Clueless About Cars

In the recent negotiations over the future of the auto industry, General Motors is expected to be saved by the taxpayer and restructured, but Chrysler is being called hopeless and will be sold to another company at a fire-sale price.


Chrysler’s expected merger partner is now said to be Fiat, the Italian car company. But anyone who remembers when Fiats were common on American roads in the 1960s and 1970s knows that they were notoriously unreliable, and that Fiat really stood for Fix It Again Tony.


Fiat does not bode well for Chrysler. Toyota would be a more reassuring partner but Toyota is a competitor to Chrysler with its ‘transplant’ factories in the American South producing super-quality cars with non-union wage costs that are 65% of the union costs at Chrysler.


Why would Toyota jump in?


They won’t. It’s just a thought.


Chrysler has been on a long downward spiral as have all of the Big 3 American companies. Now this period in history is presenting the ‘perfect storm’ that will kill them, partly or wholly. But car companies have been coming and going since the beginning of the Auto Age in 1907 when the first Model T rolled off the Ford assembly line. Think of fallen flags like Studebaker, Hudson, Tucker, American Motors (the smallest of the Big 4) etc.


Here one year, gone the next. The same with all of American industry. Things change. It’s the ‘creative destruction’ of capitalism. We should let it happen naturally and let the jobs be made up elsewhere because they will be. Otherwise we will be permanently subsidizing the wrong jobs and it will cost much more in the long run.


In Chrysler’s case, it petitioned the government way back on September 7, 1979 for $1.5 billion in loan guarantees to avoid bankruptcy. Lee Iaccoca of Ford became CEO with his famous, “If you find a better car, buy it” campaign.  


Congress passed the bailout on December 20, 1979. The military helped Chrysler by buying Dodge pickups, and Chrysler slowly recovered, selling off its Defense subsidiary and repaying its bailout loans by 1983. Iacocca was seen as a genius, but he was helped in large part by the Reagan economic boom of the 1980s.


Today the situation is dire. America’s long postwar economic expansion is no longer strong enough to keep Chrysler and GM afloat. Global competition is forcing their hands while the union is acting like it’s 1956 all over again. The United Auto Workers are going to be the last to make any concessions to GM or Chrysler, and the taxpayer may end up subsidizing the UAW if Obama has his way.


After Chrysler, General Motors is the next weakest and Ford is strongest. And the two best-selling and most profitable cars in America are GM and Ford gas-guzzling pickup trucks, respectively the Silverado and the F-Series which sold 465,065 and 515,513 units in 2008.


Note: The traditional SUV is nothing but a car body on a pickup-truck chassis, which is what makes it different from ‘a car’. In fact, SUVs were created specifically to get around fuel-economy limits set on ‘cars’ in the 1970s. SUVs built on truck chassis were not classified as ‘cars’ and thus were exempt from the fuel economy limits.


Now with the government injecting billions into GM and Obama “suggesting” that GM CEO Rick Wagoner retire – which he has done – the government also is “suggesting” that GM cease production of 11 of its 20 profitable car lines(!)


This bodes poorly, for government to come in and tell a company to stop making profitable items. These banned vehicles certainly will include heavy, high-end, fuel-inefficient and high-profit SUVs that environmentalists have been after for years. You know, the kind that Hollywood drives. These are the very cars that GM has needed to sell to make the big profits to finance the union pay scales that it agreed to over the last 30 years when things were fat.


Will the government seek to ban the Silverado? What is going to replace these 11 models? You can rest assured that the government and its eco-kook allies will now force GM to make ‘green’ cars that ultimately will kill off the company for good. These cars are A) hybrids, which are much more expensive that non-hybrids while giving little in consequent fuel-economy improvements; B) small fuel-efficient cars that traditionally have only been bought by people in the lower income classes and are lightweight, carry little payload and are considered dangerous; and C) the electric car like the Chevy Volt which will be so expensive to drive because of the costs of electricity that consumers won’t buy it.


Ultimately, the environmentalist plan will not work by forcing fuel efficiency. Energy efficiency actually increases overall energy demand. Think of it this way. If all cars got 2 miles to the gallon, most people would ride the bus or the train, and they wouldn’t drive their cars much. It is the increasing efficiency of cars, refrigerators, air conditioners, lamps and all the rest that ultimately leads people to buy more of them and use them more. This drives up overall energy consumption. Call it the Efficiency Paradox.  Whatever you call it, it is a fact.


Finally, GM and Ford are signing on to a plan where the company will pay your car loan for up to one year if you lose your job. This is more desperation on top of more desperation. In other words, the taxpayer already is subsidizing car buyers with tax credits, and now will bail out some buyers who lose their jobs. Add that to the list of other bailout recipients like home buyers, banks, cities, states, the homeless, the poor etc. etc. etc. etc.


So where’s MY bailout?


Please visit my website at www.nikitas3.com for more. You can print out for free my book, Right Is Right, which explains why only conservatism can maintain our freedom and prosperity.