Ford puts China first

Reliance on China is bad, yet companies, spurred by the next quarterly report are too focused on the idea of cheap, that they ignore common sense, they ignore long term thinking and even ignore the best interest of their country, and shareholders, for the sake of that next annual bonus.  Shameful.  Ford is yet another example.

Until we start incentivising longer term thinking, and incentivising pro-American decisioning, this will continue to happen. This does not just affect the companies making these decisions, after a while they become a national security issue.

Ontario Canada goes conservative

A quick follow-up to yesterday's post on conservatism vs. liberalism vs. socialism in Ontario, Canada.  As I suspected, our ruling Liberal party was decimated.  As I suspected, our Hillary-Clinton-sounding-but-way-left-of-Bernie-Sanders NDP socialist party came second, and our conservative leader, tagged as our version of Donald Trump, won a majority government in provincial parliament.

He's pro-business, he's in favor of lower taxes for the middle class, he's hugely anti-government-waste.

I'm looking forward to four years at least of respite from the growth-choking liberal policies that have torpedoed our province.  In his victory speech, Ford did not disappoint:

In an emotional victory speech, Ford thanked his supporters and vowed to make Ontario “once again the engine of Canada.” He also paid tribute to his late brother, former Toronto mayor Rob Ford, who died of cancer two years ago.

“I know that my brother Rob is looking down from heaven,” Ford said, as the crowd erupted in cheers. “He is celebrating with us tonight.”

Ford said his election marks the beginning of an era of economic growth “the likes of which this province has never seen before.” He also reiterated some of his marquee campaign promises, such as cutting gas prices and reducing taxes for middle-income families.

“Tonight we have sent a clear message to the world: Ontario is open for business,” he said, before pivoting to address those who didn’t vote for him.

“In those who didn’t support us, I will work even harder to earn your confidence.”

Maybe instead of dealing with our Prime Minister, Donald Trump should deal with this guy. 

Surprise: Mitt Romney's Against A Brokered Convention

Internal debate is ultimately a healthy thing.  We're not Democrats.

Mitt Romney says a brokered convention would be bad for the Republican party and by Republican party, he means him.

Via Politico;

“Look, if we go all the way to the convention we would be – we would [be] signaling our doom in terms of replacing President Obama,” Romney said on Fox News.

“You’re going to see me getting the delegates I need to become the nominee and we sure as heck are not going to go to a convention. All the way to the end of August to select a nominee, and have campaigns working during the convention?” Romney said. “Why, can you imagine anything that would be a bigger gift to Barack Obama than us not having a nominee until the end of August? That’s just not going to happen.”

Ford Bailout Commercial Pulled, Buyer Stands Firm

You may have heard that Ford has pulled it's bailout commercial. It must have been too political for them, but they've gotten their mileage out of it.  Meanwhile the man in the commercial who spoke his mind did it again.  He spoke out about his beliefs and stood behind his convictions.  I applaud him, slow clap style.

GM is lying to us

I'm not bashing GM because it's Obama's toy now.  Okay, maybe I am.  But that's beside the point.

Check out the fuel economy here;  http://www.chevrolet.com/malibu/

33 mpg highway (you have to click fuel efficiency to get to the number)

Now go to the GM website in Canada; 

http://www.gm.ca/gm/english/vehicles/chevrolet/malibu/compare-options-and-specifications#ui-accordion-header

Click on specifications.

43 mpg highway (30 mpg city, and 34 mpg combined).

Why are the numbers different in Canada than the U.S.? Is GM lying to us?  Are Malibu vehicles more fuel efficient in Canada? Am I simply overlooking something obvious? Just asking.

It doesn't really matter - I'll probably end up buying a Ford - they don't need bailouts to stay afloat.  There's something reassuring about that.

Presidential Unemployment At A Glance

Unemployment by President.  A little comparison of how Presidents have fared with unemployment.  While the issue belongs more in the purview of Congress, this metric does influence Presidential elections.  the graphs below provide some interesting comparison points.

American Muscle

No matter what Toyota makes, American muscle is still more exciting. No matter what eco-friendly blandness the government tries to impose, these cars will still be more exciting than any hybrid, or electric car. Take that Ed Begley Jr.


Forget Chrysler - Save Dodge.




Chevy still rocks




And Ford too

Buying a GM? Think first.

