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December 9, 2008

DE-troit. (Where the PO-lice smoke SEE-gars.)
Posted by Patrick at 11:44 PM * 99 comments

I am, on balance, in favor of a narrowly-targeted deal that will keep the Big 2.5 barely alive until Obama gets into power, at which time his people can have the unenviable task of figuring out what to do with the internal organs, tail, and ears. That said, this is still funny.

Disclaimer: I was born in Lansing, of parents both born and raised in Michigan. My father’s father toiled his whole working life for Fisher Body. River Rouge! Grosse Pointe! Blah blah blah. Feel free to ignore me on this subject.

Comments on DE-troit. (Where the PO-lice smoke SEE-gars.):
#1 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 10, 2008, 12:38 AM:

Ha! This reminds me of a sign I saw on a local car repair shop: "I couldn't make your brakes work right, so I made your horn louder."

Anyway, I'm tired of hearing why the auto unions should be made to bend over and undergo endoscoping to make sure they don't make away with 5% of the loot we're throwing at banks to throw parties and pay dividends. At least if we pay some money to real workers, some of it may actually trickle down to others. Give it to financiers and the only trickle will be them trickling on us.

#2 ::: Lizzy L ::: (view all by) ::: December 10, 2008, 01:40 AM:

I truly can't decide whether I want the Big 2.5 (thanks, P) to get some money or go directly to Bankruptcy, Do Not Pass Go, Do Not Collect One Thin Dime. But I know that I would dearly love to ask the bankers at Citigroup (and at all those other places currently collecting our lunch money to make up their bonuses): Hey, fuckers, just what makes you think you're too good to walk the unemployment line? And by the way, how many corporate jets do you (collectively) own, and why have you not sold them already? And while you're here -- what's your reorganization plan? Tell me again why you should keep your job...

#3 ::: Lee ::: (view all by) ::: December 10, 2008, 02:01 AM:

Hey, I grew up in Grosse Pointe Woods; most of my friends' parents worked in the industry. And I think it's both hella funny and depressingly apt.

#4 ::: Joe McMahon ::: (view all by) ::: December 10, 2008, 03:25 AM:

At this point, I think someone could make a good case for prosecuting (among others) the Lehman Brothers CEO under RICO. That $45 mil condo? You won't be moving in after all.

#5 ::: Roy G. Ovrebo ::: (view all by) ::: December 10, 2008, 05:16 AM:

Ok, what's the "2.5" refer to? GM, Ford, half of Chrysler[1]?

[1] Chrysler did get swallowed bymerge with Daimler-Benz - though Daimler later sold out most of it.

#6 ::: Roy G. Ovrebo ::: (view all by) ::: December 10, 2008, 05:26 AM:

Ok, what's the "2.5" refer to? GM, Ford, half of Chrysler[1]?

[1] Chrysler did get swallowed bymerge with Daimler-Benz - though Daimler later sold out most of it.

#7 ::: albatross ::: (view all by) ::: December 10, 2008, 08:59 AM:


I can't believe it will be acceptable for executive branch officials to dismantle this industry. Letting the failing companies go into bankruptcy will be painful for all involved, but it won't leave us permanently on the hook for propping these companies up. Once we start propping them up, I don't see how we're ever going to stop. (Say, how'd that work with passenger rail? Or with farming?)

My understanding here is that there's pretty much no prospect of these companies recovering anytime soon, at least not in their current form. If we give them the requested bailout, they will be back in a crisis and needing more help in less than a year. Having helped them once, it seems like it will be almost impossible not to help them the next time. And there will be many more next times. My prediction is that each time they come to us for more money, we'll see congressmen and administration officials sternly telling them (for the news cameras) that there will be no further bailout money. But we'll keep giving in, because in a year, when we're in the depths of a nasty recession, it won't be any easier to let all those employees be laid off. And in a year and a half, who will want to maybe stifle the recovery by putting all those employees in the unemployment line. Fast forward another year, when the next bailout demands are being made, and Obama is thinking about re-election, and wanting to carry the Rust Belt states. At some point, it will simply have transitioned to being unthinkable that we let them fail: We will already have spent hundreds of billions propping them up, and will have given government officials enormous control over their operations. The Car CommissarCzar will presumably accumulate quite a bit of power and staff over the years, and will be personally committed to his decisions. How will he and his staff react to arguments that it's time to stop giving them subsidies?

And bailing out the Big 3 almost guarantees that we will bail out other (better run, less arrogant and evil) companies, more and more of them. We are deficit financing all this, on the apparent theory that there's no limit to how much we can put on the deficit without consequences. That can't really work forever, but politicians' time horizons aren't "forever," they're "next election." We have no idea what we're doing with this course of action, no way of knowing whether we're going to eventually trigger some change in the global financial markets that makes unlimited deficit financing not workable anymore. We're just going to run the experiment and see whether we end up as a really large version of Iceland, because other courses of action would be politically painful.

#8 ::: Lila ::: (view all by) ::: December 10, 2008, 09:05 AM:

I had a nasty thought: what if we were to offer $5 billion to any currently solvent automobile company that would agree to take over the plants and continue to employ the workers for a set period?

#9 ::: Raphael ::: (view all by) ::: December 10, 2008, 09:29 AM:

albatross @7, (Say, how'd that work with passenger rail? Or with farming?)

Perfectly well. Given what I've heard about the state of many parts of your country's basic infrastructure, I don't see how it would be a good thing if it would be in even worse shape.

And why didn't you mention roads and airports in that list?

#10 ::: Natalie L. ::: (view all by) ::: December 10, 2008, 09:38 AM:

I grew up in Michigan (mostly). My sister still lives there and is employed in one of the many, many, many companies that depend on the Big 3 (she does QA for a parts wholesaler). For her sake--and the sake of all the other people like her--the Big 3 need to stick around. Michigan is already looking at double digit unemployment, I can't imagine how much worse it would be if the Big 3 went under.

#11 ::: Graydon ::: (view all by) ::: December 10, 2008, 09:53 AM:

Making internal combustion engine cars is not helpful. Dumping public funds into maintaining a completely dysfunctional company's ability to do more of something unhelpful is unwise.

The current market capitalization for all three big 2.5 combined is under 10 billion; it might be under 5 billion.

So, have the feds:
- buy them outright, offer-you-can't-refuse style.
- extend this offer to the parts industry on an "in and all eated" or "out and take your chances" basis.
- take on the pension and health plan obligations; use these as a minimum basis for the single payer system.
- fire everybody in marketing and senior management.
- form not less than 10 and not more than 25 worker-owned companies to build electric and hybrid electric vehicles; none may use internal combustion engines in any way. Other than that, free choice of tech EXCEPT
- there will be standards about things like voltages and battery pack dimensions, mass, and so on, so that the parts industry has a target
- safety standards are not relaxed
- each new company has 2 years to get a car on the road

The new companies have to stay worker owned.

The dealers are borked except for service business, but that's not really avoidable. Set up retraining programs for mechanics on a "you haz ticket? You wants electic or hybrid-electric ticket? signs up, shows up, billed only if shows not up" basis.

#12 ::: Fragano Ledgister ::: (view all by) ::: December 10, 2008, 09:59 AM:

As a resident of Atlanta, I'd like to point out that Bob Nardelli did such a wonderful job ruining, er, running Home Depot, that he just had to move to Chrysler.

#13 ::: albatross ::: (view all by) ::: December 10, 2008, 10:05 AM:


Patrick's post assumes that we will maybe prop the Big 3 up for awhile, and then dismantle them. I suspect we will simply prop them up forever, because dismantling them will be politically harder and harder over time. Amtrak is an example of a government takeover of a failing industry which has stayed with us for a very long time[1].

What's your prediction? Assuming we start bailing out the auto industry (and we clearly are going to do that), when do you suppose we'll stop having substantial government control of the domestic auto industry and/or substantial government funding of the domestic auto industry? My prediction is that once we start, we will find it all but impossible to stop propping them up and running them, and that in 20 years, we'll still have some shadow of the Big Three being run as an inefficient, subsidized car production operation.

If there is to be a bailout, my recommendation is to decide on the maximum amount (much more than the current bailout), call it $X. Find the number of employees of the Big 3 and their suppliers who will be wiped out when they go under--call that N. Cut checks to each of those employees for $X/N, either in a lump sum or in an annuity. Let the inefficient companies die out. (There are also retiree benefits which may have to be taken care of, which would leave less of the $X for direct payments to the employees.)

The advantages of this is:

a. It lets failing companies fail, rather than getting the government into the business of designing and manufacturing and selling cars.

b. It avoids the distorting effects of subsidizing some car companies against others, which (among other things) avoids the prospect of some kind of duel of subsidies between different governments to prop up their national champion carmakers, trade disputes caused by subsidies, etc.

c. It moves workers and capital out of companies that are doing stuff that's not actually valuable--that costs more than it benefits people. Over time, that makes the whole country better off (and subsidizing inefficient industries, in general, makes the whole country worse off!)

d. It doesn't leave us on the hook forever to prop up this dying industry.

e. It actually takes care of a decent fraction of the people most affected by the failing industry. But it doesn't keep those people working in an unproductive industry--they get to keep their $X/N and then go find a different job somewhere else if they like. If $X is as large as it seems to need to be to do the bailout, older people may just get to retire at 50 and not worry about retooling; younger people will have a cushion while they move and find another job.

f. Investors and lenders (who made bets on which they expected to profit if things went well) will not get a dime. This both gives the right incentives (invest and lend wisely, don't assume the taxpayer will make good your losses) and removes much lobbying muscle from future bailout demands.

g. It doesn't set an example that we will bail out every industry that can get a dozen congresscritters to squawk on its behalf.

