Bromleyisms

Ya think, Obama screwed up on Iran, and largely?

Let’s see: any negotations taken place? any abandonment of  WMD?  any advance of openness and democracy?  Or is Iran still just another axis of evil?  Over the last three weeks Obama accomplished less than nothing; worse, he’s got nowhere to go, nowhere to start, and nowhere to land.

The Obama “anti-Bush” policy was “negotiation without preconditions.”  Naive, juvenile, and politicking is all it was, and it served him on the campaign. People latched onto “change,” and this “no preconditions” business sounded 1) like change and 2) cleary anti-Bush.

Funny, though, that words actually matter, and once in the White House, the politicking became policy.

Too bad the last eight years didn’t cooperate, and the Iranian people stood up for those hateful American values of self-government and free expression. While Obama was bowing to the Saudi king, or talking to the mirror in Egypt, the Iranian people were listening to Bush.

Here’s where it became a disaster for Obama, and why he reacted with near bewilderment to what to Americans is a very plain circumstance of people demonstrating self-determination.

Ahmadinejad

This one warms my heart, letter to the Editors, Washington Post, June 8, 2009:

Catering to Speed Scofflaws
Joseph Scott should be ashamed of himself. As described in the June 8 Metro article “Man Hopes to Cash In on Speed Camera Law,”   Mr. Scott is the owner of a company that sells a device called PhantomAlert. This device alerts drivers to locations of speed cameras as well as places where police have been known to set up so-called speed traps.

I would like to point out that there is a better device available to help drivers avoid speeding tickets. What’s more, it’s standard on every vehicle sold. It’s called a speedometer. If you wish to avoid a speeding ticket, don’t speed. And with regard to speed cameras, you don’t even have to do that. The cameras photograph only those motorists who are driving 10 or more miles per hour over the posted speed limit.

People who are against speed cameras are in effect saying that the law doesn’t apply to them and that they have the right to drive over the speed limit. Such thinking amazes me. By selling this device Mr. Scott is aiding people in breaking the law.

DAVID BANCROFT

My dear Mr. Bancroft has a lovely heart, and is so sure of justice.  No mention whether he drives a Prius, but he’s sure from a long line of social reformers who must — simply must — make the rest of us heel:

Here from 1910, a “life-saving device” that would solve the automobile menace — a pedestrian catcher, if you will.  Truly, this made the news.  I wonder if it made the Patent Office, too?

Alas, there’s always someone who will save the rest of us from ourselves.  And most sad of all, there’s always a politician to go along and give if the force of law.  Leave us alone, Mr. Bancroft; nobody – NOBODY – drives the speed limit.  What say you, Mr. Bancroft: shall we have rev limiters attached to GPS units to keep us under 26 in the 25, or under 66 in the 65?  Or is it just a matter of degree – and who gets caught for going too far at the wrong time?

Truly, Mr. Bancroft, your speeding is no different from mine, just a lot slower.

Adobe just launched a revised version of the “free” flashplayer, and flash content being delivered on many websites requires the latest version. You have probably seen the advsiary to update the flash player. If, like me, you dutifully followed the corporate order and downloaded/installed the new flashplayer, perhaps you got lucky and it worked.

Not here. Three days, and I’m finally up to speed. Sort of.

The problem is not mine alone; google any terms revolving around flash 10 installation for Vista, IE8, Firefox, whatever, and you’ll find despair across the technical forums. Follow the expert advice, and, if you’re lucky like me, none of it will work. I followed ‘em all: uninstall, install, install in safe mode, install as administrator, blah blah. I even fell asleep at 11pm on hold with Adobe support and awoke at 7 to their hold music.

The next morning I managed to get through to the Photoshop support, which sent me to a priority line for Flash support, but even that wasn’t enough.  Told the product is “free,” and that I should just take it as it is, thereby, I threatened damnation, eternal hatred, and voodoo dolls, and the Adobe rep finally relented and worked with me.  Two hours later, he gives up and tells me to call Microsoft.  Ugh.

I don’t know what’s happened to Microsoft, but I actually got through to a tech who was amazingly helpful.  Turns out that the problem was neither Adobe nor Vista, but Norton.  My “virus” protection program was acting like a virus and keeping my system from properly registering the new update.  Hence, I am no longer a client of Norton, and the new Flash player works nicely on my Microsoft IE8.

So, if you’re having problems installing Flash 10, check out your “protection” – it might just be protecting  you from yourself.  Funny how “anti-virus” often acts the same as the things it is made to protect against: runs without your permission or knowledge, slows your computer, and generally gets in the way of a free-running system.

National Health Care: “Where the Lowest Common Denominator is the Your Highest Number”

It’s allergy season, and I needed two allergy Rx refills today, plus some more OTC Zyrtec.  Called in the refill request at 1:00 and was told it’d be ready within the hour.  Got to the pharmacy at 2:45.

There were two others before me: one was waiting around for a prescription to be filled, and the other, an old man, was at the counter arguing with the clerk.  Seems that a $3.00 Medicare co-pay was too much for him, and he wasn’t going to leave before getting his due. The one guy was entirely resigned to the wait, while the other was taking the situation for a ride. This old dude was totally lost, groping pockets for change and demanding another perscription that didn’t exist. But dammit, it was his, and he was gonna get it.  He eventually gave up, presented a credit card to cover the three bucks, and left.  The other guy was waiting still.

I moved forward and asked for my prescription. Not ready.  So I sat down with the other man, an immigrant from Egypt, turns out, and we both sat there feeling stupid.  I asked him, “How long you have to wait in Egypt?”  He laughed politely, unsure where I was going with this one.  I pointed across the Rx counter, to the top shelf where both my medicines were stacked neatly in rows.  “Look.  There’s my medicine. Both are in boxes, prepackaged. Why does it take two hours to hand it over to me? It’s right there.”  The Egyptian was still beffudled, but starting to get it. “I’d bet in Egypt you’re out of here in two seconds, right?’  He nodded agreement.  “Two hours to do paperwork, that’s all it is. Paperwork. You know why?”  He didn’t.  Hadn’t a clue.  I left him with the idea that the government made it difficult, by trying to protect us from doctors, drug companies and ourselves. “Meanwhile, I’m gonna get a heart attack from sitting here with my head exploding, then have to go through it all over again with new heart medicine.”  Now he was really getting it, nodding, laughing with me.

Then the pharmacist called me over. Looks like one of my prescriptions was a year old, and thereby expired.  It still had three refills left.  Why expired?  Virginia law.  I shook my head at the Egyptian, and he replied with a laugh.  At least my Zyrtec was there and waiting freely on the shelf outside the pharmacy.  OTC, I could grab it myself, pay for it myself, and be done.  Just two years ago I’d have had to wait those two hours to get this one filled by the paper-pushers behind the counter, and at triple the cost. Deregulation, anyone?

So I call my doctor, and the receptionist promises to call over another prescription. Now I gotta burn another gallon the Obama’s precious gasoline and fill the air with hydrocarbons in order to get my Nasacort to help  me breath easier.  As of this writing I’ve put off for another day the hated trip back to the pharmacy.  I’ll burn that fuel tomorrow, I guess.  Or whenever.

