The Low Down On Green Living
November 14th, 2008
Alternatives to an Auto Bailout: Help the Economy and the Planet
Stumble it!
Are you as tired as I am of the unending bad economic news? From the subprime crisis to the collapse of the real estate bubble to the near-failure of the global finance industry, it just goes from bad to worse. More scary news this week — major retailers are failing (Circuit City) and one or more of our domestic auto manufacturers appears to be next.
It now appears likely that the government (and as a result we, the taxpayers) will fund some kind of bailout for the auto industry. The price tag could be in the $25 - $50 billion range, and that’s on top of a $25 billion loan they’ve already received from the US Department of Energy to retool their operations to produce more efficient cars.
This really pains me. Several years ago, when the Prius began to take off, it was pretty clear (at least here in California) that this was the beginning of a transformation rather than a little niche. It doesn’t take that much marketing insight to see that something major is happening when folks who normally would buy $50K+ luxury cars (executives, celebrities, high-tech entrepreneurs, etc) are standing in line to buy a $22K mid-size car that looks like a spruced-up door stop. Especially when that trend is being driven by a real-world problem that just happens to threaten the entire planet.
Instead of taking action, the US car companies pursued inaction. Instead of investing in new design on these alt-fuel cars, they lobbied hard to prevent increased fuel economy standards. They repackaged old products based on old technologies in increasingly extravagent ways (see Hummer and Escalade) instead of ramping up innovation. And they made sure that they used their clout (both companies and unions) to keep anyone else who might prod them to change, such as the State of California Air Resources Board, at a standstill as well.
These companies deserve to fail, but this can’t happen. Our economy is teetering on the brink, and losing one out of every ten jobs in the US (and probably a higher percentage of wealth, given that these jobs are high paying) would certainly push us into a deep dark hole the likes of which we haven’t seen before. This would take a huge human toll: as much as auto unions have been part of the problem, they represent hundreds of thousands of workers who have families to support and homes to keep out of foreclosure.
Now, I’m not an economist. But it would seem that we can either “rescue” these companies (albeit from themselves) or sustain their work forces in a way that ensures we are fueling the creation of a new economy rather than prolonging the rattling last gasp of an old one.
Here are some thoughts, and I’d love to hear some of yours as well:
- Provide the funds, but with major strings attached. First, they must be used exclusively to fund the acceleration / development of new green cars. The Japanese and German manufacturers seem to be able to do this on their own, but our companies need a big stick. Second, remove the Boards and top executives who have been part of the downward spiral. Thomas Friedman in the New York Times recommended bringing Steve Jobs to the rescue, but why stop there? Assemble new boards and sprinkle the executive teams with folks from Silicon Valley and other centers of innovation.
- Invest in retraining a major portion of the companies’ workforces for new energy-related jobs as part of any package. Together, the Big Three employ about 140,000 hourly workers in the US. You could pay full salaries and benefits and fully retrain half of those workers for less than $10 billion. Our new government is likely to invest billions in new energy technologies (solar panel installation & manufacturing, geothermal generation, new transmission infrastructure, etc), and these workers could be on the ground floor of the next great growth industry.
- Provide incentives to new renewable energy manufacturers to locate near failing auto plants. Take, as an example, thin-film solar companies. Billions have been invested in this promising technology, and many of the leading companies are based in the US. But, most of the production capacity is being built overseas. The same is true for many other green tech advances. Keep them here, and staff them with displaced auto workers.
- We’ve learned as of late that large banks can fail in a less-painful way when they’re immediately taken over by a stronger bank. Let’s do the same here - wouldn’t Honda or Toyota do a better job managing GM’s manufacturing network? I know this is controversial, but pitting any domestic survivors against a combined multinational company would be the competition needed to make all remaining players stronger.
I’m sure some of these won’t pan out under rigorous economic or political analysis. But this crisis is also an opportunity to finally get things right in a critical industry. That will require new and perhaps radical thinking, not more of the same.
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Comments
Jason Pelletier (not the author of this blog)
November 15th, 2008 at 8:06 am
I agree all the way around. For years, these manufacturers have been sitting on innovation. They’ve been buying patents and locking them away in the drawer. The problem is game theory is working to their advantage. What they’ve been selling works, and they think that the best investment of capital was to sell what was selling. There has been no reason to innovate, and no one can come along to eat their cake because of the barriers to entering the market. Decades of research around auto safety (crash testing), efficient manufacturing (assembly lines), and distribution models/methods keep the cost to enter the industry too high. So, alas, there’s no competition (outside of the existing pool), and thus, no motivation for innovation and progress. If tax payers are going to be fronting cash, I would like to see us create a situation that levels the field a bit more. Maybe it’s not as extreme as the research results becoming public domain, but certainly, we should have some level of access to what they’ve learned and the technologies they’ve developed and purchased.