I'm sure we won't do this, by the way. We're going to bail out this industry, and create a new political appointee (the car commisar, more or less) who will direct its operations. Our grandkids will be paying to keep the shriveled remains of these companies afloat.

[1] It's also a byword for irrational and inconvenient operations, in my experience. Many places where good rail service would be easy to provide and make sense don't have it; many small towns keep their Amtrak stops by congresscritter intervention. I predict we will see something similar when we put a political appointee (subject to both executive and legislative branch pressures) in the disturbingly aptly named position of "car czar."

#14 ::: Seth Gordon ::: (view all by) ::: December 10, 2008, 10:13 AM:

I think that once the rest of the economy has recovered, if the current bailout effort fails, then Congress will not be so interested in feeding more brains to the zombie. (In particular, note that the Congresscritters from districts with non-Big-Three auto plants have an incentive to shut off the spigot to the Big Three.)

#15 ::: P J Evans ::: (view all by) ::: December 10, 2008, 10:36 AM:

Note that Shelby is from a state having heavily-subsidized foreign manufacturers with non-unionized workers. (Conflict of interest, much?)

#16 ::: Magenta Griffith ::: (view all by) ::: December 10, 2008, 10:37 AM:

albatross @13, point f.
One of the problems of letting the auto industry fail in ways that screw the investors is that not all investors are fat cats.

Investors include pension funds and mutual funds. Many retired people are dependent on either a pension fund or mutual funds or both. Some of them would be badly hurt. How are you going to pick up the pieces for them?

This is also a problem with the financial industry in general; not all the people hurt are rich. Many are middle or lower class, with investments not chosen by them personally, but by managers they had little or no control over. Those who are at or near retirement age are f**ked.

#17 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 10, 2008, 10:37 AM:

Graydon @ 11

Your solution appeals to me; I like the notion of converting those bloated capitalist ticks into worker-owned companies. I would like to point out by analogy that:
Making internal combustion engine cars credit default swap instruments is not helpful. Dumping public funds into maintaining a completely dysfunctional company's ability to do more of something unhelpful is unwise.
Doing to Lehman Bros. as ye would do to Chrysler makes sense to me.

Oh, there is just one problem: take it from someone who spent some years working on ANSI and ISO standards committees that the development of industry-wide standards by committee is a hideous time-sink with no guarantee of any useful outcome.

#18 ::: Lee ::: (view all by) ::: December 10, 2008, 11:29 AM:

albatross, #7: What you're describing here is the phenomenon of "once you have paid the Danegeld, you'll never be rid of the Dane." And I concur completely. If we bail them out at all, it should be made dependent on a complete restructuring, including a clean sweep of the boards of directors and upper management.

Graydon, #11: That's not a bad outline. As Bruce says, I just wish they'd do it to Wall Street as well.

#19 ::: Raphael ::: (view all by) ::: December 10, 2008, 11:52 AM:

Graydon @11, to build electric and hybrid electric vehicles; none may use internal combustion engines in any way.

Err, as far as I know, "hybrid electric" means a hybrid where the part that's not electric is an internal combustion engine. What kind of "hybrid electric vehicles" should be built under your conditions?

albatross @13: If there is to be a bailout, my recommendation is to decide on the maximum amount (much more than the current bailout), call it $X. Find the number of employees of the Big 3 and their suppliers who will be wiped out when they go under--call that N. Cut checks to each of those employees for $X/N, either in a lump sum or in an annuity. Let the inefficient companies die out. (There are also retiree benefits which may have to be taken care of, which would leave less of the $X for direct payments to the employees.)

That's a good idea, and pretty close to what I would suggest.

c. It moves workers and capital out of companies that are doing stuff that's not actually valuable--that costs more than it benefits people. Over time, that makes the whole country better off (and subsidizing inefficient industries, in general, makes the whole country worse off!)


[1] It's also a byword for irrational and inconvenient operations, in my experience. Many places where good rail service would be easy to provide and make sense don't have it; many small towns keep their Amtrak stops by congresscritter intervention.

Basically, you seem to claim that the efficieny of anything in an economy is simply the cost/revenue relation for it- that, if something doesn't make a profit, this shows that it is inefficient. The problem with this line of thought is that things can increase the total profit of the economy in a place even without getting much out of it themselves. For instance, if a piece of transportation infrastructure makes it easier for the potential customers of a business to reach it, this can lead to additional profits for that business that don't show up in the revenues column of the organisation that runs the piece of transportation infrastructure.

So, while it's bad when good rail service is lacking where it should be provided, I don't see what's wrong with railway stops in small towns. Basic infrastructure is a Good Thing. And, again, if you want to argue against subsidised rails, why don't you argue against subsidised roads and airports as well? I'm sure that a lot of small, remote towns and villages can be reached by roads that would be uneconomic to operate on the free market.

#20 ::: Bill Higgins-- Beam Jockey ::: (view all by) ::: December 10, 2008, 12:05 PM:

A question about the Graydon Plan:

- form not less than 10 and not more than 25 worker-owned companies to build electric and hybrid electric vehicles; none may use internal combustion engines in any way.

So, what, steam hybrids?

#22 ::: y ::: (view all by) ::: December 10, 2008, 12:19 PM:

Oh, there is just one problem: take it from someone who spent some years working on ANSI and ISO standards committees that the development of industry-wide standards by committee is a hideous time-sink with no guarantee of any useful outcome.

Yes, but I'm still convinced it's better than the alternative--and I say this as someone who has spent some time watching ISO 29500 up close.

#23 ::: Xopher ::: (view all by) ::: December 10, 2008, 12:45 PM:

PO-lice, DEE-troit, and SEE-gars are all Southern pronunciations. The class of people from Detroit who use them are the (cultural/linguistic, not necessarily biological) descendants of poor whites who came to Detroit from the South after the Civil War (and for quite a while thereafter).

Somebody in Grosse Pointe who says DEE-troit? Nouveau Riche.

Or so I learned in linguistics class. But I graduated in 1981, so this may have been debunked.

#24 ::: James D. Macdonald ::: (view all by) ::: December 10, 2008, 12:59 PM:

Interestingly enough, Detroit was (at one time) a major manufacturing center for cigars.

No wonder the police would smoke them. (When they weren't brutalizing unionized cigar workers.)

#25 ::: Brooks Moses ::: (view all by) ::: December 10, 2008, 01:14 PM:

James @21: A prototype of rather vague sorts, according to the comments on the article. Whether it's a prototype of anything more than putting a sterling engine in a car (which can fairly obviously be done) in the sense of providing useful feedback about the practicality of doing so in a production mass-market car -- and, more importantly, what the results of that feedback have been -- is rather less clear.

Sterling engines are traditionally pretty low on power-to-weight and power-to-volume ratios. In any efficient car, excess weight is a problem; in hybrid cars (with two separate drivetrains and a battery pack involved) volume is also very much at a premium. One of the reasons the current Prius is shaped the way it is, I'm pretty sure, is to disguise the fact that it pretty much needs to be a station wagon to have a reasonable cargo area -- and that's using a small internal-combustion engine for the power.

Furthermore, sterling engines, being closed-cycle, require a radiator with capacity considerably greater than their power. Internal combustion engines, being open-cycle, don't require nearly so much; they can reject heat through the exhaust. Large radiators are a significant part of the aerodynamic drag of a modern low-drag car.

My guess would be that a reasonable hybrid car would need an engine that produces around 30-50hp. (That's based on a vaguely-remembered number of about 20hp for sustained highway cruising, and the idea that the engine shouldn't be running all the time. Probably, for best efficiency, you want something at the higher end of that range.) A bit of back-of-the-envelope google-searching finds a "much smaller than current technology" idea for a 50hp-range sterling engine that's based around an inner rotor 28 inches in diameter and 4 inches thick; at a rough guess based on other rotor-based engines, the overall engine is probably going to occupy five or six times that much volume, not counting the radiator. Other googling finds numbers for engine heat rejection to an average car radiator of around 20-25kw; my guess is that thus this will need a radiator about three times the size of one in a typical large car -- which is lots larger than what a hybrid internal-combustion-engine car would need, adding both a lot more volume and some quite notable aerodynamic drag.

Though those numbers are very rough (probably accurate to factor of three or so), they're of a scale where I would be very surprised if they don't eat up all the efficiency advantages of a sterling-cycle engine over an internal-combustion engine, and then some. And the loss of cargo space in the vehicle is quite significant in that "this is probably not commercially viable" sort of way.

I'd be glad to be proved wrong, of course, if someone has more solid numbers or an actual vehicle that's testing production feasibility. But I'll be quite surprised.