The guiding principal behind any health care “reform” should be fixing what’s wrong without sacrificing what’s presently right.  There’s so much right in what we have today.  Truly, we have a health system that can be trusted. Think about this one carefully: would you really want to end up in a British or Chinese or Egyptian hospital? Really, would you?  I was subjected to some seriously awful medical care in South America. I also got some excellent care down there, but only when it was routine.  Anything out of the ordinary was plain scary.  But there are some good things there.  My daughter was born in South America. Her mom had an entire suite to herself for three days, five nurses and two doctors. It all cost almost nothing. Her brother was born in Miami, and his mom had to share a room, share staff and doctors, and got kicked out six hours later, all for a ridiculous amount — get this: 13,000 1992 dollars. (Always make sure you have the pregnancy rider — at all times.)

But guess what: had we needed the care for something extraordinary, it wouldn’t have been there in South America.  Thank God things went perfectly for both kids.  But had they not, my son was in a far better place.  Worst of all,  the reason health care is so cheap down there is that it’s so awful for most people.  Even the rich don’t have much choice.  That’s why Miami hospitals and clinics are so full of the Latin American wealthy.

Of couse there’s so much wrong with our current health care in the U.S.. But can we really fix it without losing the incredible good in what we have now?  I don’t even want to begin to think through my little prescription episode of today under nationalized care.  Please: don’t even compare it to the DMV.  What we have today is the DMV.  What we will get under a national plan will be a much deeper, darker circle of Hell, something like… oh, say, a perverse combination of the worst of every nationalized structure.  At least the DMV can be reasonably well run in some ares.  You can thank the Lord for federalism for that.  But combine the very worst of the local DMV, the Post Office, Amtrak, Welfare, the public schools… and there you have it: nationalized care.

Here’s the larger point: today there is no “system” — there are multiitudes of small, large, and all their sub-systems that each have their own problems and advantages. By blending them into one, they lose their mutual benefits and mesh their worst problems all into one big mess. Once we have a “system,” then we’re really screwed.  I could move to Maryland, or go to the pharmacy across the street from the one that screwed me today.  As bad as they are today, they’ll all be much more equally bad when the standards are the same for all.  Please, please, don’t let the lowest common denominator reign. For me and you both, please don’t support this “reform.”

Universalizing health care can only come at the expense of the benefits of today.

Here’s the day’s news, oh my:

Obama unveils ‘historic’ car efficiency standards
President Barack Obama Tuesday unveiled “historic” efficiency and greenhouse gas standards for US cars, forging a rare moment of unity between auto firms and environmentalists on climate change.  “For the first time in history, we have set in motion a national policy aimed at both increasing gas mileage and decreasing green house gas pollution for all new trucks and cars sold in the United States,” Obama said.

Really, the rhetoric all-too often escapes this guy.  One of the better ones was when he lifted a line from the Gettysburg Address to justify deconstructing veteran health care:

Washington understood that caring for our veterans was more than just a way of thanking them for their service. He recognized the obligation is deeper than that — that when our fellow citizens commit themselves to shed blood for us, that binds our fates with theirs in a way that nothing else can. And in the end, caring for those who have given their fullest measure of devotion to us — and for their families — is a matter of honor — as a nation and as a people.”

Those who gave their “fullest measure of devotion” — actually, Lincoln called it their “last full measure of devotion” (the teleprompter couldn’t get that one right) — died.  So why bother with health care for them?  I’m all for no health care for those who gave their “fullest measure of devotion.”  Now, for those who have survived war in service of their country — a fine and high measure of devotion indeed, deserve the thanks and care of their countrymen.

 So, back to this “historic… national policy aimed at both increasing gas mileage and decreasing green house gas pollution…”   Yeah, okay, it includes SUVs and pickups (that’s called losing the ‘12 election).   But this was already done.  Shall we quote?

To Senator Ed Muskie

The amendments to the Clean Air Act of 1970 which the Senate will soon consider are of critical importance to the success of our public health and environmental programs.

My EPA Administrator, Doug Costle, my Energy Advisor, Jim Schlesinger, and I studied the issues associated with these amendments very carefully before submitting the Administration’s recommendations to the Congress last April. We examined the auto emission schedule proposed by Senators Griffin and Riegle, and found it unnecessarily lax from the technology and fuel economy standpoints, and inadequate in view of the need to protect the health of our citizens in urban areas.

More than 96 million people in at least 48 of our cities breathe air which exceeds the federal health-based air quality standards. Asthma, chronic lung disease, respiratory illness, and cardiovascular attacks are among the health impacts which auto pollution can cause. These effects are particularly severe in children and in the elderly. We cannot hope to have a successful public health program in this country without a major effort to reduce pollutant levels in our air.

Fortunately, however, auto emissions are controllable without jeopardizing our ability to meet fuel economy standards, adding substantially to the cost of automobiles, or costing our economy the jobs we so vitally need. While we have made some progress in reducing auto pollution, the technology is available to do better.

The proposal which I submitted to the Congress, like the Committee bill, will require use of emissions clean-up technology which is inherently more efficient than that being used today. The Griffin-Riegle proposal would encourage continued use of this less efficient technology, thereby compromising our ability to protect public health and achieve our fuel economy goals.

Control of auto pollution also has direct bearing on economic growth and our ability to provide jobs in our cities. Each additional increment of unnecessary pollution-pollution which could be controlled–is wasting those air quality margins which would otherwise be available for development in our urban areas. The unnecessary relaxation of auto emissions standards and clean-up schedule proposed in the Griffin-Riegle amendment would exacerbate the already difficult choices which our cities now face in providing for both economic growth and protection of public health. It would also hinder our program to make increased use of coal.

For these reasons, I remain firmly opposed to the proposal made by Senators Griffin and Riegle.

On another matter, I want to reiterate my support for the Committee’s provisions for protection of air quality in areas which are now cleaner than required by the primary ambient air quality standards, particularly our national parks and wilderness areas. As I stated in my Energy and Environmental Messages, we can achieve our energy goals without sacrificing environmental quality. We can build those power plants which are needed without ruining the air quality of our national parks. Amendments such as those offered by Messrs. Breaux and Emery in the House of Representatives defeat the very purpose for which these spectacular natural areas have been set aside. I urge that you and your colleagues oppose any amendments which would weaken our ability to protect these irreplaceable resources.
An identical letter is being sent to Chairman Randolph and Senator Stafford.

Sincerely,

JIMMY CARTER

Waay too much happening all at once.

I always thought that that “Hundred Days” was a canard, and that the real foolishness — I mean, any more foolish than two and a half trillion dollars in debt — would start after the publicity blitz had subsided and the attention was off the first steps.

There’s some serious issues before us, and, according to the polls, Americans haven’t a clue what they mean.

Gallup, which  has so reliably tracked Americans’ infatuation with this President, reports today:

Americans Green-Light Higher Fuel Efficiency Standards
A recent Gallup Poll reveals solid majority support for higher fuel efficiency standards such as those President Obama announced Tuesday. In March, 80% of Americans said they favored higher fuel efficiency standards for automobiles.

