AN INDECENT PROPOSAL

Today, December 5, 2008 Chrysler announced it has hired a law firm experienced in bankruptcy.
--- Yesterday I opened my e-mail and found a news brief that claimed that 61% of the population is against what the press calls a bail-out of the car makers. I tried to analyze why so many are against what generally is accepted as a CONDITIONAL bail-out, I use the term reluctantly. I came up with three main reasons: Frustration, Misinformation, and Emotions.
--- If there is one thing I have learned in my professional life it is that Emotion perpetually interferes with analysis.
--- In todays blog I am going to discuss three points:
(1) the true cost of no bail-out, (2) the combined causes of car makers failure and
(3) the patent situation as one of them.
Before I do, please, give me eleven seconds to explain my background. As MBA and MSEE I am foremost an analyst.
I have consulted companies on a global scale, that is in Japan, Central Europe and the United States, mostly in matters of innovation and corporate reorganization.
I was a consultant to General Motors Opel Division in Ruesselsheim, to Mercedes Benz in Stuttgart- Untertuerkheim, and Honeywells Automotive Division in California.
Now to point one, the true cost of a non-bail-out. According to the Center for Automotive Research, as quoted by CNN-Money, a non-bail-out would result in 2.5 million workers being laid off that receive unemployment benefits.
The New York Times reported that GM workers were paid $70 per hour. That is false. The average base pay for GM workers is $28. To calculate the economic damage the base pay matters most.
--- The economic damage of a lay-off of 2.5 million people has two elements.
First the loss in income, shown on the next table, which amounts to $145.6 billion per year, a significant loss in purchasing power
Next, the cost to the community via unemployment benefits. Based on potentially outdated figures that may be lower than the actual current figures, the average unemployment benefits were $3,118 per unemployed.
Alright then, $3,118 times 2.5 million amounts to $7.8 billion in added damage, that is a cash outlay paid by the tax payers.
--- Lets discuss misinformation, some as in the New York Times case I just mentioned it appears is based on aversion towards Unions. In another case based on political orientation, as here in the case of Senator Shelby of Alabama, a wannabe economist who claims that the doldrums the car makers find themselves in have nothing whatever to do with the downturn in the economy and are solely based upon mismanagement.
I know, I know, it is tempting to follow that argument. But it is only partially true.
First car sales fell when oil prices went through the roof. Second Car sales fell when the economy turned sour. Both events were causal for lack-luster sales.
There is another reason, at the moment, Chevron acting as patent troll, that is having bought the Ovshinsky patent for the sole purpose to prevent car makers from bringing electric cars to market. Let me say this: The purpose of patent law is to protect the inventor and give him a chance to bring his invention to market without being afraid that it would be stolen. The purpose of patent law is NOT to restrain the trade or keep an entire nation dependent on hostile nations for its oil supply. This borders on treason.
Here then again is my indecent proposal:
FIRST change the patent law to the point that a patent is invalid IF HELD NOT TO BRING A PRODUCT INTO THE MARKET or differently worded if held to restrain the trade.
Next, provide bridge loans large enough to allow reorganization, and retooling, but conditioned upon an agreement to immediately commence the electrification of cars. I have argued and shown earlier that retooling is not the monstrous venture some want you to believe. Remember, we talk about installing electric motors in wheels.

Category:

Autos & Vehicles

Tags:

• CAR
• MANUFACTURER
• BAILOUT
• ELECTRIFICATION
• RETOOLING
• BANKRUPTCY
• BRIDGE
• LOAN
• CHRYSLER
• GM
• GENERAL
• MOTORS
• OPEL
• FORD

[josephdupont]

what did Mercedes do when they owned Chrysler?

did they raid the company..

you make good points.

keep up the good work.

[bvongrabe]

That is a good question, or rather a riddle. I forgot how much they actually paid for Chrysler, but I think it was beyond $100 billion, then they sold it for a fraction. In the meantime they let the opportunity slip away. Talkig about incompetence!

[PhotonDrive]

Industry SHILL! Detroit is now EONS BEHIND in energy changeover & WILL NOT CHANGE! They continue to hope that the "Good Old Days" will come back! "Hibrids", "Electrics" they scream: "Yes we will make- we HEAR you!" AS IF THESE ARE THE ONLY POSSIBLE CHOICES! Everything they build is designed to say:"See, we TOLD you that GAS-BURNERS were BETTER!" Shit-heads: NOBODY WITH AN I.Q. more than 100 believes a SINGLE WORD THEY SAY! The "Culture of Procurement"- NAZI TRAITORS EVERY ONE!

[bvongrabe]

I agree that there are alternative choices, Hydrogen, Fuel Cells, to name just a few. Mercedes-Benz has a Hydrogen fleet leased to I forgot who, yet the lacking infrastructure and the cost to set it up will have law makers cringe - their understanding of the meaning of national security is - how can I put the politely - zilch, or translated: zero.

[PanzerDivisionBOM]

The particulars are immaterial - the auto makers competed on the market, and they failed. More money will only postpone their inevitable failure.

If the market is allowed to consolidate the lost resources, then maybe someone will be able to make cars profitably. And if US car manufacture and service truly cannot become profitable, then the resources will be reinvested to meet true demands, rather than illusory ones. Either way, no taxpayers will be slapped with another massive, unwanted bill.

[AdventKingBand]

wanting new friends

seen it yesterday! lets chat 2s

[WolYou]

The problem is, that employees and consumers are seen as two different entities. Each supplier is a consumer and vice versa. Anyway, the entire economic theory is absurd. If one is doing the math, economic growth is only possible if earth is an infinite resource and an infinite garbage can. If one believes that steady growth is possible he is either a fool or an economist.

[WolYou]

Mostly corruption. A system based on profit it a system of corruption. Say whatever you want. This fact remains. Get small and local. Its more fun and more responsibility. Big companies are the end of democracy.

[LastReplaySC]

well said

[PhotonDrive]

Another John McSame talk-alike! WATER ("Hydrogen") has been totally finished for 6 years! They tried to cut platinum content, didn't work: WATER IS UNIVERSAL SOLVENT! Fake premises carried on by "Culture of Procurement"- bribery, fake "new" ideas! It defeated Hitler & it will defeat YOU! Wheel Hubs are REAL: Electric Generators (to replace hibrid gas-motors) are REAL: Photon input (now including nano) is REAL! Millions now being sold for 1/10 price of US (or GERMAN!) car! Just TRY to stop it!