs that created this mess. Everyone, even Noble Prize winners, have their biases.

Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common.

Click to expand...

Quotes like this show that he is really more interested in getting his name out than discussing the actual industry. Out of everyone I know in the industry, and I know a lot, I know only a handful that make 7 figures and they are very special.

Krugman doesn't have to "get his name out". I would think that he would be much more interested in preserving his reputation by NOT engaging in throwing false accusations.

His writing in that piece reeks of lack of professionalism. He has some legitimate points in it, but he write like he is trying to be cute. I expect more out of a nobel prize winner.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible?

Click to expand...

I'd be curious to know if he was out sounding the alarms a few years ago.

Google him and you will find out what his position was few years ago. And, since it is NYT Op-Ed and not a WSJ or FT, he is probably trying to be cute. His points aren't any less valid because of that.

Blame the consumers! Blame the regulators! Blame the government! It can't possibly be the banks fault they need multi-billion dollar bailouts every couple of decades afterall its not like they're supposed understand the business they're in.

No one is saying not to blame the banks, just don't ONLY blame them.

zahratustra said:

Google him and you will find out what his position was few years ago. And, since it is NYT Op-Ed and not a WSJ or FT, he is probably trying to be cute. His points aren't any less valid because of that.

Click to expand...

I'm familiar with him. I don't agree with everything he says, but generally he knows what he is talking about. Regardless, I stand by my point that his editorial is far too simplistic in assessing blame. Get him in a room and talk to him, and he'd probably agree. But it wouldn't make a good editorial.

IMO, gambling on Wall Street became acceptable for professionals the moment they started investing based on trends. At this point we're really asking ourselves how much gambling is OK.

Investing in things that aren't actually worth it (like alpacas) is gambling. Investing in things you don't understand (like high-technology) is gambling. It's time we all got that straight.

Average Joe's can hardly be expected to understand the difference between investing and gambling if their investment advisors are willing to kid themselves.

blatantninja said:

I'd be curious to know if he was out sounding the alarms a few years ago.

Click to expand...

He was. Here's a sample:

[ http://www.nytimes.com/2005/08/29/opinion/29krugman.html?_r=1 ]

You'll find lots more like it there.

BTW, I agree with you about many of his columns -- he has a habit of being a bit too coy with the facts when they don't support his position. It's highly annoying, because it means that you have to keep a pretty strong bullshit filter whenever you're reading him. Generally speaking, if he's wonky and technical, you can trust him, but if he's waxing rhetorical, it's likely that he's omitting something salient.

I don't understand why the automative business in the US should get a bail out at all. They have refused to listen to what their customers want; they have refused to
make cars that have more mileage pr. gallon in them as well as they have refused to re-organize production and labour.

aries100 said:

I don't understand why the automative business in the US should get a bail out at all. They have refused to listen to what their customers want; they have refused to make cars that have more mileage pr. gallon in them.

Click to expand...

And here was me thinking that, until recently, USA was in love with big gaz guzzlers and that Humvee was a status symbol. They haven't refused to listen they were simply very happy to feed this addiction.

That's because it was unpatriotic to suggest that oil might be a finite resource.

Also, it was considered super unpatriotic to buy furrin cars that stole the food off the table of honest American workers. Bah. Detroit built the cars they programmed people to want. Now people resent it, but until gas goes back up over $3 a gallon, they'll probably continue to sell better than whatever 'green' hybrids the government tries to make them build....sigh.

magerette said:

Also, it was considered super unpatriotic to buy furrin cars that stole the food off the table of honest American workers. Bah. Detroit built the cars they programmed people to want. Now people resent it, but until gas goes back up over $3 a gallon, they'll probably continue to sell better than whatever 'green' hybrids the government tries to make them build....sigh.

Click to expand...

You may be right, but I hope you're wrong. The buzz from people I talk to is that while they they welcome the lower gas prices, most are pretty concerned that prices will spike again. They've seen what it did to their wallet and for a change, many seemed to be concerned about making sure that doesn't happen again. My brother is a good example. He builds condos and townhomes in Austin. He has an extended cab F-150 that he does use semi-regularly for work related hauling. After getting destroyed over the last year on gas prices, he's looking at a buying a hyrbid SUV and getting a small trailer for when he needs to haul stuff for work. That's a pretty big shift, especially for a guy that actually uses a truck for what it is intended for.

Of course he's also living in a pretty left leaning place too (Austin), but I know at some point I'll be buying a vehicle again and I'm thinking along the same lines.