Next we have a “Consumer Watch” poll that shows overwhemling consumer support for hybrids — so long as they don’t cost too much…

Poll finds Americans like hybrids, want them cheaper
A recent online poll shows most Americans support hybrid technology in cars but won’t buy one until costs come down or fuel savings are even better. The survey of 2,000 adults in March by Harris Interactive indicates close to 90 percent believe the United States must become a global leader in producing hybrid technology to reduce dependence on foreign oil, create jobs and curb CO2 emissions.

The same survey, however, faults the cars for being too expensive. Eighty percent said costs and insufficient fuel savings would discourage them from buying a hybrid. The survey, which was released last week, also shows 84 percent of those surveyed support government tax incentives and credits to make hybrids more affordable. That finding, though, comes as the federal government is phasing out the credits.

And don’t miss this is funny line from the poll:

Johnson Controls, which manufactures batteries for hybrid cars, among other things, commissioned the study.

As for “Cap & Trade,” the deception is even greater:

Congress Pushes Cap and Trade, But Just 24% Know What It Is
The gap between Capitol Hill and Main Street is huge when it comes to the so-called “cap-and-trade” legislation being considered in Congress. So wide, in fact, that few voters even know what the proposed legislation is all about.  Given a choice of three options, just 24% of voters can correctly identify the cap-and-trade proposal as something that deals with environmental issues. A slightly higher number (29%) believe the proposal has something to do with regulating Wall Street while 17% think the term applies to health care reform. A plurality (30%) have no idea.

Democrats are pushing the legislation on Capitol Hill, but Democrats around the country are a bit less likely than Republicans and voters not affiliated with either party to know that the concept has something to do with the environment. This helps explain why some Democratic pollsters have advised the president to back away from the term cap-and-trade to describe what he wants to accomplish.

I have seen references to polls of African-Americans which show amazingly small support for the Cap & Trade proposel and its impact on energy prices.  Surely, the President and the Congress understand this, which explains the energy cost subsidies proposed for the poor.  But it’s a huge political mistake. 

When the questions become specific, Americans drop ideaology for self-interest. Here’s a poll:

Minnesota Poll: Don’t tax me, tax my neighbor
Minnesotans have little taste for higher taxes that would hit most people’s pocketbooks, but two-thirds would offer up the wallets of richer folks to help solve the state’s budget woes, a Star Tribune Minnesota Poll has found. When it comes to a broader increase — income tax hikes for most Minnesotans — nearly 60 percent said that would be unacceptable.

Half of the poll respondents said they think the state should use a combination of unspecified tax increases and spending cuts to help erase the state’s $4.6 billion deficit, while another 40 percent said the balancing should be achieved primarily through spending cuts alone. Only 4 percent favored squaring the books primarily with tax increases.

Sounds great, but the structure of “don’t tax me, tax my neighbor” can only last so long.  Experience shows that higher taxes lead to less taxable income and compliance, and, thus, less revenue.  So, taxing the neighbor works for a while.  Cap the rich and trade it for the poor will work for a while.  Then you’ll need another Reagan revolution to fee the system of the inherent inequities in the extremely “progressive”  – or unbalanced — tax code.

Once those Minnesotans realize that the taxes they’d will upon their neighbors will cost themselves, they’ll think twice.  The poll could have been written differently, say, “would you support higher taxes on the wealthy if it leads to lower employment?”  or, “would you tax your neighbor until he cna’t pay anymore, at which point you’ll have to pay?”  Seriously.  Just ask a different question and you’ll get a different result. Frankly, these polls are dumb.

How about these questions:

* would Americans would give up their SUV for a 48 mpg CAFE?
* would Americans would trade their Impala for a Prius?
* would Americans would pay $5.00 a gallon, even with 48 mpg cars?

The fallacies in this entire debate derive from a confusion of costs and benefits, and causes and effects — which the polls disregard.  If the government mandates small cars, it must also mandate higher gasoline or other energy costs. Yet, if energy costs go down, Americans will want bigger cars and they will drive more.  There’s no balance here except that which is either mandated or discovered through the “invisible hand.”  Hate Adam Smith, but he had a far better means to the end than Marx.

These polls seek the feel-good impact of desired outcomes, yet are stuipidly short on the specific impacts of those policies. The Johnson Controlls poll on hybrids is most illuminating, for it does ask about higher costs, which Americans reject.  So what is the solution for JC?  Clearly, get the governemnt to subsidize those costs.  Socialized hybrids solve everything.  Until the dollar crashes, and the cost of batteries gets beyond even the fastest Federal Reserve printing press.

The only way these changes can be put upon the public is without its understanding of what’s really happening.  Polls measure the question asked.  Ask nothing, and that shalt recieve a good looking poll for anything you want,

My previous entries have evalauted the government’s strategy for the Chrysler reorganization and its impact on Chrysler, its competitors, and the law.  I thought it’d be useful to listen to the President himself in order to better understand his design, in this case from the President’s statement of April 30 on the state of the auto industry. 

Since his words are carefully chosen, I shall carefully parse them for you.  To read it without commentary, go here:  to the entire statement by the President on the Chrysler bankruptcy:

Read it, if you like. Otherwise, I’ll do you the favor of translation of what the President might really have been saying. It’s especially enlightening to read following three weeks of events, the impending GM bankruptcy, and the proposed legislation regarding emmissions caps, CAFE standards, and “Cap & Trade.” 

Yes, I find it all scary:

THE WHITE HOUSE

Office of the Press Secretary

Grand Foyer

12:08 P.M. EDT

THE PRESIDENT: Hey, guys. I know you haven’t seen enough of me lately, so — (laughter.)

One month ago, I spoke about some of the problems that have led to the crisis in the auto industry, and about what would be required to ensure that General Motors and Chrysler emerged from their current troubles stronger and more competitive.

Okay, it’s standard rhetoric, but what does the President really mean by “stronger” and “more competitive”?  I don’t believe he’s talking market share here.  As we’ll see below, he’s operating from a different set of “principles” than those of a “stronger and more competitive business.”

My team will continue working with General Motors as they strengthen their business plan and move towards restructuring that’s consistent with the principles that I’ve laid out.

And today, after consulting with my Auto Task Force, I can report that the necessary steps have been taken to give one of America’s most storied automakers, Chrysler, a new lease on life.

Old management out. Long live the new management! The “new” here is not a renewed life, but an entirely new one.  This is not a renewal, it’s a complete rebuild.

This is a company that has a particular claim on our American identity. It’s a company founded in the early years of the American automobile industry; a company that helped make the 20th century an American Century; and that came to embody, along with the two other members of the Big Three, the ingenuity, the industriousness, and the indomitable spirit of the American people.

Chrysler has not only been an icon of America’s auto industry and a source of pride for generations of American workers; it’s been responsible for helping build our middle class, giving countless Americans the chance to provide for their families, sending their kids to college, saving for a secure retirement. It’s what hundreds of thousands of autoworkers and suppliers and dealers and their families rely on to pay their bills in communities across our industrial Midwest and across our country.

Here is gets ugly.  Obama doesn’t realize that the automobile century is not one of the Big Three.  That was a creation of the command economy of the 1930s and late 1940s.  By 1950 and the Korean War, the Big Three was the auto industry.  Before then it was a vigorously diverse, competitive industry with an incredible array of consumer choices.