#26 ::: Graydon ::: (view all by) ::: December 10, 2008, 01:32 PM:

Raphael @19, Bill @20 --

As Jim noted, Stirling engines; steam engines, too.[1] Methane/air and methanol/air fuel cells.
Those three are demonstrated tech.

There are credible, in the sense of "the thermodynamic math works" suggestions for closed-cycle boron-air [2] and other more exotic things, including the solar->hydrogen->burn hydrogen loop, which is demonstrated tech but involve the horrible problems of handling bulk gaseous hydrogen, but I think those first three are the only ones really worth bothering with.

Going forward, if we're using combustion (I'm just leaving out all the electron tank, pure electric candidates, here), we want to be burning things under three conditions:

  1. high thermal efficiency

  2. fuel derived from non-fossil sources

  3. high efficiency of combustion/low pollutant output

Internal combustion engines (ICE, hereafter) are not good choices for 1 and 3. External combustion engines do much better (Carnot cycle equivalence, continuous burn) for 1 and 3, hence Stirling or steam. Fuel cells do well on 1 and 3 as well, though they have really persistent fragility problems.

ICE power plants are deeply embedded in the industrial infrastructure for mid-to-late 19th century performance reasons; getting them un-embedded will require that kind of flat prohibition.

[1] Pure steam cars are demonstrated tech. I'd want to insist on the hybrid for overall infrastructure reasons -- we're going for the big electron tank happy future, here -- and some performance reasons. For heavy traction applications -- you start it, it stays running for nine days sorts of traction applications; mining machinery, combine harvesters, long haul trucks, etc. -- steam might wind up being the preferred approach.

Also, nothing says "steam" has to be a water working fluid loop, or open. Google "naptha launch" sometime for a Victorian example of an alternative working fluid, one which I do not recommend!

[2] the exhaust is a big box of hot glass, which you drop off at a nuke plant to have the boron cracked back out of it...

#27 ::: Caroline ::: (view all by) ::: December 10, 2008, 01:44 PM:

Xopher @ 23, my boyfriend's parents (both white Detroiters, from steelworking families) don't say those things. Well, I don't think I've ever heard them say "cigar" one way or another. They say "garadge" and "pahtaytah", and his dad says "So I says" when telling stories.

They are currently of the opinion that the automakers brought it on themselves, and they have no sympathy. It should be noted that they left Detroit 14 years ago and no longer have any family members who work or wish to work in the auto industry. However, they have also refused to buy a foreign car for years. The driveway is full of Pontiacs and one Chevrolet.

I don't understand the economics of the situation nearly well enough to venture an opinion on bailout or not. It's pretty clear that the automakers' business model was bad, but as for what should be done about it now, I have no idea. I need to take up reading economics blogs again.

#28 ::: Caroline ::: (view all by) ::: December 10, 2008, 01:52 PM:

(P.S. Xopher, I also cannot give a good analysis of where my boyfriend's parents originated, or what cultural/linguistic roots they have. They were born in or near Detroit, I believe, but his dad's family moved there from Wisconsin and I couldn't tell you where his mom's family moved there from, but I can tell you that she is biologically related to Appalachian whites, which does not prove anything about her linguistic roots. So this is observational evidence, not intended to attack your thesis above.)

#29 ::: Graydon ::: (view all by) ::: December 10, 2008, 01:57 PM:

Brooks @26 --

The current tech Stirling engine application is in solar dish thermal; they're getting 25 kW from a 380 CC, 4 cylinder engine, at about 30% peak solar conversion efficiency. (They're also running on a really hot hot side...) One of the tricks is using compressed gaseous hydrogen, instead of air, as the working fluid. It needs topping up occasionally as some escapes, but this is apparently not a major issue. (The solar guys have been running their test plants for a decade+ at this point.)

That's over the 30 horsepower bottom end you give, and somebody, somewhere, is tooling up to produce at least thousands of the things, given the scale of the solar projects going forward. So there is some design and manufacturing knowledge out there.

Getting current mass figures, or power to weight, is harder; old style air is something like 0.5 W/kg, which is not on. You may find this NASA paper of interest. They got working cars out of Stirling engine direct drive in the early/mid eighties. I really don't think a good design team with a mandate for a Stirling/electric hybrid power pack is going to find it all that tough.

#30 ::: Graydon ::: (view all by) ::: December 10, 2008, 02:08 PM:

Ahha --

Actually reading the paper from the beginning, that pernicious habit, gives:

  • 3.35 kg/kw (so the 40 kw engine that beats the 50 horsepower requirement is 134 kg)

  • 17.5 km/L (41 miles/gallon) in a 3000 lb car

  • 1,200 USD if 300,000 are produced/year

For a working, EPA-tested, automotive Stirling engine, developed in a DOE project that started in 1978 and ended in 1986. I refuse to believe that a team with access to modern design and modeling tools couldn't do substantially better.

#31 ::: albatross ::: (view all by) ::: December 10, 2008, 02:16 PM:

Magenta #16:

The same is true of every investment available, every single one. Some people invest all their money in collectable comic books, some in gold, some in Icelandic government bonds. Sometimes, those investments do well, and the investors get to keep the extra money made. Sometimes, they do poorly, and the investors lose their money. As long as we have investment markets, we will have this sort of situation, in which people can win or lose.

For the overwhelming majority of investments, nobody's talking about trying to help out the people who invested in them. Instead, those investors are expected to take their lumps in the market, just as they took their profits when the market was doing well. Why are car companies any different? Why should we prop up pensioners' investments in GM stock, but not gold or comic books or Icelandic government bonds?

#32 ::: David Dyer-Bennet ::: (view all by) ::: December 10, 2008, 02:34 PM:

As Bill Higgins pointed out on LJ, the person overseeing the auto industry bailout really ought to be labeled the "autocrat".

#33 ::: Brooks Moses ::: (view all by) ::: December 10, 2008, 02:50 PM:

Graydon @29: Hmm, interesting -- thanks for the link! Those numbers do sound a good bit more reasonable -- and the engine size looks smaller than I'd have guessed, too; it at least fits reasonably nicely in the Celebrity engine compartment, and uses a stock-sized radiator (with extra fans).

The key numbers there seem to be that they got comparable-or-better performance than a stock Chevy Celebrity with the engine retrofit, using the stock engine compartment holding an approximately 80-hp sterling engine, and got 41 MPG vs. 31 MPG for the stock internal combustion engine. It did weigh 100 pounds more than the stock engine, which also ends up showing up in the cold-start costs (about four times that of the internal-combustion engine, which is considerably less than I'd feared).

I won't say that I'm convinced, but it does seem a lot more reasonable than I'd estimated.

#34 ::: Terry Karney ::: (view all by) ::: December 10, 2008, 03:19 PM:

albatross: I think the reason has to do with the (hard to believe figure) that one in ten jobs in the US depends on the automobile industry.

If we lose, goes the argument, the direct cashflows that provides, and the idirect cashflows as well, the economy will fall, not just stagger from the blow.

Comic books, bad. Citigroup, bad (and Fred Clark did a good job of explaining why/how Citigroup's layoffs condememned them for utter failures, no matter how one tries to spin it, but I digress).

Automakers, worse than bad.

That's how the argument goes. The Bush Administration also sees a way to make hay (they want the "czar" to be able to force concessions, anyone going to bet the concessions forced from unions will be equitable to those forced from the companies? Anyone want to bet those union concessions won't be used as leverage to force other unions concede similar items?).

#35 ::: Graydon ::: (view all by) ::: December 10, 2008, 03:26 PM:

Brooks @33 --

Theory informs, practice convinces. Not going to argue with that!

Do note that this was a small project, with what we'd presently consider no computer modeling support and a limited budget, for an engine system way further down the development and optimization curve than either spark or Otto engines. And that all the problems -- high rpm torque fall off, start energy costs, and relatively sluggish acceleration -- are all neatly addressed by the hybrid scenario.

So I'm pretty confident that this is a viable power plant path for automotive engines.

#36 ::: Lee ::: (view all by) ::: December 10, 2008, 03:38 PM:

Xopher, #23: My experience says the same. I never knew anyone who used those pronunciations, and I would have labeled them Southern immediately if I hadn't taken it for satire. Nor did I hear anyone using them when I was up there for a visit a couple of months ago.

OTOH, the major street Cadieux is universally pronounced "CAD-jew" all over the area. Go figure.

#37 ::: albatross ::: (view all by) ::: December 10, 2008, 04:46 PM:

Terry #34:

I was talking about investors, not employees. However, I don't buy the figure--I agree with you that it's very hard to believe. Do you have a source for it? My guess is that they're summing up everyone who works for any company involved in the domestic auto industry, but I'd love to see where it comes from.

Digging around a bit, I found this table from the BLS (US government site). It shows all manufacturing jobs in the country accounting for only about 9.4% of jobs. (By contrast, 9.9% is healthcare and social services.) It would be really remarkable, to me, if the Big Three going under could take down more jobs than the entire manufacturing sector of the US economy.

