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GM's Pending Bankruptcy: How Buying a Car Is Going to Change

When will Ford make its case that continuing government assistance to two of its competitors is not only unconstitutional, but a violation of anti-trust laws? Ford bit the bullet to hock its facilities to gain working capital, and is stuck with the cost of paying down this debt. GM and Chrysler not only shed $billions in debt, but have oodles of low-cost capital courtesy of us taxpayers.

I relish the court case Ford could bring! For once, some lawyers may earn their keep.

A Natural Gas Centric Strategic Long-Term Comprehensive Energy Policy

Good, factual post! We certainly need to wean the U.S. away from imported petroleum quickly, and with minimum expense. CNG may be the way, if not bio-fuels and EVs. Probably a mix of each of these as well as petroleum-based fuels during a transition period.

One flaw in the CNG argument is the 4:1 lower energy density of CNG vs. gasoline. Thus for equal range and energy efficiency, a car powered by CNG would require 4x the tank volume of a gasoline-powered car. I don't know how the Honda GX packages its tank into its body, but I suspect it simply has reduced range and/or trunk space compared to a gasoline-powered version.

The cost of conversion from gasoline to CNG runs $5000 to $7000 per vehicle, and it's hard to believe that this will be economic until the price of gasoline returns to well over $4 per gallon. I drive a Ford Escape hybrid, and I figured I'd break even on the $3000 cost premium after tax credit with gasoline over $2.75 a gallon; made money last summer, not this year. The cost to convert the entire U.S. light vehicle fleet of 240 million vehicles (R.L. Polk) to CNG would be an astronomical $1.5 trillion (doesn't sound so bad in comparison with the projected federal deficit).

Safety is also a concern: a house I used to live in blew up a few years ago because a technician made a wrong connection to a high pressure gas line. Two houses were destroyed here in central Virginia last year when an interstate gas line blew up. The thought of householders plugging their cars into gas lines for overnight refills scares me. But then gasoline is explosive, too, it's just not under pressure. CNG refueling at service stations with trained operators and reliable devices sounds better to me; that's how I get the propane bottle for our grill refilled.

For these reasons, the Pickens Plan dropped the idea of using CNG for light vehicles last year, and is now concentrated on adoption of CNG for heavy trucks. This is supported by the fact that major CNG lines tend to parallel the major interstate truck routes. I have every respect for Boone Pickens and his investment in the cause; he has the good sense to realize the limitations of CNG as a vehicle fuel in the near term.

You suggest a number of policy steps that should be taken, and I can agree with some, particularly slapping an import tax on petroleum. I do not believe that there is an effective government solution to the problem, however; far better to let the market sort out the best among alternative fuels for our future transportation needs.

The Fate of General Motors' Rick Wagoner

No one here has mentioned the comparison of GM and Chrysler to FORD! Maybe Ford will have its comeuppance yet, but so far it has managed to avoid the financial meltdown and beggary of its U.S. competitors.

I don't find much to admire in the Great O's approach to governing, but his Auto Task Force came through this morning with an admirable analysis and rejection of the "restructuring" plans submitted by GM and Chrysler. They called spades spades, set firm timelines for corrective action, and offered constructive responses to the political issues of destitute Michigan communities and credibility of warranties. Kudos to the Task Force!

Let's not forget either that GM and its competitors turned out cars for years that its customers wanted to buy. Even Toyota, Nissan, and Honda introduced big SUVs - just before the oil prices of last summer caused the market to change its perception of what cars should be. The industry won't be transformed by any technological breakthroughs - just good design to provide the roomy vehicles that the U.S. market wants with incremental improvements in mileage at affordable cost.

It's well known what technical changes will make vehicles more efficient: lighter-weight materials (more composites), hybrid drives, and turbo chargers. (Forget about an all-electric car - this is a silly stunt for GM and companies like Tesla.) All of these changes come at a cost, and it will be interesting to see who can engineer them into affordable and attractive vehicles to come. But be patient - the lead times for these changes will still be five years or more.

Autoworkers' Pay Only Small Factor in Detroit's Problems

Something is left unsaid in the article and comments: What is the contribution of Government benefits (Social Security and Medicare) to the income of the autoworkers in retirement?

The total payroll tax paid into the SS and Medicare "trust funds" (employer plus employee shares) is 15.3%, applied to the wages and wage-related payments, or $6.58/hr for Ford vs. $5.36/hr for the transplant. The difference in "benefits cost" is about the same: $1. So the funds put aside for supplemental benefits is about the same for both.

What accounts for the difference in "legacy costs"? Either Ford is paying its employees a premium for early retirement (before SS eligibility), or it is gold-plating supplemental payments on top of SS and Medicare after retirement. Or is the cost of the infamous "jobs bank" that pays workers for not working part of "legacy costs"? In either case, let's not feel sorry for the autoworkers if their benefits in retirement get reduced to the SS allowance plus Medicare.

The extortion perpetrated by the UAW was affordable to the Big 3 when they all had the same labor contracts and there was no competitive differential in labor costs. Now that the transplants have come on the scene, that situation has changed.

My U.S. Infrastructure and Employment Plan

Good try, but no cigar!

All the suggested infrastructure improvements require a heavy up-front investment in engineering. Speaking as a semi-retired engineer, I can attest that the US has an acute shortage of qualified engineers (plenty of lawyers and pseudo-environmentalis... though). The lead time to train and develop a qualified engineer is 10-15 years -- if you can find and motivate qualified candidates. What is our esteemed Congress doing to open up the H1B program so we can import more engineers?

Solar power at utility scale is a wacko idea, except maybe in the SW. Peak solar generation is near noon, while peak demand is after sunset. Likewise wind is OK when it blows, but the least capacity is near sunset. There are no viable technologies to store large amounts of off-peak energy for use at the time of peak demand. Sure, there are a few viable applications for solar or wind in remote off-grid areas at low power, but not for economic residential or industrial use.

As for replacing oil -- 80% of petroleum consumed in the US is for transportation - primarily passenger cars, but also trucks, trains, planes, etc. There are 200 million cars on the road in the US, and in a good year we have the capacity to produce and sell about 15 million. Given an optimistic lead time of 5 years to develop a car with new technology, we're looking at about 20 years to replace the US fleet - we'll need oil at near current volume for much of this time.

Are passenger trains a viable replacement for cars? Not until the US population changes the way it chooses to live. As long as our ideal is a place in the suburbs with an acre or two of lawn, or until we do much more tele-commuting, train service will continue to depend on heavy subsidies - even in the cities.

Hopefully we as a country (not just the powers in Washington, but also industry and the public at large) can evolve a plan that starts us on a path to energy independence. This goal will not be achieved in five years or even 10, and crash infrastructure programs without adequate engineering preparation will only waste resources and prolong the recession - just like what happened in the 1930s.