That the “middle class” is a result of the automobile is true, but not the way the President sees it. For him, unionization created the middle class. In rhetoric, it’s called “correlation” not “connection.”  The UAW created a middle class of its workers, but “the” middle class is a creature of far different origins than collective bargaining. It’s a fantasy that unionization created the middle class.

It’s been a pillar of our industrial economy, but, frankly, a pillar that’s been weakened by papering over tough problems and avoiding hard choices. For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable, and less fuel-efficient than foreign competitors. That’s part of what has brought us to a point where they sought taxpayer assistance.

Here’s where it gets ugly.   The accusation is that Chrysler should have been more like Honda.  Okay. Let’s see what that would mean: April sales drop of only 25% over April 2008  sales, but claiming the best selling vehicle based on huge consumer incentives and a $1500 bite in profits per vehicle (see Chrysler Drags U.S. Auto Sales to 34% Drop, Trailing Estimates) – but hardly the best selling brand  But then, maybe Chrysler should have been more like Hyundai, which only suffered a 14% sales decrease. Or, Chrysler could have been more like Toyota, which fell behind Ford in April sales (dropping 42%), or Nissan, which fell 38% in sales. 

What the President is saying is not that Chrysler should make smaller cars, but that consumers should buy smaller cars that Chrysler ought to be making.

But as I’ve said from the start, we simply cannot keep this company, or any company, afloat on an endless supply of tax dollars. My job, as President, is to ensure that if tax dollars are being put on the line, they are being invested in a real fix that will make Chrysler more competitive.

More dictation of consumer choice: the only way the government can guarantee Chrysler’s success is by skewing the market to Chrysler’s favor.  And it won’t be by freeing consumers to choose, for they’d go and choose the kind of cars Obama does not like.  The equation is all too simple, and all so ugly.

That’s why I rejected the original restructuring plan that Chrysler offered last month. It was clear that if we put tax dollars in that plan, it would be a bad deal for American taxpayers and would not put the company on a viable path. But it’s also clear that if Chrysler was able to form a partnership with the international car company Fiat, there was a chance Chrysler could have a bright future.

This one is amazing: “that’s why I rejected…”   Wow. 

After consulting with my Auto Task Force, industry experts, and financial advisors, I decided to give Chrysler and Fiat 30 days to reach an agreement. And the standard I set was high — I challenged them to design a plan that would protect American jobs, American taxpayers, and the future of a great American car company. But over the past month, seemingly insurmountable obstacles have been overcome, and Chrysler’s most important stakeholders — from the United Auto Workers to Chrysler’s largest lenders, from its own — from its former owners to its suppliers — have agreed to make major sacrifices.

A touch of honesty here: “Chrysler’s most important stakeholders” –>> the UAW.  The rest — the lenders, “former owners” (still the owners, btw), and suppliers —  were discarded in the government deal.

So, today, I am pleased to announce that Chrysler and Fiat have formed a partnership that has a strong chance of success. It’s a partnership that will save more than 30,000 jobs at Chrysler, and tens of thousands of jobs at suppliers, dealers and other businesses that rely on this company.

It’s a partnership that the federal government will support by making additional loans that are consistent with what I outlined last month. As part of their agreement, every dime of new taxpayer money will be repaid before Fiat can take a majority ownership stake in Chrysler. In addition, considering Chrysler’s extensive operations in Canada, the government of Canada is also committing resources to ensure that Chrysler has a chance to succeed, and we’re working closely with them.

This is assuming the bankruptcy is a done deal as this “partnership” has demanded upon the courts, creditors, and the government “partners.”  Oh — and consumers, eventually.

It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry. Fiat has demonstrated that it can build the clean, fuel-efficient cars that are the future of the industry, and as part of this agreement, Fiat has already agreed to transfer billions of dollars in cutting-edge technology to Chrysler to help them do the same. Fiat is also committed to working with Chrysler to build new fuel-efficient cars and engines right here in America.

This one is interesting to me: Fiat specializes in small cars, not in alternative fuel cars.  Obama wants to mandate small cars.  Otherwise, there’s no reason for Fiat.

Now, this partnership was only possible because of unprecedented sacrifices on the part of Chrysler’s stakeholders, who are willing to give something up so that this company — and all of the men and women whose livelihoods depend on it — might see a better day. Chrysler’s management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process. The United Auto Workers, who had already made painful concessions, agreed to further cuts in wages and benefits; cuts that will help Chrysler survive, making it possible for so many workers to keep their jobs and about 170,000 retirees and their families to keep their health care.

Or, they could have lost everything in a real bankruptcy.

Several major financial institutions, led by J.P. Morgan, agreed to reduce their debt to less than one-third of its face value to help free Chrysler from its crushing obligations. The German automaker, Daimler, agreed to give up its stake in Chrysler and contribute to the company’s pension plan, further easing Chrysler’s financial burden. And countless Americans across our country will be making major sacrifices, as well, as a result of plans to consolidate dealers, brands, and product lines.

While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don’t stand with them. I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don’t stand with those who held out when everybody else is making sacrifices. And that’s why I’m supporting Chrysler’s plans to use our bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and onto a path of success.

Please re-read this one. Rule of man, not of law. 

No one should be confused about what a bankruptcy process means. This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler’s revival. Because of the fact that the UAW and many of the banks, the biggest stakeholders in this whole process have already aligned, have already agreed, this process will be quick. It will be efficient. It’s designed to deal with those last few holdouts, and it will be controlled. It will not disrupt the lives of the people who work at Chrysler or live in communities that depend on it. And it will not affect the ability of American consumers to buy a Chrysler, or to get it serviced and repaired. It’s a process that has the full support of Chrysler’s key stakeholders and the full backing of the United States government. And I have every confidence that Chrysler will emerge from this process stronger and more competitive.

“No one should be confused” as to what kind of a fraud that is this “bankruptcy.”  A little honesty would speak to what it is: a survival plan for the UAW.

I know that there are some who will insist that bankruptcy, even for these limited purposes, is a step that should not have been taken. But it was unsustainable to let enormous liabilities remain on Chrysler’s books, and it was unacceptable to let a small group of speculators endanger Chrysler’s future by refusing to sacrifice like everyone else. So I recognize that the path we’re taking is hard. But as is often the case, the hard path is the right one.

Changing the topic: no one can possibly question the financial situation of Chrysler and the need for bankruptcy. That’s a fact.   What should be questioned here is the government response to it.  The President is downright misleading in this paragraph.

The path we’re taking also involves steps to shore up financing, because we cannot have viable car companies without strong car financing companies. It’s now clear that Chrysler Financial — the institution that finances Chrysler cars and dealers — would on its own require an unacceptably large stream of taxpayer money to remain viable — and that’s something I refuse to provide. And that is why, as part of this agreement, GMAC, an independent bank holding company that finances General Motors, has agreed to finance new Chrysler sales. We will be providing additional capital to GMAC to help unlock our frozen credit markets and free up lending so that consumers can get auto loans and dealers can finance their inventories; a measure that will help stabilize not only our auto market, but the broader economy, as well. And tomorrow, the Small Business Administration will be announcing it is expanding eligibility for some loans to include more suppliers and dealers, including RV dealers.

And guess what will happen to GMAC as soon as GM goes through another such “bankruptcy” as Chrysler.

