The Big Three: Evolve or Die

Talk about conflicted. I filled up the tank this week and paid $2.09 per gallon of gas. It’s been a long time since a fill cost me under $35, and with the rest of the economy in the tank (no pun intended), a little part of me was OK with saving some money. But a bigger part of me is thinking: Stop the madness!

At $4.25 per gallon, it hurt to go fill up, and as a result, people’s behaviours changed. SUVs and pick-ups weren’t moving off lots, major car dealerships shut down, and those that manufactured the vehicles to feed this craving, The Big Three, have admitted that they’re no longer capable of being self-sustaining and are looking for government bailouts. Why are they dying? They have ignored innovation and resisted building high mileage fleets, choosing instead to convince the US public that it needs 8 cylinder, 8 passenger, 12 mpg behemoths that cost over a hundred bucks to fill.

Evolve or die. They didn’t evolve as the 20^th century came to a close, and in fact openly opposed evolution. It’s time to let the market economy do what it does, and allow the next wave of innovative start-ups room to transform the automotive industry in the 21^st century.

Politicians don’t do “tough love” well. No politician, blue or red, will risk alienating entire swing states, so I expect there will be some kind of package put forth. Personally, I think it’s keeping the patient with multi-organ failure on life support. Does anyone think that the tens of billions of dollars that will be spent to transform The Big Three or will we be extending the suffering? Imagine if, instead, a portion of that money was invested to build a national distribution system for renewables? Or hydrogen refueling stations?

The government needs to man up, and act with an iron fist in a velvet glove. Bail them out, if you must, but use it as an opportunity to avoid a national crisis that threatens our future.

 

1. Add a bailout tax of $2 per gallon, so that every American is paying a user tax commensurate with the vehicles they’re driving.
2. Tie all monies to real mileage targets that will make a difference, not the abysmally minor gains currently on the books.
3. Legislate that ten percent of all vehicle sales must by electric by 2015.
4. 50% of vehicles produced must be hybrids by 2013, etc.

Put some teeth in the package. Give the Big Three a choice: evolve or die.

Stop the madness.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

Comments

[Brock]

My neighbor was the CEO of an airline and always told me - late night over wine - that he and his other airline buddies thought the real price should be $25-$35 a barrel.

They turn the pumps off when it goes below $15 barrel. Seems 147 was the peak and we will probably settle around 50-60 for the time being.

Of course with an extra 8 trillion of our dollars floating around liek fairy dust..time will tell where we end up....cart and buggy maybe...

If - when the US dollar fails and they re price oil in Yuan - or Gold - it might go back to 150 barrel for the USA..as by then our dollar will be worthless....

Canada passport - check
Canadian passports - kids - check

[Martin Suter]

Thanks for your thoughtful comments. We are in violent agreement on many points. "Evolve or die" IS about letting the Big Three fail, however the point that I was trying to make was that in today's political climate, letting this happen would probably alienate big chunks of the voting population in key swing states, and is therefore unlikely.

My point was that IF the government elects (no pun intended) to bail them out, not to issue them a blank check, but to tie it to shifts in behavior that are desirable for the overall health of the country. I can't grant you the point about "taxing behavior you don't like - like cigarettes - doesn't work because if one is successful, then tax revenues fall". May we agree that deterrents to smoking are good? If so, the Canadian example is telling. Since 1981, smoking rates in Canada have fallen from 44% to 18%, and with a pack of smokes ~$8, it's easy to see why.

I think $4.50 gas would be a deterrent that would lubricate innovation. If people resume their purchases of Yukons, Suburbans and Hummers with gas down under $2, the funding of innovation on alternative fuels or high-mileage vehicles will stall, which I think continues to put our country at risk. We've seen it this past year, with the largest transfer of wealth in history flowing to the petro-states. The Big Three haven't evolved. The choice is simple: Let them die, but IF you must intervene, force them to evolve.

Starbucks beckons! Thanks for your comments...

[ProfAHK]

There is an alternative to "evovle" or "die" and it is bankruptcy. The airlines declared Chapter 11, re-organized, and have emerged better than they were. The unions now own part of UAL - what if the UAW owned part of GM?

The proposed solutions all fail the Ayn Rand test of getting government out of business:

1. Add a bailout tax of $2 per gallon, so that every American is paying a user tax commensurate with the vehicles they’re driving.
... taxing behavior you don't like - like cigarettes - doesn't work because if one is successful, then tax revenues fall.

2. Tie all monies to real mileage targets that will make a difference, not the abysmally minor gains currently on the books.
... Let's let consumers choose what mileage they want.

3. Legislate that ten percent of all vehicle sales must by electric by 2015; 50% of vehicles produced must be hybrids by 2013, etc.
... Let's not tell companies what kind of products they should produce. They will either meet consumer demand or die.