Happy holidays everyone! The blogging hiatus continues as I am enjoying the holidays. I’ve been from Minocqua, WI to Whitewater, WI and back to Chicago. Today, we head up to Whistler and I am really excited!
I’ll try to post more regularly up there and give you a snow report!
It has arrived finally. I finished up my econ final and turned in a final paper for my music class last Tuesday. On Friday, I took my history exam. Today, I found out the results of my economics exam and I am extremely pleased. The only reason I’m sharing this is because 1) the class was tough and 2) it ensures I can write a thesis next quarter.
I have a few travel plans for this winter break. I’m very excited about embarking on all three of them.
First, Monica and I will be heading up to her parents’ cabin in northern Wisconsin. It will be nice to be away from things and relax a little bit. I can’t say that a whole lot of relaxing has gone on this quarter. Plus, I am excited to be going “up north”. That phrase is tossed about frequently in Minnesota with little meaning. Going up north covers a huge array of geographic areas. I am using the phrase just as wantonly, but the universal recognition of its meaning makes it a useful phrase.
Second, we’ll be heading to southern Wisconsin for Christmas. There we’ll be enjoying present opening and a lot of food with Monica’s family.
Third, we’ll be meeting my family in Vancouver for a ski trip to Whistler. I haven’t had too many opportunities to ski recently – thanks to living in Chicago and the lack of snow. Hopefully, I can get some practice when we’re up north, but otherwise I’m soooo excited for what will surely be an amazing trip. Honestly, I love skiing, it is an amazing sport. There is no better feeling than stepping out onto a mountain in your awkward boots and getting ready to carve down it.
Happy Holidays everyone and if you’re on break…enjoy it!
The Senate voted 52-35 to bring the measure for a vote — short of the 60 votes needed to advance the legislation. The failure followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that all sides could accept.
Auto bailout suffers possibly fatal blow in Senate – Dec. 11, 2008.
Believe me, I’m not happy that this is happening as the result of Senate inaction, but ultimately might force Congress to reconsider prepackaged bankruptcy options.
Bankruptcy…yeah…Chapter 11…that thing used for companies who aren’t making money, but if they restructure could be profitable.
The US car industry will not be shut down, but it does need to be restructured. That is what Chapter 11 of America’s bankruptcy code is supposed to do. A variant of pre-packaged bankruptcy – where all the terms are set before going before the bankruptcy court – can allow them to produce better and more environmentally sound cars. It can also address legacy retiree obligations. The companies may need additional finance. Given the state of financial markets, the US government may have to provide that at terms that give the taxpayers a full return to compensate them for the risk. Government guarantees can provide assurances, as they did two decades ago when Chrysler faced its crisis.
FT.com / Comment / Opinion – Chapter 11 is the right road for US carmakers.
A great piece from the Financial Times explains how Chapter 11 would be the best solution for Detroit. This goes back to something Dan said at Up for Grabs, Detroit is like a bucket with a hole in it – the money just drains out. The FT piece cites industry experts who believe the Big 3 need more than $125 billion to get out of this miss. Giving them $15 billion now is like using that bucket with a hole to try and save a sinking Titanic – futile.
Even so, we should not forget that a few months ago, President George W. Bush said there was not enough money for health insurance for poor children although it cost just a few billion dollars.
I think the above paragraph makes a great point. We shouldn’t be forgetting the things this money could go to…The money draining out of the bucket.
I want to quote a few things out of this editorial and see if they make sense to you. I don’t think the Ayers advertising was particularly effective during the campaign. This editorial is Ayers’ response to accusations made against him.
I never killed or injured anyone. I did join the civil rights movement in the mid-1960s, and later resisted the draft and was arrested in nonviolent demonstrations. I became a full-time antiwar organizer for Students for a Democratic Society. In 1970, I co-founded the Weather Underground, an organization that was created after an accidental explosion that claimed the lives of three of our comrades in Greenwich Village. The Weather Underground went on to take responsibility for placing several small bombs in empty offices — the ones at the Pentagon and the United States Capitol were the most notorious — as an illegal and unpopular war consumed the nation.
The Weather Underground crossed lines of legality, of propriety and perhaps even of common sense.
Sorry, but in my book planting several bombs in the U.S. Capitol and the Pentagon doesn’t just “cross the liens of legality”, it is illegal, dangerous, and near treasonous. Let’s look at a dictionary definition of terrorism:
the use of violence and threats to intimidate or coerce, esp. for political purposes.
What did Ayers and his group do?
Our effectiveness can be — and still is being — debated. We did carry out symbolic acts of extreme vandalism directed at monuments to war and racism, and the attacks on property, never on people, were meant to respect human life and convey outrage and determination to end the Vietnam war.
Use of violence -check
Meant to coerce -check
Political purposes -check
Sounds like terrorism to me. What’s the point of an editorial with his side of the story if he’s not going to be honest and admit things like they are. The language he uses isn’t apologetic and I hope our future president does not associate with him at all in the future.
I’m curious what people think about this next round of bailouts? It appears that the White House and Democrats have agreed on taking a large stake in the Big 3 automakers.
The benefit for the auto makers? Money. They need capital to operate. It has been no secret that GM, Ford, and Chrysler have been struggling to compete with more modern, foreign car companies. Where does this leave them? Strapped for cash with expensive union contacts, too many dealerships, too many brands, and too many retirees to support. State law makes it nearly impossible for GM to start consolidating its 7000 dealerships (opposed to Toyota’s approximately 1500). Stubborness has made it difficult for GM to abandon one of its eight brands.4 It is no wonder the Big 3 are losing market share.