So these are some of the steps that we’re taking to make it easier for Americans to buy a car. If you are considering buying a car, I hope it will be an American car. I want to remind you that if you decide to buy a Chrysler, your warrantee will be safe — because it is backed by the United States government. And to further boost demand for autos, we are working to accelerate the purchase of a federal fleet, and we’re also working with Congress on fleet modernization legislation that can provide a credit to consumers who turn in old cars and purchase cleaner, more fuel-efficient cars.

Please re-read this one, too.  These seemingly innocuous little “steps” are 1) hardly small; and 2) just a start.  Competitors beware.

As pleased as I am about today’s announcement and about the opportunity Chrysler has to remake itself, we know that far too many Americans in far too many communities are still struggling, as a result of layoffs not only at plants that produce cars, but at the businesses that produce the parts that go into them and at the dealers that sell and repair them. And that’s why, as I discussed the last time we gathered here to talk about autos, I’ve named Ed Montgomery to be the Director of Recovery for Auto Communities and Workers. Ed will be traveling to Michigan next week with representatives from all the key government agencies represented here, reaching out to our hardest-hit areas, cutting through red tape, ensuring that the full resources of the federal government are getting to the workers, the families, and communities that need it the most.

Now, these are challenging times for America’s auto industry and for the American people. But I am confident that if we as a nation can act with the same sense of shared sacrifice and shared purpose that’s been shown by so many of Chrysler’s stakeholders, if we can embrace the idea that we’re all in it together — from the union hall to the boardroom to the halls of Congress — then we will succeed not only with Chrysler, we will not only see our American auto industry rise again, but we will rebuild our entire economy and make the 21st century another American Century.

The final deciept, willing or not, is that the President has entirley ignored the causes of the automotive business. He blames Chyrsler’s predicament on its uncompetitiveness, yet he give nothing to those conditions that led to the situation. He might start with government-imposed collective bargaining, government regulations that skewed the market towards an unhealthy combination of big and small (SUVS and economy cars, with the family car regulated out of existence through CAFE), and the cummulative uncompetitive conditions of manufacturing in the rust belt.

For a touch on the “legacy costs” of GM, Chrysler, and Ford, please refer to Brian Sullivan’s take from his Fox blog:

The Wall Street Journal describes the primary terms around the $17.4 billion dollar loan as:

The deal’s ambitious targets for the companies include replacing two-thirds of their debt with stock; using more stock instead of cash to fund retiree health-care obligations; eliminating much-criticized union “jobs banks” that pay laid-off auto workers; and establishing wage structures and workplace rules that are more competitive with foreign rivals.

Notice the pension costs faced by GM and Chrysler are not even discussed.   They are obvious in their absence.   It is clear that the pensions are sacrosanct, the cow so sacred that it dare not even be discussed.   Sadly, that cow is also the one kicking the lamp over in the barn and setting off the inferno.

Reference again the New York Times story a week ago laying out the cost differences between the domestic and foreign auto companies.   According to the article, on average GM, Ford and Chrysler pay $3 per hour more in actual wages, $5 per hour more in vacation and overtime, just $1 per more in current benefits, but a whopping $13 per hour more in legacy costs such as pensions.  Put another way, the legacy costs per worker per hour are more than all the other higher costs combined.   Yet the UAW, automakers and the government only continue to discuss the wages and health care issues and leave the real problem of pension reform presumably to the imagination.

The problem is growing worse by the year, as the UAW workforce continues to age and place an increased burden on the companies.  Check out this page from the UAW’s own website, written back in 2003.   It notes that the average age of a GM/Delphi worker was 48.9 that year with the average length of service at 23.3.   30 years of service is the primary retirement figure.   This means that in less than 7 years (2010, as this article was written in 2003) most GM/Delphi workers would be eligible to retire with full benefits.   All the the ripe old age of 56.

We have made great progress. We can make great American cars. Chrysler and GM are going to come back. And I am very confident that we’re going to be able to make once again the U.S. auto industry the best auto industry in the world.

And I want to thank my entire auto team who worked so diligently on what I consider to be a much better outcome than it looked like we were going to see 30 days ago.

Thank you very much, everybody.

END
12:20 P.M. EDT

Watch these words reformulate and bend around the next steps:

1) GM “bankruptcy”  w/ government and UAW ownership
2) Government incentives to purchase Chrysler & GM vehicles
3) Government “disincentives” to purchase the competition
4) Emmisions caps to force small car production
5) CAFE standards rise for same
6) Gasoline tax for same
7) Other regulatory responses to the invetibable consumer revolt against market mandates.

Anyone out there really understand the Chrysler “bankruptcy” deal?  Has the press been up front about what is happening, or is it just another day?  Or, has the news has been so sliced, so pieced and threaded that no one has been able or willing to transmit the larger story?  Here’s my best try:

For a starter, try this quiz: what is the UAW getting out of this deal?

Answer… ?   … (chirp chirp)

Chrysler stock: yes.  Labor concessions: yes. Uncertainty: yes.  Liquidation: absolutely not.

What is clear is that the government demanded and got compensation for the book value of the Chrysler obligations to UAW healthcare/ retirement funds that would otherwise have been liquidated under a real bankruptcy. Be clear about this. Other such bankruptcies have never produced such salvation for employee/union funds. Never.  Others, from steel companies, airlines, and on and on, have had pension fund protections from government guaruntees, but never have these obligations been upheld above all other debt in a bankruptcy.

Still, the UAW is playing it up as a loss:

We are trading debt for equity. What is the value of the equity that we’re getting today? Let’s be honest: It’s zero today.

So says, Ron Gettelfinger, president of the UAW.  The President takes a more sanguine view, naturally, with:

The United Auto Workers, who had already made painful concessions, agreed to further cuts in wages and benefits — cuts that will help Chrysler survive, making it possible for so many workers to keep their jobs and about 170,000 retirees and their families to keep their health care.

A “professor of industrial relations” at Clark University sides with the UAW view that, according to NPR, ” the UAW is in the worst of all possible positions”

because it’s obligated to provide for health care benefits of retirees, but it must accept stock which is rather shaky to pay for this.

(Source: NPR, May 7, 2009: Majority Share Gets UAW Seat On Chrysler’s Board)

It’s not a pretty scene for anyone, but be clear that the UAW is getting far more than it would under a standard bankruptcy.  Sure, the union has made concessions to keep the company open, but that’s instead of what could have been a complete liquidation of all obligations and contracts, otherwise known as “bankruptcy.” 

This is no bankruptcy.  Where the President touts good citizenship by banks who were willing to forgive 2/3s the value of their  – SECURED – loans, that is, loans based on tangible value that would have a priority in a normal bankruptcy proceeding, the UAW retirement funds have given up NOTHING.  Here’s how losing nothing adds up: what they have is a new note (secured) and a 55% share of the new equity – along with a government partnership that will guarantee its value.  Between the note, its interest and the 55% stock holding, the 10+ billion dollar union health care fund  will be upheld at par (see UAW leaders recommend Chrysler concessions; union trust to own 55 percent of company). Would that other debt and equity holders had at least the chance to get back full value.  So the UAW complains that it has nothing.  Not quite.

