Would you buy a car from Congress?
Congressional "wisdom" and California environmentalism prevents U.S. auto manufacturers from concentrating on the one thing they are good at: Building the big vehicles that most Americans want -- such as the one below. The auto makers have been suffocated by a political straitjacket
Leave it to Bob Lutz, GM's voluble vice chairman, to puncture the unreality of the auto bailout he himself has been championing. In an email to Ward's Auto World, he notes an obvious flaw in Congress's rescue plan now taking shape: The fuel-efficient "green" cars GM, Ford and Chrysler profess to be thrilled to be developing at Congress's behest will be unsellable unless gas prices are much higher than today's. Very few people will want to change what has been their 'nationality-given' right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50," Mr. Lutz explained. "Those prices will put the CAFE-mandated manufacturers at war with their customers -- and no one will win in that battle."
Translation: To become "viable," as Congress chooses crazily to understand the term, the Big Three are setting out to squander billions on products that will have to be dumped on consumers at a loss.
None of this was mentioned at four days of congressional bailout hearings, because Detroit knows better than to suggest Congress has a role in the industry's problem. Yet its own recently updated Corporate Average Fuel Economy regime, or CAFE, makes a mockery of the idea that government money will render the companies profitable, even as the same bailout bill demands that the Big Three drop their legal challenge to a California mileage mandate even more unsustainable than the federal government's.
Forget Chrysler, which has needed a bailout from Washington or Stuttgart in three of the last four recessions. The tragedy of GM and Ford is that, inside each, are perfectly viable businesses, albeit that have been slowly murdered over 30 years by CAFE. Both have decent global operations. At home, both have successful, profitable businesses selling pickups, SUVs and other larger vehicles to willing consumers, despite having to pay high UAW wages.
All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don't want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.
Under a law of politics, such truths were unmentionable in last week's televised circus because legislators are unwilling to do anything about them. They won't repeal CAFE because they fear the greens. They won't repeal CAFE's "two fleets" rule (which effectively requires the Big Three to make small cars in domestic factories) because they fear the UAW. They won't hike gas prices because they fear voters.
And make no mistake: An even more massive auto wreck lies ahead when a soon-to-be taxpayer-financed and taxpayer-owned auto industry confronts a California rulemaking that, in a silly gesture against global warming, would render most of its auto designs, profit centers and tooling unsalvageable.
We hate to admit it, but the only good idea from the bailout debate is the proposal for a new "auto czar." Along with disposing of Chrysler and downsizing Ford and GM, his job should be to confront Congress with its own policy cowardice and failure. If saving gasoline and Detroit are both worthy goals, let's ditch CAFE and institute a gasoline tax to make consumers value the cars government is forcing auto makers to build. If Congress doesn't have the tummy for that, at least ditch the "two fleets" rule so Detroit can import small cars to meet the mandate.
Alas, Barack Obama's vaunted "change" apparently doesn't include spending the political capital to make Congress acknowledge the failure of CAFE. If he can't do better than throw taxpayer money at a dismal policy disaster like our fuel-economy regulations (and so far he seems to be joining Congress in pretending it's all Detroit's fault), we might as well give up on his presidency along with any hope of progress on the nation's other unresolved dilemmas. His campaign never really answered the question of whether he was Chance the Gardener or Abraham Lincoln. We might as well find out now.
Politics posing as financial analysis: "Why the rally? It isn't really about the actual stocks, says CNBC stock guru Jim Cramer. It's about the end of the Bush administration. "The whole source of this rally is President Bush, meaning that each day we come closer to getting rid of him is a day where the market is better," Cramer writes on BloggingStocks."
Fighting Racism, U.N.-Style: "One of Colin Powell's best moves as Secretary of State was to pull out of the United Nations' 2001 conference in Durban against racism once it became an anti-Semitic rant. One of the best moves the new U.S. Administration and Europe could make is to stay away from the follow-up meeting altogether. "Durban II," planned for April in Geneva, promises to be an encore of the same old Israel-bashing. The draft declaration says Israel's policy toward the Palestinians amounts to no less than "a new kind of apartheid, a crime against humanity, a form of genocide and a serious threat to international peace and security." We'll spare you the rest. Israel will be the main obsession, but it's not the only target. The draft declaration also goes after the West's freedom of speech and antiterror laws"
Will Volvo ever be the same again? "Volvo, the quintessentially middle-class Swedish marque, could soon be in Chinese hands after it emerged that Ford, its owner, is in talks with one of China's biggest carmakers. Last week Ford said that it was considering all options for Volvo, its last European brand. The American group has been selling businesses over the past two years as it struggles to bolster its balance sheet. Now it is under even more pressure as, like the rest of the car industry, it faces one of the most depressed markets for decades. Ford is in talks with Changan, one of the six biggest Chinese manufacturers with a history stretching back to 1862, about selling Volvo, which it has owned since 1999. Changan is a joint venture partner of Ford in China and has worked with the American carmaker for seven years. It is believed that early negotiations took place last month between Xu Liuping, Changan's president, and Ford and Volvo executives at a motor show in Guangzhou".
They can't catch me. I'm the gingerbread man: "The list of crooked politicians is long, and the list of stupid politicians even longer. But if the criminal allegations made yesterday against Illinois Governor Rod Blagojevich are proven in court, rarely will a politician have combined the two qualities with such efflorescence. The second-term Democrat knew that a grand jury probe was under way into corruption in Illinois politics, and that one of his fund raisers, Tony Rezko, had been convicted and is cooperating with prosecutors. Yet according to those prosecutors, Mr. Blagojevich talked openly in recent weeks about selling a U.S. Senate seat, trading government favors for campaign cash, and punishing the owner of the Chicago Tribune if it didn't fire members of the newspaper's editorial board. The Governor's comments were taped in court-approved wiretaps and include such self-incriminating classics as: 'I've got this thing [the power to appoint Barack Obama's Senate replacement] and it's [expletive] golden, and, uh, uh, I'm just not giving it up for [expletive] nothing. I'm not gonna do it. And, and I can always use it. I can parachute me there.' We recommend the entire 76-page FBI affidavit for every high school civics course as proof of the need for political checks and balances. If convicted, Mr. Blagojevich would be the second consecutive Illinois Governor to be found guilty of a felony, and the fourth in 35 years."
Questions about the Obama/Blagojevich relationship: "Asked what contact he'd had with the governor's office about his replacement in the Senate, President-elect Obama today said "I had no contact with the governor or his office and so we were not, I was not aware of what was happening." But on November 23, 2008, his senior adviser David Axelrod appeared on Fox News Chicago and said something quite different. While insisting that the President-elect had not expressed a favorite to replace him, and his inclination was to avoid being a "kingmaker," Axelrod said, "I know he's talked to the governor and there are a whole range of names many of which have surfaced, and I think he has a fondness for a lot of them." ... But there remain questions about how Blagojevich knew that Mr. Obama was not willing to give him anything in exchange for the Senate seat -- with whom was Blagojevich speaking? Did that person report the governor to the authorities? And, it should be pointed out, Mr. Obama has a relationship with Mr. Blagojevich, having not only endorsed Blagojevich in 2002 and 2006, but having served as a top adviser to the Illinois governor in his first 2002 run for the state house."
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