People who have a few big problems have, well, a problem. But people who have (or inherit) a whole mess o’ problems all at once, well, those folks have an opportunity. For the wise and the clever – and our President-elect is both – a plethora of problems often is so tangled, so teeming with potential disaster, that you can actually use your problems against each other, killing multiple birds with a few well-thrown stones.
The current mess in Mo Town is a case in point. All of the Big Three American automakers, after binging on SUVs and cheap gas for two decades, are now coughing up blood and are stalking the corridors of power, hat in hand, looking to the Government for solace. Of course lawmakers are reluctant to hand them embarrassingly large stacks of cash when they plan on slashing the workforce and raising unemployment. So the Big Three are looking to the new Obama Administration for help.
And here’s a couple of things he can do . . .
Obama, as I said, has inherited a number of crises all at once. One is the disastrous economy, of course, which was sparked by the financial crisis and resulting stock market crash. Getting banks lending again was one of the prime reasons for the $700 billion bail-out, but no one wants to write loans until it’s clear who is going to survive the downturn.
Unemployment is starting to look dire, of course, and its going to get a lot worse before it gets better. Unfortunately, any of the Big Three crashing means thousands of lost jobs, with a gargantuan ripple effect across the Rust Belt.
Consumer confidence remains pathetically low, although recent events may just raise it a notch. But no one wants to buy a new car when they don’t know if they will have a job next month, much less know what the price of gas is going to be. So all those cars are sitting in lots, stagnant.
The Iraq War will be winding down shortly, and as returning servicepeople face a bad economy they will likely only add to the unemployment rate – if not the homeless population. The VA is going to have a lot of fun trying to help get them integrated back into the anemic economy.
Gas prices have fallen now that the speculators have gotten out of the way – and a slowing economy eases demand. But the recent sting hasn’t gone away from the American memory quite yet, and the gas crisis brought with it some depressing realizations in corporate America. Far too many businesses realized just how dependent they were on cheap gas and inexpensive transport costs to sustain their margins. For the next several quarters they will be continuing to move cautiously, one eye on the gas prices. The need for alternatives is clear, as the continuing demand for hybrids demonstrates. And Peak Oil has been thrown around so much that, thankfully, several key figures have figured out that the petroleum situation is never going to get any better.
Health Care, of course, lingers in the background as a pressing issue, and one that weighs heavily on the minds of the Big Three – skyrocketing healthcare costs for employees and retirees has demolished hope of future profits, and led directly to this mess.
The Environment and the specter of global climate change also haunts the policy stage – Kyoto needs a replacement, and the Obama Administration, with help from Archdruid Al Gore, plans to be at the front of the pack for a change. Greenhouse gas issues, carbon cap-and-trade, coal powered polluters, China and India, the whole bloody mess is looming in the background with the inevitability of a melting glacier.
. . . which dovetails nicely with the energy issue – back to the Petroleum Problem again.
So what’s a brotha to do?
Obama’s new Administration should sit down with all three of the Big Three and propose a deal. They won’t like it, but they literally have no choice – it’s help or bankruptcy. The deal should include:
Immediate cash loans to keep operating budgets afloat during the next six months – with conditions. Namely, no more lay-offs (early retirement? Why not? Attrition is fair game.), no more plant closings, no more executive cash bonuses and no more stock dividends until the loans are repaid. Maybe the Federal Government even takes a minority stake in the company, just to keep ‘em honest.
A commitment to pool their R&D resources, with assistance from whatever Federal agencies can provide it, to design and build a new generation of electric fuel vehicles – plug in hybrids, at first, then full electric. All three of the companies have invested their future on such cars, anyway, but they are all pursuing slightly different iterations of the same idea. By working together, they can achieve similar standards of engineering and similar drive train and power technologies, to keep their individual designs from being too radically dissimilar. By developing a commercially-viable EV, and then encouraging zero-emissions mandates like California’s, they can ensure a wide-open market for the next decade. Imagine that every car on the road today had to be replaced – by law. Honda and Toyota would be invited to participate, of course, as would the European car firms, but the focus would be on the Big Three.