Listen to Obama here, not the Union. The President has decreed that the workers are “to keep their jobs and about 170,000 retirees and their families [are]  to keep their health care.”  And their retirement fund, which is guaranteed by $600 million from the previous owner, Daimler, and the federal Pension Benefit Guaranty Corporation.

Now try this little quiz: what is Cerberus getting of this deal?

Uhhhm…. nothing.  Although it is rather messy exactly who owned what under Cerberus, all of the equity is being wiped out (see Running the Numbers on Cerberus’s Chrysler Debacle).  This is normal and correct. What’s not is the federal patronage of one set of creditors over another.

So, if you’re still looking forward to your next corporate investment or drafting a new union contract, be aware that your measure of risk is rather different now than it was but three months ago.  Unless the courts wake up during the GM bankruptcy, the biggest accomplishment of the so-called “100 Days” is that contract law has been overturned for political patronage and favoritism.  Back we go to the rule of men, not law.

Here are the numbers:

 Sources:
* Chrysler lenders exchange $6.9 bln in debt for $2 bln in cash
* UAW wins big Chrysler stake but can’t run company
* UAW’s Gettelfinger On Chrysler’s Future
* Majority Share Gets UAW Seat On Chrysler’s Board
* Chrysler Agreement Prevents Strike by UAW Until at Least 2015
* GM Union Retirees Said to Cede Dental, Prescription Benefits
* Chrysler’s plan isn’t just greedy, it’s also wrong
* MOTION OF DEBTORS AND DEBTORS IN POSSESSION, PURSUANT TO SECTION 105 OF THE BANKRUPTCY CODE, FOR AN ORDER CONFIRMING THE PROTECTIONS OF SECTIONS 362, 365 AND 525 OF THE BANKRUPTCY CODE
 * Chrysler LLC – 50 Largest Unsecured Bankruptcy Creditors
* Yazaki is one of Chrysler’s biggest unsecured creditors

—————–

See this article for a statement by the secured creditors group that was opposing the restructuring that gave precedence to unsecured creditors:

Dissident Chrysler Group to Disband
…. “After a great deal of soul-searching and quite frankly agony, Chrysler’s Non-TARP lenders concluded they just don’t have the critical mass to withstand the enormous pressure and machinery of the US government,” said Tom Lauria, the White & Case attorney representing the group. “As a result, they have collectively withdrawn their participation in the court case.”

Lauria added: “In withdrawing from the fight, each of the members indicated that, despite their inability to continue active opposition to the stripping of their rights in the bankruptcy process, they did not intend to consent to the 29 cent proposal. They continue to stand on and believe in the validity of the principles previously presented:

•They acquired contract rights for their investors that entitle them to recover first and ahead of Chrysler’s other stakeholders;
• The legal, financial and business principles that support their position are longstanding and well-known;
• The current U.S. government-sponsored proposal would defeat their rights to the unfair and unprecedented advantage of Chrysler’s other stakeholders;
• They have been and remain prepared to compromise those rights on commercially reasonable terms in order to facilitate the reorganization of Chrysler;
• They feel that undue pressure has been brought to bear by the Executive Branch to coerce them and others to accept the pending proposal.”

Update 5/15/09:

Chrysler works to keep suppliers through bankruptcy
Chrysler LLC wants to transfer the vast majority of its supply base to a new company that will be formed from its proposed alliance with Fiat SpA.  The automaker plans to use much of the $4.1 billion in financing that is keeping it going during bankruptcy to pay outstanding bills to parts makers and complete the transfers quickly.

Chrysler is working feverishly to emerge from Chapter 11 bankruptcy before that funding, known as debtor-in-possession financing, expires around the end of June, 60 days after the company filed for bankruptcy on April 30. ….  The documents list how much Chrysler believes it owed each company before filing for bankruptcy. While such liabilities usually are wiped out in bankruptcy, Chrysler wants the debts paid off before the new Chrysler-Fiat assumes the individual contracts. The automaker is offering to pay 40 percent now and 60 percent post-bankruptcy.

The list is not yet complete. Priority was given to production suppliers for when Chrysler starts building vehicles again. Nonproduction suppliers will be added, as well as some bigger suppliers with more complicated accounts that are still being sorted out ….

There should be no questions left as to the intent and forms of the government-sponsored restructuring of the Big Two.  This is not business reorg, this is union security.  Sure, they’re going the route of bankruptcy, but have you ever heard of a Chapt 11 filing funded $2 billion by the  US Government?  Let’s not kid ourselves.

The government has set its loyalties and chosen sides.  With Chrysler, management, investors, and – get this — secured debt holders are out. With GM, it seems that bond and stock holders, especially of common stock, are out. In both cases, the union is in.  Well, unions haven’t been out of Detroit since the Wagner Act, but now they’re seriously in.  Do the math and you will see how it adds up — not to nationalization of the industry  — but nationalization of the UAW.

Not that they’ll admit it:

 ”While we realize the proposed sacrifices for UAW members are painful, we fought to maintain our wages, our healthcare and our jobs,” UAW President Ron Gettelfinger and Vice President General Holifield said in a letter to union members.
   – UAW would get 55 pct stake in Chrysler under deal

Right. Yeah…  Not.  There’s no way in hell those obligations would have survived a real bankruptcy, much less have been converted to stock.  The reorganization is just for new shareholders, a.k.a. the UAW and Fiat, which is skating its way into the U.S. market as it never could before.  The bankruptcy is but a front for making the “new Chrysler,” with the real bankruptcy landing on creditors.  So much for the 5th amendment.  Looks like eminent domain now includes worker retirement and health care, and due process no longer applies equally.  And beware GM: what goes with Chrysler will go with you.  For now, what the judge decides is unclear.  Meanwhile, though, the press treats it all as a done deal, and so, too, does the President:

“For too long,” Obama said at the White House, “Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors.”
   – Obama backs Chrysler bankruptcy as wise move
(see the full White House transcript: scary)

Gotchya, prez: Chrysler needs to build your kind of cars.  Go for it.  And you’ll kill the company and its jobs in the process.  Chrysler’s problem isn’t that it has built the wrong cars; the problem is that the government has been pushing for the wrong types of cars, and both builders and consumers have been resisting.  Obama is plainly wrong here, and stupid to say it.  “less reliable”? “less fuel efficient”?  Chrysler tried that with the “Neon.”  Didn’t fly, but not because it was poorly built or unreliable.  Consumers didn’t like it.  So then-owner Daimler-Benz cut it off — two years before the gas crisis hit.  Woulda-coulda.  And now gasoline prices have dropped, and everyone wants to buy a Ford F150 instead of a Neon. Got it?

Over the last two decades, Chyrsler has built cars people want, namely trucks, minivans, and SUVs.   Are they to blame for meeting market demand?  (Blame CAFE standards first).  And now SUVs are on the down – is Chrysler to be faulted for the gaming of the oil markets last summer? No, Mr. President, no one can predict, make, and perfect the right car at the right time. Especially not you. 

But heh, Mr. President, you might just be capable of overthrowing 500 years of common law:

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”  (here)

No mention that the hesitent are holders of secured debt (see Bill Frezza on this at realclearmarkets.com “Obama to Secured Creditors: Drop Dead“).  See what I mean about due process?