I hope you're right, bn. I of course live in an area where everyone has at least one pick-up and one SUV in their driveway, so my perspective may be skewed. I agree that the screwing most folks got this summer is one that will stick in the memory. Also, if hybrid cars are competitively priced and most importantly imo, as conspicuously promoted as the average 4WD monster truck, there could indeed be a shift in the paradigm.

Unless gas prices stay well below $2 for a year or two, I don't see people forgetting. Besides, with GM and Chrysler now on the government dole, Pelosi and the enviro-nuts now have much more influence than they did.

The problem is the startup cost. You've got new cars that are already too expensive for the average Joe. That means "the public" can't really afford to go out and buy a new vehicle. Since there aren't any hybrids on the used lots yet, "the public" is effectively locked out of the technology. Not to mention that you slap an extra $5-10k on the tag for a hybrid engine. You can buy a lot of gas for $10k.

Gas prices will stay down as long as the recession lasts. Once growth picks up again, they'll shoot back up.

Hybrids aren't that much more economical than small-displacement cars anyway, and no more economical than small-displacement diesel cars. My crystal ball shows several more years of the kinds of cars we're driving in the rest of the world, until either electric cars mature, or we end up with an infrastructure for a non-petroleum-based fuel.

If Joe Average can afford a Jeep Cherokee, he can afford a Volkswagen Polo.

The additional cost for the hybrid isn't so much in the engine as it is in the batteries. I've read about some pretty good breakthroughs in battery technology. Once some of that gets into production, and once production demand is high enough to reach economies of scale, then I think you'll see a lot of the price difference evaporate.

The problem in reaching economies of scale though is that you need a catalyst to get you there. Most people if you ask them "Would you drive a hybrid/electric car if it had the same performance and cost as a normal car?" would say yes, but the price difference is a big barrier to entry. The catalyst can come from either consumer demand, which high gas prices induces, or government mandate.

I'm generally a free-marketeer, but this is one of those cases where I don't think the common good is fully served by the supply and demand model. For consumer demand to really increase long enough for the major auto companies to be willing to invest in the production changes necessary to reach those economies of scale, we'd need high gas prices (north of $3 at least) for a protracted period (3-5 years).

Now that could, and imo likely will happen in the future, but the effects of that high gas cost on the economy is what causes me to support government intervention in this case.

US consumer spending is about $8.7 trillion per year, which is about $287 billion per month. When gas was at $1.50/gallon, it was estimated that for each 1 cent raise in gas prices, approximately $1 billion was taken out of non-energy consumer spending per month. The relationship falls as gas prices rise over $2/gallon as consumers still spend, but use more borrowed money to do it.

A protracted period of gas prices at the $3 or higher range would not only crush non-energy consumer spending, but the ripple effect could easily push us into a protracted recession or even a depression.

So I don't think we can just sit around and wait for the consumers to fully embrace the hybrid/electric car and manufacturers to put the capital into it. I think we need to government to force the manufacturers hands a bit so that when this protracted increase of gas prices occurs, consumers can easily make the shift to more fuel efficient vehicles.

Prime Junta said:

Gas prices will stay down as long as the recession lasts. Once growth picks up again, they'll shoot back up.

Hybrids aren't that much more economical than small-displacement cars anyway, and no more economical than small-displacement diesel cars. My crystal ball shows several more years of the kinds of cars we're driving in the rest of the world, until either electric cars mature, or we end up with an infrastructure for a non-petroleum-based fuel.

If Joe Average can afford a Jeep Cherokee, he can afford a Volkswagen Polo.

Click to expand...

What we need are the following for hybrids/alt energy cars to really make a difference:

1) Plug-in hybrids. Most drivers drive less than 75 miles per day and with a plug-in you can easily get that range
2) Diesel Hybrids - I've seen a very articles on prototypes, but it seems that the combination of a hybrid with a super fuel efficient diesel would be very powerful
3) Natural Gas powered vehicles - Most major metropolitan areas run their buses and at least a portion of their fleet vehicles on Natural Gas, there is no reason consumers shouldn't either. We have excess capacity domestically, it's clean (though still CO2 generating), and we have a huge distribution network already in place (a large percentage of homes already have nat gas piped into them).

But you do hit a good point, American's really need to change their tastes in cars for anything to happen. I think we've seen it to some extent in the past year, but in general, we still love our big cars or more specifically big engines. Heck, I'm as guilty as anyone. I have a 5.0l '94 Mustang GT that I keep out at my in-laws. While in town for Christmas, I was driving it and I just loved hearing the purr of that engine!