Skip to main content

Calling the Shot - Halfway there

Yesterday I posted about the Wagoner firing being a smokescreen--a bit of PR to throw a scapegoat before an angry mob weary of bailouts.
Here are the options:

Option 1) GM can build more inexpensive fuel-efficient green cars
Option 2) GM can preserve UAW jobs, contracts, and legacy commitments
Option 3) GM can be profitable

Pick two.

The math doesn't work out any other way. It is an impossibility.

Analysis:

Option #1 is pretty much a given under the current administration and Congress. CAFE standards and a near religious-like zealousness amongst the Democratic party base has pretty much settled this issue.

I failed to state that, even though wildly improbable, my preferred method of dealing with this is that we back off the environmental jihad, and let American car companies make cars Americans want and turn a profit. However, GM building more fuel-efficient cars is a federal mandate, because anthropogenic climate change is for all intents and purposes a secular religion, and not to be questioned.

The American auto companies, saddled with higher labor costs and legacy costs compared to overseas competitors, were only staying afloat because of the higher profit margins on vans, full-size trucks, and SUVs--exactly the kinds of things that ever more stringent federal environmental controls make it harder and more costly to produce. In turn, this eats away the profit margins on those vehicles, leaving U.S. auto manufacturers no choice but to cut labor rates to be competitive in the small-car market (sacrificing option #2, above). Caught between a rock (CAFE standards) and a hard place (the UAW), they can sacrifice neither option #1 or #2, both deemed sacred by the current administration and congress.

Alas, GM has to surrender any hope for option #3 (turning a profit).

Michael G. Franc points out that the smokescreen obscured even more than I originally thought. On the same day that Wagoner was fired by the President stepped down from GM, a DOT press release stated:
U.S. Secretary of Transportation Ray LaHood announced today that the Department of Transportation has posted the new fuel economy standards for cars and light trucks for the 2011 model year…
Yep. Looks like a pretty safe bet that the government won't ease up fuel efficiency standards. The Detroit News goes on to report:
Stricter fuel economy standards… for the 2011 model year will cost struggling auto companies nearly $1.5 billion and boost the cost of passenger vehicles an average of $64 for cars and $126 for light trucks.
Will you recoup those costs in fuel savings over time? See my next post.

#UPDATE#
Ok, see "a future post". Not my "next post". I'm still hammering this one out. -ER

Comments

Popular posts from this blog

The Re-Opening Experiment

We should remind ourselves that, this Memorial Day weekend and the weeks that follow, we are subjects in a grand experiment to see how good we are at social distancing as stay-at-home orders are being slowly lifted. The state's stay-at-home order was never meant to keep you, individually, safe from infection. It was meant to keep hospital's safe from being overwhelmed by too many of us needing them at the same time. In Michigan, the daily new cases of COVID-19 are higher today than they were when we locked down in late March. We are testing whether or not we can open up (with all of our new precautions and protocols) without spiking the rate of spread, but make no mistake: it *is* an experiment, and we *are* the test subjects. Please don't get careless as things start to open up. We need to get our economies back on track, but we are still a long way (and a vaccine away) from being out of the woods. Stay vigilant, folks. Wash your hands. Wear a mask. As has always been the

VMWorld Wednesday

Today I noticed three things: 1) All the good sessions ran today. 2) Lines for everything! 3) You can't do back-to-back sessions all day without burning out. Today's sessions were not to be missed, and everybody knew it because lines starting forming 45 minutes before some sessions. VMWorld has been on their toes, however: I didn't miss any session that I wanted to hit, and the most popular sessions from Monday and Tuesday got added back to the schedule on Wednesday and Thursday so everyone would have a crack at them. This is some very nimble work for a conference this big. Well done, VMWorld! Here's the photolog: My morning run takes me down to ferry building and up the Embarcadero. Here's the view at sunrise. This lovely scene is the hallway in my hotel. Creepy, but swank! Lines! Today was the day of lines! This was the line first thing in the AM for the Labs. More sidewalk art outside of Moscone South. Bean-bag Alley - where people and devic

A Christmas Present

What more could I ask for? Wine. Innovation. A blow against government over-regulation. A story about a penniless Yugoslavian immigrant. Capitalism. And whooping some French ass. All from Reason.tv. Merry Christmas to all, and to all a good night. http://reason.tv/video/show/red-white-and-sacrebleu