Similarly, the CIA World Factbook lists US GDP in 2007 at about 13.8 trillion (1.38 x 10^{13}) dollars. Some quick Googling gives total 2007 revenue figures of $181 billion for GM, $174 billion for Ford, and $49 billion for Chrysler. Added together, that's $404 billion in revenue. That is about 3% of total US GDP. Now, this isn't any really meaningful comparison (apples and crankshafts, perhaps), but it gives you some sense of why the scale doesn't work. There's no way the Big Three are supporting a bigger fraction of the economy, year in and year out, than their total revenues (just the money that comes in, ignoring all the costs).

I don't know what the real impact of the Big Three disappearing entirely would be, but I don't buy that it would take out 10% of Americans' jobs. Of course, bankruptcy doesn't mean going away entirely--that's the whole point of bankruptcy. (And God knows what kind of weird multipliers are in play here--the housing bubble collapse wasn't remotely big enough to explain the hit the global economy took.)

More fundamentally, the oncoming recession is going to lead to a lot fewer cars being sold under almost any conceivable circumstances. That means that many people involved in making, selling, transporting, storing, and financing those cars are going to be losing their jobs in any conceivable environment. Even if we bail out the Big Three, as we almost certainly will, dealerships aren't going to pay salesmen who aren't selling anything, nobody's going to pay truck drivers who don't have a load to carry, the Big Three aren't going to order parts for cars they aren't making because they aren't able to sell them (and so their parts suppliers will be laying people off or closing their doors themselves), and the financing people who are now able to find neither anyone willing to lend money for car loans nor anyone willing to borrow money to buy a car will find themselves without work. Nothing short of having the government buy the cars (and destroy them) will save *those* jobs. But then, those folks don't have lobbyists and PR/media people and congressmen on speed-dial who always take their calls, so it's not like they're important or anything.

#38 ::: albatross ::: (view all by) ::: December 10, 2008, 04:59 PM:

Graydon #30:

I'd like to see us give the right incentives for creating this, but I don't think writing the already-decided-upon best technology into legislation is very likely to lead to an optimal result. Admittedly, tha last couple decade haven't exactly been a commercial for leaving the Big Three to their own devices in terms of designing energy efficient cars. But it seems to me that the legislative process is more likely to give us something more like corn-based ethanol (supporting politically connected industries and farm states) than like some optimal solution.

Honestly, none of us knows what the optimal solution will be. There is a huge distance between getting something working in a lab and getting it working in the field, another huge distance from there to getting the production working with reasonable quality and cost, another to getting a final product that works out well for consumers in terms of the stuff they care about (which includes fuel efficiency, safety in an accident, cargo space, convenience of refueling, appearance of the car, car performance, maintenance costs, reliability, and many other things). When all that has been hashed out, we may end up with IC/battery hybrids, or fuel cells, or Stirling engines, or some other weird thing none of us has ever heard of. (I wish someone would go ahead and invent Shipstones!)

#39 ::: Brenda Kalt ::: (view all by) ::: December 10, 2008, 05:19 PM:

...until Obama gets into power...

Ugh. That rubs me the wrong way. Patrick, would you be willing to reword the phrase as until Obama is inaugurated? Power in the U.S. comes from the Constitution (to which I hope the new administration will pay much more attention than the current one does). To say "gets into power" de-emphasizes something precious.

Just sayin'.

#40 ::: Graydon ::: (view all by) ::: December 10, 2008, 06:07 PM:

Albatross @38 --

I'm not specifying Stirling engines; I'm specifying not internal combustion engines, and very little else other than "you will have electric motor voltage standards, dammit". (I then got into a discussion about how Stirling engines were a viable choice for a hybrid.)

If I was doing this as a formal functional spec it would be a lot longer, and would address fuel, but that's a whole nother headachey thing.

ICE doesn't have a good solution for pollutants or thermal efficiency; lots of other technologies do, but there's an incumbency problem. Times of crisis are a good time to deal with technology incumbency problems.

The pollutants kill people, lots of people, every year. This is a real problem that catalytic converters, etc. do not solve, just ameliorate somewhat. So I figure it's a good opportunity to make some lemonade.

The conviction that government involvement inherently makes things worse is something of a self-fulfilling prophecy and wildly unhelpful.

#41 ::: Alex ::: (view all by) ::: December 10, 2008, 06:22 PM:

Question: Is the Chevy Volt PHEV going to be as good as the Rolls-Royce RB-211 series jet engines?

The answer is your answer.

Meanwhile, if you decide to kill North American GM and Ford, can we keep Ford of Europe, Vauxhall-Opel, Saab and friends, all of which make sensible cars? Kill the head and the body will die, they say.

It's also true that the GM retiree benefits trust that the UAW runs had enough money in it to buy GM at the share price of six months ago; what it would be like now, well. You could call it, I dunno, People's Car...

#42 ::: miriam beetle ::: (view all by) ::: December 10, 2008, 06:44 PM:


You could call it, I dunno, People's Car...

is that an intentional or unintentional nazi allusion? i am not offended or anything either way, but it certainly changes your comment...

#43 ::: Gag Halfrunt ::: (view all by) ::: December 10, 2008, 08:02 PM:

Alex @ 41:

Meanwhile, if you decide to kill North American GM and Ford, can we keep Ford of Europe, Vauxhall-Opel, Saab and friends, all of which make sensible cars? Kill the head and the body will die, they say.
I've read quite a few online discussions about the bailout, and hardly anyone seems to be aware that Ford and GM are global businesses or that their foreign operations are doing ok (or were before the credit crunch). A lot of people suggest parachuting in managers from Toyota or Mazda or wherever, as if they couldn't adapt to making smaller cars without help from outside. (Never mind that a lot of Mazdas are based on Ford platforms anyway.) And then there are the folks who think that the Big Three should be taken over by the Japanese, or by electric vehicle startups like Tesla Motors.

#44 ::: CHip ::: (view all by) ::: December 10, 2008, 09:52 PM:

Raphael@19: Can you be more specific about what you see as subsidized roads? In theory the ongoing maintenance is paid for by the taxes on gasoline; IIRC the original construction costs weren't directly funded, but then the govt. didn't fund the original construction of the railroads they took over either.

#45 ::: Jaws ::: (view all by) ::: December 10, 2008, 10:03 PM:

One of the problems with the Stirling-cycle engine is that nobody knows how to maintain it. It's one thing to say "change the cars over to a different power train"; it's entirely another thing to train all of the mechanics, parts suppliers, etc. on the new systems, let alone figure out what is actually going to break in practice. We won't learn that from the solar-power plants, because putting a mechanical device inside something that moves is... different.

My own preference would be for a small, high-bypass turbine running a combination generator/storage system with power from electric motors at the wheels. That would still be a logistical nightmare, but it's a nightmare that would not require extensive retraining (turbines are pretty darned simple).

The other thing that we may need to do is reconsider the form-factor of vehicles. Putting the mechanicals in the front, the passengers in the middle, and the baggage in the back may be traditional, but (memories of the Corvair and Slug-bug aside) is quite inefficient, particularly for heat dissipation.

#46 ::: j h woodyatt ::: (view all by) ::: December 10, 2008, 11:27 PM:

Patrick writes: "I am, on balance, in favor of a narrowly-targeted deal that will keep the Big 2.5 barely alive..."

Here's what I would prefer to see: federal loan guarantees for a portion of the bridge loans the automakers need to get through Chapter 11 instead of Chapter 7. Not a guarantee for the whole amount. Just enough of it to make the usual sources of such funding, which have all gotten quite stingy of late, to come through with the kind of package the automakers would have otherwise gotten if it weren't for the crisis in the financial markets. That usually includes some very hard-headed turnaround artists. I don't want government committees doing 5-year plans for the American auto industry.

The whole reason we should be considering federal assistance to the automakers is to keep them from being utterly liquidated. If we let them go down those tubes, it will mean flushing a damned big slice of the American economy with them. Nobody should want that— even the Republicans currently threatening to force the issue in Congress.

#47 ::: Linkmeister ::: (view all by) ::: December 11, 2008, 01:17 AM:

I don't quite buy the 10% figure, but you do have to consider that there are innumerable parts suppliers to the auto companies, many of which also sell to the aftermarket. Next time you need a new turn signal lamp and head to the local Napa or Redline auto store, think about that. For that matter, if you've got a newish car still under warranty and the local dealer goes under, where are you going to go with that car?

Also, there are who knows how many restaurants and bars which cater to auto plant workers, both white- and blue-collar, in all the cities which house those plants. There's a heartbreaking story which aired on the CBS Evening News tonight about a restaurant which had to shutter its doors and throw 20 or 30 people out of work because its customers stopped coming when the RV plant in town closed.

That isn't an isolated instance, I'm sure. Heck, out here we've seen several high-profile restaurants go under recently, and we don't even have an auto plant.

#48 ::: Alex ::: (view all by) ::: December 11, 2008, 04:50 AM:

41: It's an entirely intentional Volkswagen allusion. Any Nazism in it is entirely the result of history.

It's also amusing that the UAW bennies trust has almost the same acronym as the East German one for a nationalised industry (VEBA; VEB.)