Are you in the market for a car? Would you buy GM right now knowing it is seemingly being run by Barack Obama? The government can't even get the post office right, imagine how badly they'll screw up a car company. Not to mention the fact that getting Rick Wagoner to step down as CEO of GM is heavy handed autocracy on the part of the Obama administration. That's not what America is about. America is about allowing businesses to decide their own fate, free of government interference. That would include providing bailouts, by the way.

Would you buy a GM knowing that it is still suffering under the weight of the crushing legacy costs of UAW pensions and a crippling competitive disadvantage of fully loaded wage rates that will still take time to address despite the re-negotiations?

Don't believe it? Blogging Stocks points out the reality;

For both GM and Chrysler to receive any more federal aid, it was mandated that wage parity had to be reached between the two companies and the U.S. operations of their foreign rivals. Instead of a $70/hour figure for compensation, insurance and fringe benefits, wages would have to approach the $50/hour level.

Indeed, Ford's latest contract with the UAW puts it close to the $50 level, even though Ford has not taken federal bailout money yet. So, it took the impending collapse of the U.S. auto industry for this change to come? If you don't think unions have power in U.S. industry, think again.

With UAW workers making $28/hour at all three U.S. automakers (just base wage), newer workers that are hired to replace retiring ones only make half that. Still, with benefits, foreign companies like Nissan and Hyundai's U.S. operations pay $30/hour and up -- and Ford or GM's entire workforces won't retire overnight. For unions, labor concessions are only the start. Welcome to the global stage, fellas.

And what about those legacy costs? Pensions and benefits for retirees? From the New York Times the following Ford graphic shows the before and after situation, but notice the 20% new workers required to get to that smaller cost. That means the new cost per hour of labor isn't instantaneous. Taking the pensions and retiree benefits off the books will help. But recovery around the corner is still a ways away for Ford and GM (and Chrysler too).

There's an interesting take on it at 538 that argues it isn't a liberal versus conservative issue, it's a today versus the past issue. That's true from the sense the root cause - the UAW and management in the past were willing to kick the can down the road. But the solution can be addressed in a free market way or a government interventionist way. That's where the discussion becomes contentious. What makes anyone think the government wouldn't also kick the problem down the road like it has with Medicare, Medicaid and Social Security liabilities? In fact by offering bailout money the government already has kicked the can down the road.

Back to my initial question - Are you in the market for a car? Would you buy GM right now knowing it is seemingly being run by Barack Obama?

Or would you buy a Ford? The company who did not take bailout money and negotiated the wages down anyway. The company that took steps to prevent a need for potentially filing for Chapter 11 bankruptcy. A company that's trying to be ahead of the curve on the problems the industry is facing.

Or would you buy a Toyota or Honda? As Americans have been doing ever increasing percentages over time. They make what is perceived to be better vehicles, because in the 70's American manufacturers produced a lot of junk. The way back for Ford, GM and yes Chrysler, is not only cutting uncompetitive practices and costs, it's also about rehabilitating their product and their image. They need people to want to buy their product, or even just to consider it as an option and have a reasonable shot at their business.

America is still a democracy. Just because there are no elections, doesn't mean that you can't vote. You can vote with your feet and you can vote with your wallet. And that seems to be what a lot of Americans and others worldwide are doing.

But that ignores that America is the land of the automobile. It ignores that Chevy is like apple pie. It ignores that America has smart engineers and good workers. Do you want to throw all that away because of mistakes that were made and corners that were cut 30 years ago? Or do you believe America can still make cars as well as anyone else? Do you believe that GM and Ford are salvagable?

Do you believe in buying American? Because you can vote with your feet that way too. If you hate government intervention you can still buy Ford. If you don't care but want American manufacturing not to continue dying a death by 1000 cuts, you can buy Ford or GM.

Or you can not care and buy what's best for you and/or your family. That's the American way, and the way of Adam Smith's Invisible Hand.

Those decisions are your own. It may not be a simple call. Weighing what's good for America long term versus what's good for yourself immediately isn't easy to measure. Consider though, that what's good for America long term should be good for Americans long term too. I wouldn't presume to tell you what's best for your own personal situation. That would make me a liberal. I'm just saying an informed decision is always better than a rash one.

Automotive temperatutre check - Feb 23, 2009

How do things look for General Motors/Chrysler/Ford right now? Here's a look at what they could be planning for 2009.



Is GM getting any better at quality? Apparently so if you ask GM. They do appear to have made great strides but only time will tell.



And are they getting greener? Wait, who cares? Not me - I care about their economic viability. I will not get sidetracked by discussions about polar ice caps melting. What should be asked, is what is the industry outlook for 2009?