But tossing – ever so lightly, please — aside the larger question of secured debt, that this plan to reinvent the American automobile will work is far from sure. That it will has no historical testimony.  The best history can do for the government’s fantasy here is to suggest that it’ll last a little while before tripping over the ever-wrongly screwed command economy. As history, though, it does add up to a nice affirmation of the worst of the New Deal, when the government set prices, set costs and wages, and dictated production schedules.  Didn’t work then, and it won’t work now. 

Honestly, we’re not far off from this kind of statement from a high-government official seeking to redefine the car business around  politics:

“This industry has accepted standardization for one year periods, but must extend its practices to include standardization over a period of years…  I am old-fashioned enough still to admire the old Model T Ford.”

The celebration of statist economic policy here came  from FDR’s Labor Secretary Francis Perkins (she,  much lauded in the progressive historical narrative).  Perkins was referencing the government-imposed year-round employment in the previously seasonal industry, and she was asking that the industry halt all changes that required factory adjustments and shut-downs.  The “old Model T Ford” had, supposedly, gone largely unchanged over its course, and Perkins figured that all cars ought be made exactly the same day in, day out.  Not that the T never changed; Ford adjusted factory production constantly, tweaked design, accessories, and prices, and used seasonal layoffs like all other auto makers.

New Deal labor policies that “standardized” employment periods and hours actually narrowed employment in the automobile industry.+  The primary goal of the New Deal, as seem today’s “restructuring” bankruptcy deals – was employment. Seasonal lay-offs, which were common prior to the New Deal were banned, and wages were set at a minimum.  Next, cost of materials were set bureaucratically, which meant that no single maker could find a particular advantage in materials either through design, sourcing, or marketing.

Forced to flatten employment cycles and  increase hourly pay, makers naturally reduced overall workforce.  Worse, these practices rewarded large makers over small, who either reduced employment to minimal levels, or went out of business.  The advantages of scale were further amplified in the market by the flattened new-model release schedule, price controls on materials, and overall standardization of market and factory floor conditions.  Smaller makers lost any competitive advantage, and disappeared.+

In the 1920s, competition took down many makers, especially those challenging the economies of scale of Ford, GM, and Studebaker (Chrysler was a rare winner). But other makers survived the pressure of mass production, and headed into the 1930s with viable products, distribution, and sales.  But the New Deal next imposed price and wage controls that destroyed any competitive advantage of the small producer.  The market bottomed out in 1932,  yet there was continued attrition throughout the 1930s even as the market swung upward.  The problem for independent makers was that their advantages of flexible production, price, and alternative design were destroyed by the nationalization of costs imposed by the New Deal through price and wage controls.  Costs of production and wages were now set by the government, which destroyed any competitive advantage except large-scale production.+

New Deal and post-WWII historical models demonstrate that employment-based industrial policy tends to reduce employment. While wages rise, so, too, does job scarcity.  Above all, employment-first ignores fundamental market laws that seek to balance supply and demand.  The command economy can shape consumption, but it can never replace its imperative in a functional market.  The President can design a car, and he can even force consumers to buy ‘em.  But he can never, ever, change consumer desire.

That’s why the old Eastern Block politburo drove Mercedes-Benz. 

National Industrial Policy (GDR style)!

At least the politburo could choose.

——————-
+  Notes on impact of New Deal policies on automotive employment:

The below charts demonstrate the impact of nationalized economic policy on employment in the automobile industry.  From Census Reports: 1935 and 1940 economic surveys of “Motor Vehicles, not including motorcycles” (“Motor-vehicle bodies and motor-vehicle parts” are in separate category)

From 1925 to 1937, the ratio of workers to manufactuers goes progressively higher. In the late 1920s, this consolidation was due to market shakeouts and industry exits; this process was generally halted by 1931-32, when more exits ocurred following the market crash. The pattern, however, did not have to continue, but did continue, due to wage and price controls imposed by the New Deal:

The above chart demonstrates the consolidation of employment into fewer firms.  Note that these numbers include heavy-truck manufacturers, which were numerous, so the workers/mfg numbers were even more skewed towards centralized, large makers.

The next chart shows the concentration of productivity into fewer hands, again the work of centralization and the government command economy:

 Note that the late 1930s numbers approach mid-1920s productivity, but with fewer workers and far fewer manufacturers.  It wasn’t just economy of scale at work: into the 1930s, smaller makers got creamed.

 = = = = = = = = = =

Update 5/4/09:  Judge OKs Chrysler financing over lenders’ protest

Key item from the article:

“I’ve never represented a group of creditors who were called out by the president of the United States just for standing up for their rights,” Lauria said.

 = = = = = = = = = =

 Update 5/5/09:  Chrysler won’t repay bailout money

Excerpt:

Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing. This revelation was buried within Chrysler’s bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company’s key financial advisors in the bankruptcy case.  

 = = = = = = = = = =

 Update 5/7/09:  George Will: Sunbeams From Cucumbers

 Small cars are creations of governments. Period.  

Gittin some, even with a little one...

Want small cars? Tax big cars until they get smaller. Tax fuel. Regulate production. Banish competition.  That’s what they do in Europe. That’s what they do in China. That’s what they do in Japan, Ireland, Korea, India, and so on. (There’s plenty of history out there to show it, so see the footnotes below if you want some evidence. If you want more, post a comment and I’ll address it.)

Want big cars? Let consumers choose, and you’ll get big.

So, please, let’s get over this idea that car size is somehow “natural” to one place or another.  Europeans don’t have small cars because of some virtuous preference – or even the size of its roads. Small cars predominate there because of taxes and regulations.  Americans have held out with the big car, likewise, due to tax policy –  or, rather, its inneffectivenes at creating the small car. The U.S. government has attempted to move Americans to smaller cars, but the government has held off of the taxation that would force it, such as displacement, emissions, weight, fuel and other taxes that other governments have long used to manipulate markets towards small. 

Yet, the myths persist about Americans and car size. Bo Emerson writes in the Cox article, “Small car’s history underwhelming,”

Is small un-American?
Why are so many American small cars so mediocre?  Perhaps the concept of the small car is, itself, un-American, said Roger Casey, vice president and provost at Rollins College in Winter Park, Fla. The author of “Textual Vehicles: The Automobile in American Literature,” Casey points out that bigger is better in American culture.  “The second thing is, historically, in American culture, the automobile has been associated with masculinity,” said Casey. And, when it comes to masculinity, “small is not the preferable direction.” More important, American manufacturers make more money off of bigger cars, said Jim Hossack, of the California-based AutoPacific, an automotive product and marketing consulting company. “They dig where the gold is.”

Well, yes, big cars are profitable, and but absolutely NO to the psycho-social cultural analysis: Big cars because of masculinity?  Tell that to an Italian who’s stuck in a Fiat 500. He can still pull it off.  This isn’t about penis size.

Besides, girls like big cars, too.

Masculine? Oh no, the girls have always loved the big car!

The American automobile has never been a story of class warfare. Rather, it’s about class equality. The GM’s business model  of scaled consumption based on class-identity, from Chevrolet to Pontaict and upwards to the Caddy, died with the post-War democratization of credit. Once credit spread across the classes, so, too, did taste for big cars.  There is no social model that can explain the supposed “fascination” with big cars; people want ‘em, that’s all. 