#49 ::: Wrye ::: (view all by) ::: December 11, 2008, 07:33 AM:

In terms of engines, it's even possible that internal combustion might be fine: I saw Gwynne Dyer give a talk on his excellent new book Climate Wars on Sunday (which is well worth a read even if you know a fair bit about Global Warming, as he's using the newest data possible to make his arguments), and one technological possibility he mentions is new chemistry-based atmospheric scrubbers that can draw CO2 out of the atmosphere, which can then be combined with Hydrogen to make a carbon-neutral octane fuel. There are also biofuel possibilities such as Algae that aren't as much of a disaster as corn ethanol, too.

I don't know if it will pan out, but the point is it's a bit early to know what will be the best solution(s). All we know for sure is that something has to happen, or a combination of somethings, and fast, as we need to get our emissions down to zero by 2050 or so.

The book is great: Dyer's clear that the global warming situation is worse than is generally thought, but (on the bright side) also clear that governments and scientists the world over are much more aware of the problem and the consequences of failure than they let on in public. Just don't read it before bedtime or you won't be able to sleep....

#50 ::: Earl Cooley III ::: (view all by) ::: December 11, 2008, 09:31 AM:

If corn-based biofuel tears a chunk out of the damned corn sweetener market and leads to a revitalization of sugar cane farming, then that's one for the plus side. Of course, that might mean that fewer people will feel the need to smuggle Mexican Coca-Cola into the states. heh.

#51 ::: Raphael ::: (view all by) ::: December 11, 2008, 10:00 AM:

CHip @ 44, at the moment, I try to use the same standard to decide wether something is a "subsidized road" that albatross apparently uses to decide wether something is a "subsidized railway", so I'd say that a road is a "subsidized road" if it would probably either fail or have to be maintained at a much lower cost if it was privately operated and financed through tolls.

#52 ::: albatross ::: (view all by) ::: December 11, 2008, 10:07 AM:


Right, but you have to account in there for jobs that will or won't be lost regardless of a bailout. If car sales tank because the economy tanks, lots of jobs will be lost regardless of any bailout, unless you think car lots are going to be paying commissions to salesmen who aren't selling any cars, or hiring truck drivers to not deliver any cars (because the ones on the lot haven't sold yet). A bailout will presumably save very few of those jobs. Similarly, if GM builds half as many cars next year as this year, the bailout of GM isn't going to keep its captive suppliers from having layoffs or going bankrupt. (But they probably have fewer lobbyists on staff, so maybe this isn't as big a problem.)

And a GM bankruptcy may make things even worse for GM salesmen and delivery drivers and finance people and such, but it's hard to imagine that it will cause many people (other than those who've lost their jobs as a result) to decide not to buy a car at all. To the extent that a GM bankruptcy convinces people to buy a car from Toyota or Ford instead, a different set of salesmen/delivery drivers/finance people will get more work, and it's a wash. To the extent that those cars are built here, the production/supply jobs lost from the Big Three are gained at Toyota or Honda or whichever other company. (And to the extent that the cuts from Big Three production was happening in Canada or Mexico, those jobs aren't lost in the US.)

The real missing term in this equation is the cost of the bailout. The whole country (really, the whole world) is working on the assumption that deficit financing has no consequences or costs. With that assumption, the only question we need ask is what the long-term effects of a nationalization of the Big Three will be. I suspect those will be overwhelmingly negative in the long run, as lots of employees are kept working on cars people don't want at the prices necessary to keep those people building those cars, as a new bureaucracy and power center arises in the office of the Car Czar, as Congress and the President impose the demands of the most generous campaign donors, most politically connected players, biggest vote blocs, etc., upon the car industry.

But I have to admit that I also don't buy the deficit-financing-without-consequences premise. What we're doing right now is as unsustainable as refinincing the house every three years to take out and spend the bubble-inflated equity you've built up. Sooner or later, this will go very sour on us. None of us knows when that will happen, what conditions will lead to such a change, or what the change will look like. I don't buy the implied premise of the current panic-mode bailout of GM and Chrysler, that bailing out the auto industry is obviously and inherently safer for the economy than deficit financing the large amounts that will ultimately be needed to bail them out, and following that with all the other bailouts that (having bailed out the basically smarmy and evil and arrogant financial and auto industries) will become politically inevitable.

This bailout is being sold as the safe option, largely by folks who stand to gain from the bailout. It's not.

#53 ::: albatross ::: (view all by) ::: December 11, 2008, 10:13 AM:

One picture of a bailed-out but dying industry. Those people also shop at restaurants, pay tuition and rent and mortgages, and all the rest, and that industry also supports many companies that supply goods or services to them. It's just that the recipients of the bailout are rather less sympathetic, at least to me. But it's the same sort of complaint, right? "The whole world told me what I was doing was valuable, but now it turns out that it's not."

#54 ::: Serge ::: (view all by) ::: December 11, 2008, 10:19 AM:

Meanwhile, Turner Classic Movies is showing Disney's The Love Bug later this month. I wonder if someone at that studio had a sick sense of humor, way back in the Sixties. I mean, the car's name is Herbie, which sounds like herpes, which is a love bug - or an undocumented feature.

#55 ::: Graydon ::: (view all by) ::: December 11, 2008, 11:20 AM:

Wrye @49 --

The problem with internal combustion is thermodynamic efficiency. This is completely independent of fuel source.

So while the use-liquid-fuel-as-a-battery approach has a lot going for it, we'd still need more liquid fuel if it was being burned in internal combustion engines than pretty much any other technology. Which means that we'd need a lot more make-liquid-fuel plants if we stuck with internal combustion engines.

Meaningful conservation means revisiting technological choices and evaluating them for life cycle cost, not upfront cost. Lightbulbs are a easy example; the 50 cent lightbuld and the lifetime fifty dollars in electricity, or the five dollar lightbulb and the lifetime five dollars in electricity and the fifteen dollars worth of disposal? You're still ahead with the more expensive light bulb, but only if you take a systems view and look at the whole life cycle cost.

Most corporate accounting is set up to prevent that look-at-the-whole-life-cycle-cost thing, and most really significant things (like automobile transport) have the system spread over bunches of participants, which is why there's a role for government in this. None of the individual participants, not even the GM of its glory days with 43% of the global car market or whatever it was, were or are in a position to address fixing the system as a system.

#56 ::: B.Loppe ::: (view all by) ::: December 11, 2008, 12:22 PM:

#49: I'm sure there are all kinds of practical and scienctifical reasons why this wouldn't work, but I wonder: given sufficient miniaturization, could you put the scrubbers right on the exhaust, and have an (almost) closed system?

#57 ::: John L ::: (view all by) ::: December 11, 2008, 01:59 PM:

Roads are hardly "subsidized" in the same way or scope as public rail transportation is. The vast majority of maintenance and construction funds for roads comes from the Federal and state gas taxes, car sales taxes and registration fees, and motor vehicle taxes. That's not a subsidy, those are direct user fees; if you don't drive a car or buy gas, you aren't paying for the roads. It's also a reason why hybrid and electric cars are causing lawmakers to look for other alternatives to the gas tax to raise highway revenue; perhaps a mileage based tax, for example.

The operating budget of Amtrak and other public rail transportation systems, OTOH, comes either out of those same Federal/state gas taxes, or the US taxpayers' income tax payments.

#58 ::: C. Wingate ::: (view all by) ::: December 11, 2008, 03:04 PM:

Construction of most of the western railroads was subsidized by land grants; the railroad got some of the land along the ROW that ordinarily would have gone out through the Homestead Act or some such. (NP was an exception; James Hill didn't want in gov. involvement. Ironically-- or not-- he was the only one not to ever go bankrupt.) Eastern railroads got no subsidies, and the only operating "subsidy" most railroads ever saw was carrying the mails. This really only subsidized passenger traffic, and discontinuance of it went a big way towards bringing on Amtrak. Some of that was political; there were wide areas where rail transport was cheaper, but it was UnCool in the 1960s. By and large, in the 20th century the railroads were treated legally as corporate bullies who couldn't be trusted from one crosstie to the next, whereas trucks were hardly regulated. Besides, the entry cost for a trucking company was (and is) negligible-- after all, all you need to do is buy a truck, not build a highway. Truck traffic is cross-subsidized by cars, to a degree; the cars tend to decide how wide the highway needs to be, but the trucks set the construction standards.

Then we got Penn Central. A classic example of a Really Bad Merger, its collapse threatened to cut off essentially ALL rail service north of Maryland and east of Pittsburgh/Rochester except for the D&H line from the north and the B&O line from the south, both to NYC and neither in any shape to handle all the traffic into the city. So we had the government rescue/bailout, which actually turned out OK in the end. Ironically the long-term outcome was the C&O-B&O-NYC/N&W-Sou-PRR split/merger that everyone thought was the right thing to do in the first place.

Amtrak figures in this as the bastard child nobody really wants to acknowledge. It therefore drags along as half-pork/half-Proxmire-target thing. When you look at the DoT budget, it's practically a footnote, but people act as if it were this huge boondoggle.