Not great. Hence the plans to trim down, and the possible talk about bankruptcy protection options.

Conservatism losing steam?

When you get articles in the NR like this one, it makes you wonder if conservatism is a lost cause. Granted Clifford May is a writer for the New York Times, and I'm not familiar with his work, so maybe he's a flaming liberal. But if that's the case, why is National Review running the opinion?

I recommend reading the whole article, however here's two snippets that caught my attention;

You can decrease volatility by reducing demand — by making people “change their lifestyles,” a euphemism for making people poorer. A better way to decrease volatility is by increasing supply.

You can do that by drilling more, for example, in Alaska and in coastal waters. But face two facts: (1) most Democrats oppose drilling and Democrats decisively won the last election; and (2) exploiting finite and limited domestic oil resources does not get us closer to a
long-range solution.

And this;

An added bonus: Alcohol fuels have environmental benefits compared with
gasoline. And wouldn’t you rather be buying your fuel from hard-working farmers,
rather than indolent sheiks, terrorist-sponsoring mullahs, and tin-pot tyrants.

As you probably know, in the U.S. today, alcohol fuel is mostly being made from
corn. As you may not know, the price of corn has fallen almost as far and fast
as that of oil in recent months. Those who claimed that using some corn to make
ethanol was causing higher food prices were either misinformed (any number of
journalists) or lying (those paid to protect oil’s monopoly). The facts are that when corn prices rise, farmers — generally rational folk — plant more corn on
previously fallow land, and put in the additional effort to produce more corn
per acre. So the impact on food prices is negligible.

Further, growing corn is just one way to transform the sun’s energy into liquid fuel. The Brazilians make ethanol from sugarcane and use that in their FFVs — many of which are
manufactured by General Motors and Ford. Dozens of other tropical, third-world
countries could produce sugar-based ethanol — if there were sufficient demand.

Another kind of alcohol fuel, methanol, can be made from crop waste or wood waste, municipal garbage, coal, natural gas and many other substances.

What gets me about this article beside the National Review losing it's mind and printing liberal tripe? Specifically the article assumes a number of erroneous positions.

1. Clifford May buys into the whole global warming agenda. Let's assume for a minute that global warming/climate change is not pure fallacy. He gets into the argument about corn farmers. Yeah, they'd produce more fuel but (a) it ignores the amount of corn they'd need to grow (b) it glosses over the fact that given the limited supply of land, and the limited supply of farmers, that scarcity DOES indeed create a rise in prices - for corn AND the alternative crops that could have otherwise been grown. This is no small point. Crop rises had risen significantly during the oil run-up.

2. The article discounts or ignores short term benefit of drilling. A lot of new oil can be brought on line in less than the 7 years Democrats were spouting as fact. [I'll need to re-locate my sources on that]. Regardless of alternative ways to generate electrical power being developed - wind, solar, or even nuclear, an interim solution to ameliorate the price spikes that we've seen occur. Not to mention that a very significant portion of American oil does in fact come from Canada and Mexico (See here for full details).

“Unfriendly” nations are not our primary source of oil. Only 44% of U.S. oil imports are from members of OPEC, the international oil cartel that is dominated by Middle East producers. Canada and Mexico are the two largest single sources for imported oil in 2007. (Editors note: through 6/08, Mexico has dropped to #3, though this changes seasonally and may revert in 2nd half of year) .

3. Lastly and to me most significantly, he wants government to mandate certain things as a part of the bailout. It doesn't matter what those mandates are, they are wrong. They are lending money, either they will or they won't. Are we to believe that the government, via legislative fiat can make the Big 3 be better companies? Don't the car companies know the car business better than the government? You could argue not, but you'd be wrong. The car companies know what's wrong. That they may not have the stomach to make the required changes is another issue.

But the point is governments DO NOT have the stomach to require the real change, they do not have the understanding to see what is really necessary either. If they did, they'd force Chapter 11 on the car companies. A CAR CZAR? Are you kidding me? Is that supposed to be like a Drug Czar? That worked well :-p

This is socialism!! This is a 5 year plans. And NR is publishing this idea and/or buying into it???
The Big 3 - decades ago made tactical mistakes re: contracts and dealers and strategic mistakes re: product and quality and value proposition of their products. Now they should be saved from their past, but Chapter 11 bankruptcy is the only way to do that. Congress wants plans but any realistic plan involves streamlining dealerships/dealer networks, curtailing the insanity of the UAW and killing unprofitable and brands that can't be salvaged. Congress wouldn't accept that. So its not in the plans. Ergo the plans won't work long term.