People choose small only when forced to it.  Episodes of economic crisis lead to small.  But it’s government that etches the small into the culture — through law.

The small, “people’s car” has been a chimera from the 1st Model T, followed by the VW, the Tata, the 2CV, and so on. The only “peoples cars” that arose from purely market pressures were the sad, sad late 1960s attempts by the Big Three to compete with the VW Bug.  But guess what, they were competing with a government mandated vehicle.  Certainly, the Bug sold; but it sold where alternatives went absent.  And it post-War Europe it sold where those altenatives were made absent through public policy.  Gasoline and horsepower taxes cleared the way for the peoples cars, which were made so by default, not choice.

In the USA, the greatest selling cars were peoples cars by consumer choice, but not by small.  The Model T was considered a full-sized vehicle when it first arose. What made the “T” great was that it delivered value, not small. Its demise came precisely because it didn’t keep up with the size and value of the competition in the mid-1920s.

Are we happy yet?

And the next great peoples car is as big as it gets on the government size charts: trucks. Pickup trucks, that is. The Ford F150 has outsold every other vehicle in the US.  Add to it SUVs, and the “light truck” category has topped passenger cars sales since 1999 (see bts.gov annual sales figures).  Why? Because of government regulations that have forced makers into smaller passenger cars in order to clear way to meet CAFE  fleet fuel average limits while selling what consumers want, larger cars. For big, consumers have turned to the SUV and its variants.

Here in Amercia, the peoples car is a big car.  Want to change that? Manufacture a crisis, or a BIG tax. Just don’t count on the people going along with it. 

1937 American Bantam. Not.

The small car.  You really want one?  Great, go buy one. But do you really want the government to make everyone else want one, too?

Many out there want just this.  But they will only get it through a government mandate.  The irony of last summer’s crude oil price spike is that while it killed SUV sales it didn’t change consumer preferences for SUVs.  Gasoline prices are down, and SUV sales are back up.  A little honesty in the debate, and we’ll have clearer choice.  If the government truly wants Americans to drive small cars, it must let the voters choose it.  Instead, we get this back-door regulation through CAFE and EPA standards, which modulate but do not change consumer preference.

So if you want big cars, stand up.  Otherwise small is what you’ll get if  you don’t make it plain to Congress and the market that you do, actually, love a big car.

 I do. 

 = = = = = = =

Footnote 1: Taxes and automobiles

• 1902 Great Britain imposed a horsepower tax designed, essentially, as a luxury tax.  Pre-WWI Europe had no appreciable mass market, so automobile taxes were luxury taxes, simply.
• post-WWI: European governments needed revenue, and went looking to promote local industry. As such, horsepower taxes were escalated; however, the most telling tax was that on anything over 20 HP — which marked the Model T horsepower.  Essentially, Britain and other nations tried to tax the Model T out of competition, and doing so forced their own industries into the small car. (See “High Foreign Motor Tax Favors Use of Small Cars,” NYT, 11/30/1924 and “Foreign Auto Tax High,” NYT 4/3/1927).  France, Germany, Italy, and other countries did the same.
• Warren Harding reduced taxes generally, and specifically opposed horsepower and other automobile taxes (his Sec  Treasury Andrew Mellon wanted automobile taxes), which allowed American consumers free reign of consumer opportunities.
• The same old followed WWII, only now it included such places as Japan, which protected local industry through tax policy, and guided it towards small cars.  India, for example, restricted foreign investment and in 1981 imposed a national automobile in a joint-venture with Suzuki, making the “Muruti” the national car.  Piece of shit.
• During the 1980s, Thailand subsidized pickups and taxed other vehicles, making the pickup far and away the number one selling vehicle in the country.
• Some current anti-big car taxes around the world include:
  •  Europe: variously engine displacement, weight, and emissions annual taxes; the EU is attempting to move all members to emissions taxes (Germany already moving to emissions tax in 2010); also high gasoline taxes, annual road or “circulation” taxes, tolls, and VATs on new car purchases
  • Britain: emissions tax ranging from £35 to £400 per year) — annual registration tax
  • France: introducing an annual “malus” tax based on emmissions; also re-introducing annual registration tax based on emmissions
  • Japan: engine displacement ($250-$900) and weight taxes ($105/ ton), and high gasoline tax ($1.69 / gallon); figures as of 2003
  • Korea: engine displacement tax (5% up to 2000 cc, 10% on 2000 cc and up; prior to 2003 was @ 14%)
  • China: engine displacement tax (3% for under 1000 cc, 5% up to 2200 cc, 9% to 3000 cc, 14% to 4000 cc, and 20% for over 4000 cc)

sources:
http://ec.europa.eu/taxation_customs/resources/documents/306-98_en.pdf (1999 EU document on auto taxes)
http://www.autobloggreen.com/2008/06/29/a-summary-of-co-sub-2-sub-based-tax-schemes-in-europe/ (summary of EU member nations auto taxes)
http://www.parkers.co.uk/News/Road-tax/Guide-to-tax-changes/ (new British emissions tax rates)
http://www.thetruthaboutcars.com/france-to-tax-guzzlers-annually/ (French “bonus-malus” emmissions tax)
http://www.brittany-internet.com/BrittanyNews/DrivingFrance/CarTaxinFrance/tabid/1032/Default.aspx (reintroduction of annual registration tax in France)
|http://www.jama.org/AutoTrends/detail1d69.html?id=224 (”Auto tax reform in Japan”)
https://www.frost.com/prod/servlet/market-insight-top.pag?docid=4863060&ctxixpLink=FcmCtx5&ctxixpLabel=FcmCtx6 (Korean auto excise taxes)
http://www.cens.com/cens/html/en/news/news_inner_24729.html (China auto taxes)

Footnote 2: The American Small Cars

Die-cast models of the worst American cars!

• The first commercially successful American small cars followed the “fuel crisis” of 1957 that arose from the Suez Canal embargo.  American Motors and Studebaker suddenly found gold in their “differential advantage” strategy of building a niche market for compact cars.  But it didn’t last.  The Big Three quickly threw engineering and marketing at the small car and by 1959 had buried the rest with a slew of compact, small-engine offerings such as the Valient, Chevy II, Corvair, etc.  By 1962, these cars were being sold with ever larger engines and wheel-bases, and when Pontiac division President John DeLorean dropped a Catalina 389 cu.in. into a little Tempest, the muscle car was born. So much for the small car.
• The next American affair with the small car arose when Detroit freaked out over Volkswagen sales, which hit over 500,000 units in 1970.  As the Bug grew in popularity, Detroit again threw the engineers at the small competition. The result was a crowd of crappy little cars all with about the same wheelbase and four-cylinders as the VW Bug. These forgettable cars are well-known as some of the worst ever made.
• Detroit only stuck to these small models when sale of big cars dropped following the 1973 oil crisis.  Meanwhile, VW sales dropped off and the Bug was finally abandoned becuase it couldn’t meet new safety standards.  At the same time Californians discovered high quality and high-value in little cars from Japan.  These cars sold because they were small, yes, but also because they delivered value.  And, as you may have noticed, it wasn’t long before the Japanese makers started offering larger and larger cars.  Big cars, that’s what the American consumer demands.