The cost for Detroit? Government oversight, control, and mandates. I would argue that government oversight is probably a good thing because a tough leader can start instituting some of the structural forms that make these companies unprofitable. Government control, on the other hand, is unfortunate, but the consequence of giving these companies tax payer money. Lastly, government mandates appear to be the knife in the heart of Big Auto.
The WSJ shed some light on the issue:
All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don’t want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren’t bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.
Read over that passage carefully and a few things become clear. 1 – Even if unions have served a role at some point in the life of these very storied companies, they are now choking them. The problem? UAW donated a lot of money to Obama, they paid 3 million dollars to run a single ad for him a few weeks before the election. It is clear that the solution to Detroit’s woes involve not only reshaping the corporate structure, but reshaping the corporations’ relationships with the UAW.
2- Fuel efficiency standards distort the decisions of automakers. American consumers pay big bucks to drive the cars they want to spend that money on. Think about this carefully. Let’s do it step-by-step:
-Car companies have the choice to make a variety of cars.
-They have inputs like labor, materials, and machinery.
-Those inputs are expensive.
-Consumers have the choice to buy a variety of cars.
-Demand is high for Trucks and SUVs.
-Automakers charge higher prices for Trucks and SUVs.
-They make a profit.
-Demand is low for Cars at the same prices.
-Automakers charge lower prices for Cars.
-They lose money on smaller cars, which sell for less, but still require the expensive inputs.
-Government mandates require Car companies to produce small, fuel efficient vehicles in expensive factories.
-Big 3 become unprofitable.
The government’s solution? Take over the companies and make them produce more fuel-efficient vehicles.
WAIT a second!?!?! Buy a company and pursue its unprofitable business?
But, gas is expensive and people want to stop global warming! Right?…Right? Let’s take the facts from a ‘green living website’:
In 2004, many experts criticized the investment return on hybrid cars. They said that with the economy at the time, at $2 per gallon of gas, it would take 12 years to recover the investment of a hybrid Civic compared to the purchase of an equally equipped Civic powered strictly by gasoline. At that point, the hybrid Civic only averaged seven more miles per gallon than the gas powered Civic. Additionally, the hybrid Civic’s sticker price was $6,000 more.
Additionally,
In 2004, Max Martina, managing director of the Alternative Energy Institute, said that gas prices were going to have to reach $2.50 to $2.65 to cause hybrids to show a five year return on investment.
Gas has to be around $2.50/gallon for your hybrid car to save you any money over buying the standard model. With gas at current prices, it would take approximately 12 years. Not only are hybrids more expensive up-front, the investment is highly sensitive to fuel prices. If its the environment we are worried about, then we’ll have to wait for some kind of carbon tax for producing these cars to be a profitable decision. Until then, it is hard for consumers to justify purchasing these cars because the incentives aren’t in place for people to value global warming in their economic decisions. Furthermore, tax incentives to buy these cars are about to expire as well:
Hybrid tax incentives start to go away when a car maker sells its 60,000th alternative-fuel vehicle, a level Toyota reached in mid-2006 and Honda hit in the third quarter of 2007. The amount of the tax credit is first reduced by 50% before disappearing altogether over several months. Honda’s tax credit, currently $525, will be phased out by Dec. 31, according to the Internal Revenue Service. The Civic credit had been as high as $2,100 before the phase-out began in January 2008.
The article continues,
“If you look at it strictly from a short-term payback perspective, without the tax credits, hybrids make absolutely no sense for the average driver,” says Kim Korth, president of IRN Inc., a consulting firm in Grand Rapids, Mich. “The tax credit at least made it neutral, if not positive.”
Removing tax credits would extend the time it takes to receive a return on investment on a hybrid car in some cases up to 16 years! That article is from November, gas is has continued to drop since then.
So, what is Congress thinking? Why is the Bush administration agreeing to this non-sense? Making hybrid cars isn’t going to save Detroit! Requiring the Big 3 to make these cars will kill them. In fact, the Chevrolet Volt, an electric car which is getting everyone excited, will cause GM to lose money “for years”.
I know this blog post would disappoint Al Gore, but I think everyone needs a reality check here! This is going to cost a lot of money and involve a ton of special interest? When do we get smart about this?
I can tell you right now, that this NY Times editorial is not the answer:
G.M. said it would offer 15 hybrid models by 2012. Its Chevy Volt, which can travel up to 40 miles on electric power, is scheduled for production in 2010. Chrysler also said it would offer an all-electric automobile. Ford said it would cut trucks, vans and sport-utility vehicles to 40 percent of its portfolio from 52 percent in three years and would put more fuel-efficient engines in most of its cars.
Congress should ask for more
Classic. A NYT article heralding the inception of the unprofitable Volt and wanting Congress to make things worse.
On the issue of the U.S. Senate selection, federal prosecutors alleged Blagojevich sought appointment as Secretary of Health and Human Services in the new Obama administration, or a lucrative job with a union in exchange for appointing a union-preferred candidate.
Rod Blagojevich, Illinois governor — chicagotribune.com.
Breaking news! Will blog after final…Illinois produces some shady politicians!
First two finals going down tomorrow!!
Needless to say, blog posting time is at a minimum. Although, there is interesting news about Detroit-related bailouts and violence in Pakistan!
Greece’s worst rioting in years erupted late Saturday night after an Athens policeman shot and killed a teenage boy in a central neighborhood known as the base of anarchist and other antiestablishment groups.
Anarchists’ fury fuels Greek riots | csmonitor.com.
Some intense news coming out of Greece. You just don’t expect this kind of thing from the birthplace of democracy.
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