#59 ::: P J Evans ::: (view all by) ::: December 11, 2008, 03:40 PM:

The railroads got quite a bit of land; in some areas it was every other section across a width of several miles - ISTR in some places it was a strip 12 miles wide - and are the originators of a lot of cities and towns. (UP is said to be the second largest landowner west of the Mississippi, still.)

#60 ::: clew ::: (view all by) ::: December 11, 2008, 04:50 PM:

Yes, the railroad land ownership in the West was definitive. BLM maybe matches it for area, but the railroads went through the places with water.

There have been several business-as-usual legal scandals about how badly Amtrak has been treated on the rails; several of the comissioners (title?) who were theoretically looking after its interests walked into plum jobs for the freight lines, and at least one of them was caught fining Amtrak for malfeasance committed by a freight line.

Public rail might need to be justified as a public good, but we don't know yet, it hasn't had a fair shake. Also, anecdotally, the lines that are mostly managed by one or a few states are much healthier and less crazy-inefficient, suggesting that passenger rail isn't impossible.

Road travel is also subsidized by zoning laws; anything that gets built, and a lot of what's rebuilt, has to provide extravagant roads. If we required new subdivisions to build rail or trolley access, or even allowed them to build to 1920s road standards, building would be cheaper--especially building densely--and driving less attractive.

Again, maybe driving would beat other systems in a free market, but we really haven't tried to find out.

#56: Recapturing CO2 and turning it back into fuel has to take energy (fuel has energy in it by definition). So you'd have to carry fuel to capture the CO2... and then the CO2 from that fuel would have to be captured so you'd have to carry more fuel... so, alas, no.

Maybe something that captured CO2 but didn't reform it, maybe.

#61 ::: OG ::: (view all by) ::: December 11, 2008, 06:25 PM:

anything that gets built, and a lot of what's rebuilt, has to provide extravagant roads.

I'm curious what you consider extravagant. Also where this extravagance is being required.

#62 ::: Linkmeister ::: (view all by) ::: December 12, 2008, 01:27 AM:

The last-ditch auto bailout compromise failed.

The Asian markets are crashing, and I suspect tomorrow's going to be really awful on all American markets, with no end in sight.

The Republican party wants to see the unions dead at the expense of the rest of the American economy.

#63 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 12, 2008, 02:08 AM:

Linkmeister @ 62

I'm beginning to wonder if the Republican Party doesn't want to see the American economy dead, with the death of the unions as a side-dish. Maybe they prefer a dead economy to a live Democratic administration.

#64 ::: Alex ::: (view all by) ::: December 12, 2008, 05:48 AM:

It appears that the largest fraud in history has just been discovered.

#65 ::: albatross ::: (view all by) ::: December 12, 2008, 08:21 AM:


It could also be that they disagree on principle with the bailout, or that they dislike the terms, or that they don't buy the very conveniently timed claims of when GM and Chrysler will go under without help, which, by pure co-incidence, just happens to put huge pressure on a lame duck session of Congress and president to give them piles of money.

I suppose there will be some deal-making behind the scenes, and those principled "no" votes will be changed once an appropriate amount of pork of the right flavors is added to the bill. But who knows, maybe the Big Three really can't get the steamroller through congress before Obama takes office.

#66 ::: albatross ::: (view all by) ::: December 12, 2008, 09:26 AM:

Graydon #40:

I'm not assuming that government involvement inherently makes things worse. In many places, it's absolutely necessary (think national defense), and in many others, it's a huge win (think government-funded basic research in science). But I am very skeptical that the US government will manage to take over a massive failing set of companies with long-running quality control, labor relations, and financial problems, and turn them around into profitable, self-sustaining companies that produce an environmentally friendly product. It's not impossible that this could happen, but I think it's massively not the way to bet.

Is there an example of a similar thing done by the US government before which worked out this way? Is there some stock of expertise that the government either has or can hire to achieve this goal?

I expect that the incentives facing politicians will not be compatible with the changes necessary to make these companies self-sustaining. I don't know what those changes will be, but they're inevitably going to be painful for some people--lots of plants will have to be shut down and their workers laid off, contracts with unions, retirees, suppliers, executives, and dealers will have to somehow be renegotiated in barbershop mode[1]. Many people who have built a way of life around the auto industry as it is will have their lives clobbered by these changes. All of these things will be very unpopular, and the goal (self-sustaining companies producing environmentally-friendly cars) will be far, far in the future, while the pain is taken up front. So I think the Car Czar will find them almost impossible to do--if he tries, he's liable to be answering hard questions from Congress every couple months, and will sooner or later be sacked in favor of someone more cooperative.

For examples of this sort of thing, see US farming policy, in which it is simply not possible to get rid of farm subsidies, or protectionist barriers for stuff like sugar. Look at the big push for corn-based ethanol, clearly not at all about energy independence or CO2 reduction, but instead about keeping some big companies and some farm states happy. Look at the weird way Amtrak allocates routes. None of these are the same as what we're talking about, but they all demonstrate some reasons to suspect that the Car Czar's decisions might be driven by something other than efficiency concerns.

[1] Everyone gets a haircut.

#67 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 12, 2008, 10:07 AM:

albatross @ 65

If that explanation were true, why have they fought so much harder against this bailout (currently set at USD 1.4e10), when they rolled over after 3 days on the TARP bailout, which is almost 50 times larger*?

* And will probably yet grow to over a trillion. Hey, pretty soon we'll be talking about real money!

#68 ::: albatross ::: (view all by) ::: December 12, 2008, 10:26 AM:

Hey, just because they were bought and paid for on the last vote doesn't mean they haven't suddenly become Men of Principle just before this vote, does it?

More seriously, consistency in making an error is not a virtue. If you think the previous financial-market-bailout steamroller was a bad thing, then you ought not to use the fact that you incorrectly went along with it as a reason to go along with the automotive-market-bailout steamroller. Otherwise, it becomes impossible to ever back off from mistakes--Hillary Clinton and Joe Biden are never allowed to decide that giving Bush the go-ahead for invading Iraq was really a mistake, and instead must vote for and support every additional bad idea involving Iraq that comes out of the white house.

#69 ::: P J Evans ::: (view all by) ::: December 12, 2008, 10:27 AM:

Not to mention demanding major concessions only from the unions, not from anyone else involved with the big 2.5.

Why do the Republicans hate working Americans?

#70 ::: albatross ::: (view all by) ::: December 12, 2008, 10:53 AM:

Just as an aside, there's a parallel that keeps striking me between the post 9/11 antiterrorism laws and Iraq war runup, and the current financial crisis response.

First, there's a genuine big scary situation that arises. No questioning it--it's huge and traumatic and awful[1]. Second, some interested parties decide that Something Must Be Done, which coincidentally is stuff that directly benefits them, or that they've been pushing for for years. And the political elite and the media decide overwhelmingly that that Something is going to be done, and steamroller it through[2].

Next, other interested groups see an opportunity in the panic and the availability of the steamroller. In one case, it's a bunch of people who want to invade Iraq; in another, it's a bunch of people who want to remake the domestic auto industry. There are some factual claims which are mostly accepted uncritically by most media and politicians (Saddam has WMDs, Saddam has close ties to Al Qaida and other terrorist groups, Saddam is a threat to the region and the US / GM will be bankrupt by Christmas unless Congress acts now, bankruptcy is "not an option" and would inevitably destroy the companies, a bailout will allow the Big Three to get back on their feet, bankrupcy of the Big Three will destroy the economy). The big media companies overwhelmingly echo these, and very rarely call them into question.

Soon, diverse interests are being formed into an invade-and-remake-Iraq or bailout-and-remake-Detroit package. Last time, we had people dreaming about how to crush Islamic extremism, build a functioning democracy in Iraq, make an example to terrify recalcitrant Arab nations, save the Iraqi people from Saddam's brutal regime, get access to a stable base in the Middle East, control massive reserves of oil, etc. This time, we have people dreaming about how to crush the UAW's stranglehold on the Big Three, make an example to terrify recalcitrant corporate management, rebuild a healthy economy in Detroit, redesign the industry to make fuel-efficient cars, push along some desired technological or social changes (getting rid of IC engines, forcing the creation of smaller worker-owned companies), get Americans buying American cars again, get off foreign oil.

And that whole coalition is now behind the bailouts, even though it's f--king obvious to anyone paying attention that most of that coalition's goals will be discarded as soon as the bailout is secured[3]. All we need now is to name Paul Bremmer the Car Czar, and have him send all the UAW workers home with their tools, and the parallels will be just about perfect.

[1] At a personal level, the 9/11 attacks were viscerally scarier. But honestly, the global financial crisis is to the 9/11 attacks as metastatic cancer is to a really nasty bout of the flu. The skyscrapers aren't crashing down again and again on TV, and a massive pumping in of money keeps the stock market from plummeting quite so spectacularly (instead it oscillates wildly with a broad downward trend) that it shows up as the front page story every business day. But the financial crisis is way, way scarier.

[2] Note that the way the financial bailout was done, the voters were explicitly never given any way to have a voice about it. Both parties supported it, both major presidential candidates supported it. Who were you going to vote for, to vote against the financial bailout? By contrast, the Patriot Act and related things were quite popular, and voting against them was a mark of considerable courage.

