Gangster government gone green
Larry Kudlow wonders, can hybrids drive profits to Detroit?"Gangster government gone green" stated CNBC host Larry Kudlow, a proud conservative capitalist and a Cadillac Escalade hybrid driver, about yesterday's CAFE rule rewrite.
Kudlow claimed that all of the bailout money spent on GM and Chrysler thus far will be eaten by taxpayers. Moreover despite UAW concessions, Kudlow wonders can small cars, clean diesels and hybrid vehicles return US automakers to North American profitability?
I guess I doubt it. Americans have become so accustomed to buying not just more cars, but more car, than is actually needed thanks to cheap gas prices. More expensive, smaller and clean vehicles will just result in Americans buying less vehicles, won't they? That will probably mean even more downsizing in the long run and more glut in the short term.
Nonetheless, now that tax payers are part owners of Chrysler, GM, etc. shouldn't we know where our money is going? Is hiding green taxes the same way we hide military taxes really the best answer?
Inevitably, it doesn't matter, but I still think that a gas tax was the most transparent, honest way to have approached this problem. Unfortunately, a "gangster government" does run America. But, that's because we, the people, can't handle the truth. Fortunately, however, at least this new government gang is a green gang.
Labels: CAFE, fuel economy, Hybrid Vehicles
posted by Dahcredyns at
7:20 AM
4 Comments:
Larry is an idiot. He is one of the richest guys in the "talking heads" line up. Just like Rush, he makes hundreds of millions per YEAR! So let me guess, mmmm might he be a Republican 'no to anything that might help the middle class' ????
Might he support ANY Bush/Rove/Cheney/Rumsfeld carry over policies that continues to create chaos and division, so that oil/gas/defense sales(which he is a major stockholder) can continue to bankrupt our country ??
What a joke.
Please lets talk about someone conscious and ready for the future, not a person who in history will be forgotten as a wealthy SOB that helped to drum up support on ways to help the 5% elite and screw the middle class with his dribble talk.
Obviously, most conservative capitalists are Republicans - none of those terms should be dirty words, however. Disagree with their policies and politics, but remember that a significant percent of Americans think just like Mr. Kudlow. Maybe we should imprison all of them for not thinking correctly? C'mon! We need to build dialogue with these people, to understand their thinking.
Moreover, I completely disagree that Kudlow is an idiot. Do you ever watch his show? He always brings on guests that completely disagree with him. Yesterday, for instance, he had the head of the NRDC on taking the opposite side. While the NRDC thinks this CAFE technology will pay for itself, he had no statistics to demonstrate that US automakers could make a profit doing so.
Thus, Kudlow asks an important question, can US automakers make profit while achieving CAFE?
How is that not a fair question, especially considering the past of the Big 3 and the fact that two of them are in or nearing bankruptcy?
If they cannot make a profit, does that mean US automakers will forever be a ward of the US taxpayer? Is that healthy? Is there another way? Are GM hybrids made in China and exported back to America the only profitable way forward for GM?
As taxpayers paying the bills, shouldn't we know these things? Shouldn't we be able to ask questions? This is a democracy, not a fascist state, correct?
Also, the smartest strategies suggest knowing your friends, but knowing your enemies even better. Calling them idiots creates the kind of partisanship and lack of consensus that squashed our energy policy for decades.
Nevertheless, not only does Kudlow drive a hybrid, but he stated that he was willing to get behind this cafe plan if it helps US automakers achieve profitability.
But does it?
So, call me an idiot too, because I think Kudlow has a point. If US automakers haven't been able to turn a profit on fuel efficiency for decades, why will they on cars that will have to achieve even greater fuel efficiency?
If this business model doesn't work, we can't ask the question is there a better way?
I'm all for CAFE, even though I don't think it will go far enough or be as effective as sold. Still, I'm not sure I support massive government intervention into the US auto industry if they will never again turn a profit.
Throwing good money after bad just doesn't make sense in this idiot's world.
I've been working through my thoughts about Detroit competing and being profitable and here is how I see things today.
I wonder if CAFE standards play next to no role in profitability relative to quality of engineering and execution. I'm toying with two arguments supporting CAFE as a positive factor towards Detroit's profitability, one an argument of definition and one more earnest.
1. CAFE is just a market rule, by definition neutral in that all companies fall under the same rules. Apart from battery technology there are no barrier to entries into any auto market segment, given enough capital investment and execution talent. Under a given set of market rules, some strategies are dominant over others, but the rules are neutral.
The fact that Detroit was able to make profits with SUVs under the old rules, old CAFE, does not in any way prevent Detroit from making profits with whatever strategy is dominant under the new rules, new CAFE, given enough talent and capital to identify and execute that strategy.
The recent profitability problems of Detroit are not because of the old CAFE per se, but Detroit's response to the old CAFE. Toyota lived under the same CAFE rules, and hell so did Porsche.
Are we saying Detroit is incapable of competing, i.e. doesn't have the talent and capital to compete? Well, what does that have to do with CAFE? If you say CAFE is forcing smaller cars and Detroit can't compete in the smaller car segments, well, I would ask a question. Is it that Detroit can't compete in smaller cars or is it that Detroit chose not to compete in the smaller car segments per their strategy under the old market rules? And obviously it would be silly to argue that American's don't want smaller vehicles and so it is impossible for Detroit to make money even if they did compete in those segments. Somebody's making money selling all those civics and accords and corollas to Americans!
**EDIT: I think I got my 2nd argument below exactly backwards, i.e. new CAFE will lower profit margins on smaller cars. I won't change it, but I don't really believe it.***
2. The slightly more earnest argument is that the new CAFE rules change the market rules in such a way as to benefit Detroit. The main positive effect of new CAFE will be to raise relative profit margins of smaller cars, thus making it relatively easier to make money in smaller cars and justify the R&D expense to develop competitive smaller cars. Japanese smaller cars have already been developed so obviously Japan won't be hurt, but Japan automakers have benefited by Detroit's neglect of the small car segment. So, in the market that will be helped by the new market rules, Detroit has everything to gain and Japan has everything to lose, all things being equal.
As a corollary, by making larger cars relatively less profitable, Japan will have less incentive to try to compete in that market, in effect protecting whatever profits Detroit will be able to make in those segments, all things being equal.
The second positive effect of the new market rules will be to support hybrids and other electric drive train technologies. CAFE doesn't go far enough in that regard, but at least it helps to support new R&D. The benefit to Detroit is that the US government is likely going to out invest other countries in electric drive trains, giving Detroit an opportunity to compete in a brand new market segment.
the profit margins on small cars are much smaller than what the profit margins on larger vehicles have been, although larger vehicles have become less profitable.
japan, for instance, was able to derive some profit from these vehicles by always striving for efficiency in the manufacturing process. change is good under this model.
the US auto industry, on the other hand, is not driven by change, but by contracts between corporations and the UAW - this is relatively inefficient by nature. somehow flexibility needs to be the new driver of the relationship between the UAW and the US auto industry.
also, in europe us automakers are able to create small cars that they can sell for a profit because of gas prices. base models are just entry points. the profit margins are created on small vehicles with many amenities and add-ons. unfortunately, most americans would rather buy a larger, more profitably vehicle with less amenities than a smaller vehicle with more amenities.
yet, today, Europe is far beyond our new CAFE requirements already. thus, i don't think CAFE will help much. it doesn't go far enough to really push automakers.
in some ways CAFE pushes automakers to think in the right direction, but i'm not sure it pushes them far enough. actually, i'm almost certain it doesn't push them far enough.
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