Similarly, the CEO don't seem to have the stomach for bankruptcy protection. Maybe it's a not-on-my-watch view they are taking. Punt it to the next CEO. sounds like Congress on Medicare liabilities. Tough measures are needed. It seems Ford might have been best prepared but this needs to be an all or nothing gambit. All in, or fold up your hands gentleman. To put it another way, picture the auto industry as a hospital patient in need of a new kidney. You face the choice of getting a replacement kidney or keeping the patient on dialysis forever. Dialysis is an option in an emergency but it is an imperfect solution. It doesn't work as well as a real kidney. Similarly, the bailout doesn't solve the underlying problem - it keeps the 'patient' alive, but it is not an ideal, long term solution. Eventually the problems will resurface for the auto industry. Would a bailout every 10 years be suitable for you?

Back to Clifford May's point - an electric hybrid or alternative is a better long term solution than reliance on imports. But it's longer term. Fixing this by Wednesday is not in the cards. Having an all-electric-vehicle-America by 2012 isn't realistic either. So why not take that $15 billion (+++ eventually) bailout money and sink it into an independent battery research foundation to be shared amongst the Big 3? Let GM, Ford and Chrysler restructure under Chapter 11, and then come back with access to this shared battery technology. The firm could start out life as a GSE and once it is producing be spun off as a private enterprise. Then the firm could sell licensing to the Big 3 or be bought out by them. In either case, the profits could be used to repay the government funding.

Let's see; No tax burden, competitive salaries with Japanese automakers, streamlined operations for the Big 3, battery technology when it becomes available, and best of all NO SOCIALISM.

Who loses in that scenario? Maybe the UAW workers. But barring repeated future bailouts those jobs are lost long term anyway. Better $40 per hour than $0 per hour. Maybe mother earth loses out by getting more CO2 pollution, but you know what? That's going to happen anyways. When battery technology becomes economically viable it will be used. That's the free market at work. Doing it before then is simply a variation of social engineering and an aberration from efficiency, and logic.

Auto Industry bailout saga continues

This is such basic stuff!

An enterprise system, is a profit and loss system, and the loss part may
be even more important than the profit part. The crucial difference is in what
ventures are continued and which are abandoned. The crucial requirement for
maintaining growth and progress is that successful experiments be continued and
unsuccessful experiments be terminated.

--Milton Freidman

So if GM, Ford and Chrysler are failed experiments, should they not be discontinued? At least in their current form. It could be argued that at a $45/hour all in labor cost, the variables of the experiment have changed and the experiment can be retried. With the permission of the almighty UAW, and their puppetry in the Democratic party, I'd like to suggest that the experiment has indeed failed. If it hasn't yet, wait a few weeks and call me.

Luckily, there is the Chapter 11 mechanism that allows for a restructuring. Yes details would have to be worked out. But no, confidence would not be lost. The airline industry offers examples of restructuring without a commensurate loss of consumer confidence. And the red herring of subsidiary jobs being lost doesn't fly either. People will still drive. People will still need tires, oil filters, windshield, wiper blades, etc. The market is going to contract and people will need less cars and less parts and services if there are less cars on the road. But there won't be. There may be less American made cars (temporarily). But people will still have to use and buy cars. And if a smaller percentage of those parts come from American suppliers (again, temporarily during the restructuring) then so be it.

The pain is coming no matter what. But propping up a failed experiment so that you can do the same thing again in 7 years is the epitome of foolish action. The only thing worse is giving Barney Frank oversight of the whole mess. Alternatively, we can bite the bullet, pay the piper, whatever you want to call it. But what it means, what it requires is that real change be forced on those who have caused and ignored the problem. I'm not without sympathy. I'd hate to see Chevy or Ford disappear forever. I'd hate for millions to lose their jobs permanently. But that's not how it would turn out.

All that said, people opposed to the bailout have lost site of the scope of the issue. The automotive industry cost is a mere pittance. My last tally puts the automotive bailout at $34 billion. That's about $113 per American. The banking bailout passed by Congress is $700 billion, or about $2,333 per American. And the total commitment has risen to over $7 trillion, or 23,333 per man, woman and child in the country (legally). Perspective is everything. Crap sandwich does not do the whole rotting mess justice.

But just because the cost of a Big 3 bailout is a drop in the bucket, doesn't mean we shouldn't still try to do the right thing - let it be fixed rather than be kept on life support without the chance of healing itself.