[3] I don't know if the UAW and related groups of workers will win, or Big Three management, or investors, or creditors, or retirees. But I'm damned sure it won't be people who want highly fuel efficient cars. Those people have neither the votes nor the money to command the kind of attention the other groups have.

#71 ::: David Harmon ::: (view all by) ::: December 12, 2008, 11:55 AM:

albatross @#70:

[3] I don't know if the UAW and related groups of workers will win, or Big Three management, or investors, or creditors, or retirees. But I'm damned sure it won't be people who want highly fuel efficient cars. Those people have neither the votes nor the money to command the kind of attention the other groups have.

Actually, this is surely why the automakers are trying to get this done before Obama takes office -- that is, to try and forestall the much more meaningful demands he'd make!

The real question is why the Republicans are now blocking it... It could be the not-enough-pork thing, or just not enough bribes from the auto industry. They might be trying to lay blivets for Obama, or it could be something stranger....

Bruce Cohen @#63:

I'm beginning to wonder if the Republican Party doesn't want to see the American economy dead, with the death of the unions as a side-dish. Maybe they prefer a dead economy to a live Democratic administration.

I've thought for a while that they've been methodically trying to destroy every strength or power of America that doesn't answer to them. And they only have a month left to trash things.....

#72 ::: Linkmeister ::: (view all by) ::: December 12, 2008, 03:03 PM:

David Harmon @ #71, "It could be the not-enough-pork thing, or just not enough bribes from the auto industry."

Um. From today's LA Times:

Since 1990, the auto industry as a whole -- including suppliers, dealers and manufacturers -- has cut $100 million in checks to Republicans, compared with just $34 million to Democrats.

And yet, who's been fighting to save the auto industry?

This is a union-busting effort by Southern Senators, many of whom, not coincidentally, have foreign auto plants in their states. States, incidentally, which have given tons of tax breaks to those plants to get them to locate there, so the argument that tax money shouldn't be used to subsidize industry is a hypocritical lie.

#73 ::: Earl Cooley III ::: (view all by) ::: December 12, 2008, 05:06 PM:

P J Evans #69: Why do the Republicans hate working Americans?

Because, as a category of venal slackwits, they are also cynically evil, and deserve the maximum penalty allowed by law for voting incorrectly: union busting during wartime is a form of felony war profiteering.

#74 ::: Terry Karney ::: (view all by) ::: December 12, 2008, 05:49 PM:

John L: The vast majority of maintenance and construction funds for roads comes from the Federal and state gas taxes, car sales taxes and registration fees, and motor vehicle taxes. That's not a subsidy, those are direct user fees; if you don't drive a car or buy gas, you aren't paying for the roads.

Unless you buy things which travel on those roads. Unless you are paying a sales tax increase to pay for bond measures to improve those roads.

Unless you live somewhee that a road has been privatised, and the state has been enjoined from, "competing" (which happened in Calif. Riverside county wanted to improve a road, they were forbidden, because it was "competition").

Unless you live somewhere bonds to improve roads were passed and the money to pay the bonds was removed from the general fund.

A lot of secondary costs for roads come out of monies which aren't the direct gas taxes.

Re rails: I recall waking up one morning spitting mad because of what the SecTrans was saying, IIRC it was along the lines of, "We are going to change how we run Amtrak to make it more efficient. We will pay to maintain the rails, but the cars and operating costs have to come out of revenues. If a place wants the trains to stop, they will have to pay for it, or the train will just roll on by.'

Since Amtrak doesn't own any rails it was just a grant of billions of dollars in roadbed maintenance to the railroads; with no reciprocal obligations to let Amtrak have anything for it.

#75 ::: Allan Beatty ::: (view all by) ::: December 12, 2008, 07:35 PM:

Albatross @ 70: Best post ever on this topic.

#76 ::: CHip ::: (view all by) ::: December 12, 2008, 11:36 PM:

Jaws@45: turbines are pretty darned simple

In theory maybe; according to a recent Smithsonian Air & Space, not practically. They discussed people who were trying to make a jet engine small enough for a 4-seat plane, and having lots of trouble; even granting that airplane engines have higher standards (e.g., because you can't just pull over when one fails), I'm not convinced mass production could get a reasonable cost and reliability.

I know there have been really small turbines, e.g. the powerplant for the BD-5J (seen at airshows, and flown by Bond in Octopussy -- but I recall the 5J was a lot more expensive than the 5 (powered by an IC engine).

#77 ::: Graydon ::: (view all by) ::: December 13, 2008, 12:17 AM:

Chip --

Lots of people have used de-rated cruise missile engines; there's even at least one motorcycle conversion to direct turbine power.

Turbines in automotive applications have problems; slow throttle response, no useful idle speed, really hot exhaust, and loud. Turbine-electric would deal nicely with the slow throttle response; the others are not trivial problems.

It's possible a turbo-compound engine would be a better approach than a pure turbine, but those still have thermal efficiency problems compared to any of the Carnot-equivalent cycles.

#78 ::: Lee ::: (view all by) ::: December 13, 2008, 12:43 AM:

David, #71: It's union-busting, pure and simple. The latest round was scuttled by the Republicans because the UAW wouldn't agree to drastic pay cuts for its members.

Note that the financial firms got an order of magnitude more, with virtually nothing in the way of terms or conditions. White-collar industry? Sure, here's your money, no problem. Blue-collar industry? Sorry, can't give you anything unless you screw over your employees.

#79 ::: Linkmeister ::: (view all by) ::: December 13, 2008, 01:48 AM:

Lee @ #78, speaking of the relative nature of the financial industry v. the auto industry, you'll appreciate this quote:

Washington will bailout out those who shower before work but not those who shower afterwards.

That was Leo Gerard of the United Steelworkers, commenting on the union's blog a while back. More here.

#80 ::: C. Wingate ::: (view all by) ::: December 13, 2008, 08:13 AM:

re 74: I'd like to hope that the SecTrans was talking about commuter rail service in the Corridor, as that's the only context in which those remarks make the least sense. But, um, nah....

There's another big hidden subsidy to the highways: property taxes. Or rather, that there aren't any. The railroads do pay property taxes.

The Conrail rescue does provide something of a success story, but not a particularly relevant one. Penn Central's biggest problem (and for that matter four of the other five lines folded into Conrail-- the LH&HR's big problem was that, split in half and about to be surrounded, it no longer had a reason for existence) was regulatory: it couldn't easily shed lines or change rates or in fact make any large changes of business without getting various regulators involved. It took a lot of rebuild money, route rationalization and two deregulations to get it back on its feet, and they had L. Stanley Crane to run the thing. I don't think the automakers can be fixed in anything like the same way.

OTOH, the first Chrysler "bailout" worked. However, the damage to be overcome was a lot less, and they had Iacocca, who was chock full of ideas that Ford wouldn't let him try (in particular, the minivan).

And while we're talking pork, let us not forget Harley's Hornet. The original Amtrak routes included a DC-Parkersburg (WV) train which made no traffic sense whatsoever. They even put a turbotrain on it, which was completely pointless. But Harley Staggers (D-WV) was chair of the house Interstate and Foreign Commerce committee, so....

#81 ::: CHip ::: (view all by) ::: December 13, 2008, 08:31 AM:

references for #76:
November 2005
March 2008

Graydon -- adapting surplus, or actually paying list? And were the motorcycles showy crotch rockets or something vaguely practical?

I know about the high idle; the 5J had clamshells on the back not for braking but because the minimum thrust was way too high for taxiing. There was a strong belief during its heyday that one of its crashes (of a borrowed plane with an unfamiliar pilot) involved the pilot pulling on the thrust-block handle instead of the gear-extend. (They were both like modern automobile parking brakes, one on each side of the pilot, apparently without the sort of obvious-to-the-hand shape differences between gear and flap handles on conventional planes.)

#82 ::: Craig R. ::: (view all by) ::: December 13, 2008, 10:53 AM:

The Auto industry execs immediately said they would go to $1.oo / year salaries.

The financial industry complained about oversight of industry salaries and bonus (including one dweeb having the effrontery to tell citigroup he should get a multi-million dollar bonus because his contribution to his failed company was to get Citigroup to buy it)

The auto industry employs a unionized workforce that has fought tooth and nail for fair wages and equitable benefits.

the financial industry has a workforce that will either get 6-or 7-figure bonuses when cut loose or
(for most of them) they will be turned out from their minumum-wage, minimum-benefit jobs with a "too bad, guys"

The financial industry gave really big bucks to the GOP "conservatives" behind deregulation.

The unions gave their money to Democrats.

So, yeah, which group of politicians decided that the sticking point was worker's salaries? the rank and file *line worker's* salaries?

The ones who scream classism everytime they don't get their way.

The GOP.

May they rot in a new, lowermost circle of Hell.

If the big 2.5 go under,that is an immediate 500,000 workers on the street.

500,000 people collecting unenployment, and soon, because jobs for highly-skilled workers outside their skillset are few and far between, those 500,000 will be on the welfare rolls, and added to the medicare/medicaid rolls.