A commitment by the Administration to subsidize the sale and financing of the vehicles, using tax incentives, selective mandates, and creative financing options. Plus pushing of clean-air standards that force the municipal fleets of the nation to slowly convert to EV/Hybrid vehicles.
A commitment by the Big Three to rapidly convert their excess production capacity to wind and solar cell production – to power the large number of new vehicles soon to need them. Sure, this would take time and money – the re-tooling would be extensive – but the manufacturing base is already there and people are eager to work. Besides, this gives the banks whole new opportunities to float new, Federally-guaranteed loans.
And those big SUVs sitting in the lots all over the country not selling? We have at least half a million veterans of Iraq and Afghanistan in this country. Let them buy them at steep discounts, with Federally-guaranteed auto loans. GI college benefits are fine, for those young recruits, but for the hundreds of thousand of older National Guardsman, for whom college money doesn’t mean as much, well, a big honkin’ new truck with big tires with less than a $300 a month payment? That’s the kind of national gratitude those folks can sink their teeth into! Besides, if all goes well with the EV/Hybrids, they might become collectors’ items soon. Heck, all those spare, empty foreclosures around the country? Might be another good way to reward our valiant service people.
And finally, there is the health-care issue. Between the Big Three there are at least a couple of million people covered under their battered program, the costs of which is spiraling so high that they threaten the fundamental soundness of the business. In this latest round of union negotiations, there were some steps made to turn over the running of the program to the unions, instead of the companies, but that’s only shifting around the administration of benefits, ultimately. There exist the real possibility that the employees of the three companies and their subsidiaries combined would provide an outstanding test-bed for the kind of national healthcare system we’re all looking for.
It won’t be a perfect deal, but it will be ambitious, and most importantly it will help preserve not just millions of jobs, but industries essential to our national welfare. If it goes sour, we would be left with a slightly different mess than we had before, no better, no worse. But if it succeeds . . .
Imagine: the combined research efforts of the three companies produce a commercially viable leap in engineering and technology – with the simplified drive-train and ease of recharging, these new EV/Hybrids can be produced as cheaply as ICE cars, and everybody wants one. Production in Detroit and Flint booms as demand soars. Every EV/Hybrid on the road means one less ICE car guzzling petrochemicals and screwing with the environment. A decentralized system of solar and wind power allows individuals and businesses to generate power for their vehicles on site, for low cost, and every new solar cell or wind turbine put into service makes the over-all supply of power greater, while increases in efficiency keep demand rising slowly.
So business that have tight, transportation-dependent margins suddenly see a big bump in their bottom line as all that money they used to spend on gas is now available for other things – which makes them more competitive against those who resist and cling to their old gas powered fleets. Whole new industries spring up for windmill maintenance, solar cell installation, battery charging stations, the works. The heavy industries, with the auto industries in particular, were key to re-establishing American prosperity after the Great Depression – they could easily do so again. The economy would be humming along on this EV high for at least a decade, and we would save billions in transfers to overseas interests for our oil.
For some others, however, the results wouldn’t be so benign. Russia, who has grown drunk and arrogant on expensive oil, would see the price plunge below the $45-$50 range needed to make their operations profitable. Same with Venezuela. Saudi Arabia, Iraq and Iran, likewise, wouldn’t be happy. But Europe and Africa would love us. While a few African nations do have good oil reserves, just about everyone there has a surplus of hot sunshine. And Europe has wind aplenty, too, and a fetish for environmentally friendly solutions. After the initial shock of seeing their long-term energy investments (based on the assumption of a gas/oil economy) fade, China would be on board in a big way, ditto with India. And Japan and Korea would love the idea – they’ve been working on EV lines for a while, now.
Jobs. Cars. Spitting in OPEC’s soup. It’s a win-win-win situation for everyone but a few guys everyone hates anyway. It’s an opportunity for the bold, not the timid, and would take persistence and patience to move forward – but at this point we don’t have the luxury of timidity or mere symbolism. It has to be done, now is the time, and now is the perfect storm of policy opportunity.
Go get ‘em, Barack!