KyKy
November 18th, 2008 at 9:55 am
Check out Neil Young’s article on the auto bailout.
http://www.huffingtonpost.com/neil-young/how-to-save-a-major-autom_b_143749.html
AQUARIUMSW Olympia
November 18th, 2008 at 11:10 am
Those are some good ideas. A year ago I suggested that Congress temporarily suspend some EPA and DOT vehicle design regulations, such as the newer diesel emissions limits, and newer safety requirements. As part of “Win-Win” policy making, a $1 federal gasoline tax also starts. So, the “Big Three” would import or build TINY FUEL EFFICIENT VEHICLES. Modern European cars are very clean and very safe and many get 45mpg.
This way, there are less cars on the road, less emissions, less accidents, and the gas tax is used to fund alternative transportation and petroleum independance.
Also, our country needs major changes to the UAW contracts. Again, with the “Win-Win” policy making, I have a plan that: includes a trial program in Michigan for Universal Basic Health Care (and its “basic”), employee ownership of the Big Three, and continued UAW sponsorship of other worker benefits.
The keys to our overall transportation and energy initiatives are the GAS TAX, alternative transportation progress, and sustainable lifestyles. Lets start in Michigan. But don’t just “bail out” industries.
David Tannen
November 18th, 2008 at 12:01 pm
How about this radical idea? Let Them Fail and go into Bankruptcy. At least the last time I checked the USA is suppose to have a capitalist economic model.
Ray
November 18th, 2008 at 5:34 pm
There are solutions. Some listed here are doable. We can land on our feet we just have to make the jump. Many don’t like change, especially when the decisions are pushed on you. (Layed off) I must say we were the ones buying these gas guzzlers and the auto industry didn’t predict the price of fuel going up so rapidly. The bump in the road broke the car and car company. I do see gas prices going down. That’s the Band-Aid on the tumor.
Ray
November 18th, 2008 at 5:39 pm
Model T- Ford EPA 28 MPGs
Ford Taurus EPA 26-28 MPG
Chevy Volt range 30 miles on electric. Pushed off til 2010
Too little to late.
Adam
November 19th, 2008 at 8:39 am
The first suggestion gets my vote…if they get money, change needs to occur…the same old thing isn’t going to get it.
great phrase…
“prolonging the rattling last gasp of an old one.”
James Copley
November 20th, 2008 at 2:31 pm
Dear Mr. Jason Pelletier and readers,
My wife and I have been trying to get government and business to listen to a different approach to electric cars. Well, the approach is not new if you use acetylene tanks, or tape players with rechargeable batteries… There is apparently an entrepreneur in Palo Alto already pursuing the car side of it; now we need government action and standards to make it go quickly… perhaps a part of the Automaker bailout is a buy-in for this. We hope you will carry it to all those whom you know. We hope you like the idea:
1. Create a publicly regulated utility for the management, testing, charging, and recycling of automotive propulsion batteries. Set a standard for the voltage, size and shape of batteries.
2. All-electric cars designed so that these batteries can be removed and re-installed with relative ease.
3. Price these cars to include the cost to manufacture the battery. The car owner does not own the battery, just the right to have one.
4. When the battery is low, the car is taken to a service station where it is put on a track like a car-wash, and the battery is pulled and replaced with a fully charged one.
5. The car owner pays for the electricity they have used. The used battery cycles through a test and recharge to be ready for re-insertion in another car. End-of-life batteries are recycled.
Among the advantages of this approach:
1. Consumer acceptance because no major change in habits is required.
2. Battery technology improvements can be seamlessly introduced, but current technology would work fine.
3. Recycling is handled by a centralized system.
4. Electricity can be multi-sourced, so it supports a gradual shift to green energy sources.
5. Huge short- and long-term savings on energy consumption.
6. Immediate reduction of air pollution; long-term reduction in greenhouse gasses.
7. New jobs are created for a U.S. export industry that helps solve global warming!
Neil Young’s Electric Car and Other Electric Vehicles - Link Building and SEO tips from Pixelhead
December 9th, 2008 at 8:12 am
[...] While we are on the subject of the auto industry bailout, check out the post Auto Bailout-Green Economy Opportunity. [...]
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