And because the companies won't be solvent anymore, the retirees with defined benefit plans will be SOL. And because the pension provisions won't be paying the medical insurance, those retirees will be on medicare/medicaid. And welfare (or are you going to import a couple of thousand ice floes to send them off on?)

Then add in the cascade effect of the companies that depend on the auto industry.




As in the financial companies it wasn't the rank and file workers or the customers who f****d up, it was the management, and they still have their cash.

In the auto industry it wasn't the workers, but bad decisions on management. And the workers and customers will suffer if it fails.


#83 ::: Jason Aronowitz ::: (view all by) ::: December 13, 2008, 11:19 AM:

Thanks to Albatross for some excellent posts.

#84 ::: Raphael ::: (view all by) ::: December 13, 2008, 02:59 PM:

albatross @70

[1] At a personal level, the 9/11 attacks were viscerally scarier. But honestly, the global financial crisis is to the 9/11 attacks as metastatic cancer is to a really nasty bout of the flu. The skyscrapers aren't crashing down again and again on TV, and a massive pumping in of money keeps the stock market from plummeting quite so spectacularly (instead it oscillates wildly with a broad downward trend) that it shows up as the front page story every business day. But the financial crisis is way, way scarier.

Which is one of the main reasons why your comparision doesn't work that well.

#85 ::: P J Evans ::: (view all by) ::: December 13, 2008, 03:04 PM:

The advertising agencies, and the TV and radio stations and magazines and newspapers that run those ads.

#86 ::: Earl Cooley III ::: (view all by) ::: December 13, 2008, 04:56 PM:

Craig R. #82: The Auto industry execs immediately said they would go to $1.oo / year salaries.

If they had said one dollar per year compensation that would have really meant something; salaries are often a token part of the hideous coin executives claim as divine right. Those executives won't be hurting; they can damned well cry themselves to sleep every night on their golden parachutes.

#87 ::: Craig R. ::: (view all by) ::: December 13, 2008, 08:25 PM:

Earl # 86 --

From what I recall, a really big chunk in auto exec compensation is in company stock options.

If that is the case, they really do have a vested interest in seeing the industry survive.

And remember, it was the banks and brokerage houses that bristled at *any* oversight or limitation on compensation for executives.

Remember the esteemed master of the treasury clasiming that the banks et all wouldn't take the money if they had to limit compensation?

#88 ::: Lee ::: (view all by) ::: December 13, 2008, 10:46 PM:

C. Wingate, #80: Calling Iacocca's plan a "bailout" is misleading at best. He wasn't begging for a government handout; what he wanted was government guarantees on the loans the company needed to tide them over while they implemented some fairly major changes. And all of those loans were in fact paid back. Any perceived similarity to what's currently under discussion is delusional.

#89 ::: C. Wingate ::: (view all by) ::: December 14, 2008, 06:38 AM:

Lee, that's precisely why I put "bailout" in quotes, Tom Paxton notwithstanding.

#90 ::: mythago ::: (view all by) ::: December 14, 2008, 11:43 AM:

xopher @23, I'm pretty sure if you're from Grosse Pointe, you're rich(e) of some variety anyway. Detroit has a lot of blue-collar offshoots to the south and wealthy suburbs toward the north; the various Grosse Pointe neighborhoods are among them.

Linkmeister @71 is absolutely correct. And don't think for a minute that the fact that Detroit is a majority black city, with a history of unionization that (despite unions' history of internal racism) have provided many black workers with well-paying jobs, is off their radar.

#91 ::: Paula Lieberman ::: (view all by) ::: December 14, 2008, 12:22 PM:

#70 albatross
I have a relatively fuel efficient car.
It's a 2002 made in Korea Hyundai.
The junker in my yard is a 1990s Ford Festiva or Fiesta (never remember which was which) made in Korea.
The car I had before that was a made in the USA Ford.
I voted with my wallet.
500,000 out of work directly is fewer than aerospace/defense crashes, and the dotcom meltdown, dumped on the streets without parachutes.

I also remember when Glen Cook was trying to get The Book of the South written, and was on paid vacation for more than a year while the factory that was nominally his place of employment, got gutted inside and the innards completely replaced. He described some of the misadventures involved that, such as the failure to bother paying attention to pillars put in over time in the building, sag in the ceiling, etc., the refurbishment used the original blueprints for the building, and despite hundreds of millions of dollars of design work and ordering of machinery and setup, didn't bother to actually survey the inside of the building and take into account any actual measurements.... something that any competent SF convention committee does as a matter of course (Hi, CHip!--CHip's done a lot of measurements of hotel function areas....)

Big companies get dinosaur reactions, and do things like put people on corporate overheard for days, weeks, months, years.... and their expenses rise accordingly.

#92 ::: Lee ::: (view all by) ::: December 14, 2008, 12:32 PM:

C. Wingate, #89: Okay, then we're on the same page. Sorry I misread you.

Mythago, #90: Just because it has the name "Grosse Pointe" in it doesn't mean all the people living in it are wealthy. Grosse Pointe Shores, definitely yes; Grosse Pointe Park and City, more likely than not; Grosse Pointe Farms and Woods, about evenly divided between upper-middle, middle, and lower-middle class. There were a lot of people in those blue-collar suburbs you mention who made more money than my parents (or most of my friends' parents) did. In fact, my parents were stretching their resources to live in GPW because they wanted me to be in that school system, which was a very good one.

#93 ::: Linkmeister ::: (view all by) ::: December 14, 2008, 01:55 PM:

According to a news report I heard on NPR, the government actually made money on the Chrysler "bailout"/loan.

#94 ::: Terry Karney ::: (view all by) ::: December 14, 2008, 07:11 PM:

C. Wingate: No such luck, not only did he say, "Amtrak's budget", but he specifically mentioned something to the effect, "If Topeka wants to pay for a stop, that's good. If they don't, then the trains will just roll right on by."

As to the Chrysler "Bailout"... the other thing they had, which no one much mentioned, was the only plant making the military's new tank, which wasn't just a maintanence contract, but a brand new line, so there was the potential for thousands of them, at who knows what level of profit (cost plus anyone? For tanks which cost millions of dollars per).

Yes, they paid the loans back, but a lot of it was out of money they got from the gov't in the first place.

#95 ::: albatross ::: (view all by) ::: December 14, 2008, 07:37 PM:

Linkmeister #93:

I wonder whether the US government/taxpayer got a good return, given the level of risk involved. If you want to get a loan guaranteed by someone very wealthy, it has to cost you something, to pay them back for the added risk they're assuming. The other side of this is what happened to Iceland, which tried to guarantee its banks' deposits, but simply didn't have the money to back up the guarantee. I believe something similar happened to AIG, who had a big business writing credit protection (aka CDS), though I think the specific thing that pushed them over the edge was that when their credit rating went down, they were going to have to put down way more collateral against all their CDS at once, and they could no longer raise the money to do so[1].

There's an important lesson here for us. If we give too many explicit or implicit loan guarantees, it's quite possible that they'll all come due at once in a big downturn. We need to be able to afford that without wrecking the federal budget or the currency or some other part of the economy.

[1] But I coujld be misunderstanding this, because the story is both complicated and not always honestly told--note that AIG has apparently been doing all kinds of stuff with the bailout money like handing out millions to much of their staff.

#96 ::: C. Wingate ::: (view all by) ::: December 15, 2008, 06:15 AM:

re 94: Chrysler sold the military division during the "bailout". I also have to say I'm not sold on the notion that being the supplier of the M1 tank counts as being bailed out. Someone was going to be building them, after all.

If you're SecTrans, running Amtrak is actually pretty easy. You have two jobs: keeping the money coming, and finding an about-to-retire rail executive who really loves trains to run the thing. The only way managing Amtrak works is to approach it with an attitude of "we're going to do the best damn job we can with what we have". As soon as you start looking towards profitability, which never happens, service drops and people abandon the trains. And you have to have someone who knows trains and knows the other big guys in the business (so he can give them noogies when they start leaving his trains on sidings). Trying to play politics with stations stops is dumb, especially if you're a Republican, because most of the places you can even begin to play that game with are (like Topeka) in firmly red territory. The reality is that the train has to stop every so often anyway just to get the traffic, no matter how isolated the area is. Shelby, Montana is pretty dang small, but the Empire Builder is going to keep stopping there because it's the only way to pick up traffic from Great Falls.

#97 ::: mythago ::: (view all by) ::: December 15, 2008, 10:35 AM:

Lee @92, I know not everybody in Macomb and Oakland Counties is rich; but the Grosse Pointe-named suburbs, overall, are wealthy. (There are certainly working-class suburbs north of Detroit; my mother grew up in one of them.) But one of the reasons that school system was so good was the high-value properties taxed to fund it.

#98 ::: albatross ::: (view all by) ::: December 20, 2008, 11:47 AM:

In case anyone's still looking at this thread, Megan McArdle has a great post describing some of the underlying financial problems of the Big Three (and especially Chrysler and GM; I guess Ford is a bit better off).

Also, thanks to Jason and Allen for their kind comments, and to everyone for some interesting discussion on this. It will be interesting to see where the Big Three go from here....

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