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Toying With CArz - The New York Times Advises the Car Industry?

The Times shares its business wisdom with the Auto Industry.

 

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TOYING WITH CARZ

 

Today’s New York Times’ Op Ed, “So Far, So Good”, addresses (its Olympian wisdom) to the auto industry bailouts. { LINK http://www.nytimes.com/2009/05/18/opinion/18mon1.html?_r=1&ref=todayspaper }

 

The piece ends with this three paragraph collection of bromides and one revelation.

 

“Even assuming G.M.’s likely bankruptcy ends felicitously, the automaker will have to pull off the trick of becoming an entirely different company — one that can make fuel-efficient cars to serve a future of expensive energy and environmental strain and then persuade American consumers to buy them. It has little experience with either.

“Culling the Hummer and launching the Chevy Volt won’t be enough. G.M. must swiftly pare its gas-guzzling truck and S.U.V. lines, which last year accounted for 11 of its 20 top-selling brands. It must accelerate development of gas-electric hybrids and other higher-technology cars. Pulling this off successfully could well require further help from Washington to coax drivers to pay the premium for fuel-efficient cars.

“Fortunately, the government, the U.A.W. and G.M.’s new leadership all seem to get it. They share a broad vision of where the company needs to go. Pulling it off won’t be easy.”

 

Good grief.  This is either staggering naiveté or code.   Won’t be easy?  A guy is teetering on the ledge of a skyscraper and, just as he starts to fall, you throw him a weight belt.  Saving him won’t be easy. 

Business advice from one failing business to another can look a parody, a joint suicide note or air-headed, cluelessness on a public display, much like Ms. Pelosi’s energy policy remarks did last year when she revealed her ignorance of the fact that natural gas is a fossil fuel. 

 

So I’m going to allow the NYT editorial writer credit for more intelligence than first appears.  Maybe, just maybe this little editorial gem was code for the following:

“This misguided, ultimately doomed, wasteful bankruptcy & bailout policy needs to be remembered as a quixotic gesture of the brave new administration that we support.  Therefore we have gracefully chosen to praise the good intentions of the administration.  But at the same time, we must to convey our “told-you-so” superiority in a cleverly worded, double-meaning exercise in self-protective, well edited prose worthy of the Great (though economically failing) Newspaper that we are.

Am I being too harsh?  Consider the overriding principle:  When one politically imposes save-the-world policies on any profit-making commercial enterprise, the effect is to pile on a cost burden that, in a competitive market, becomes an economic poison pill.  Over time this sort of thing can bring any robust business to its corporate knees and ultimately into bankruptcy. 

The larger cars and trucks in the GM line have been hugely more profitable than the “gas-electric hybrids and other higher-technology cars” that the Times and its pet administration seek to mandate.  Toyota’s numbers should tell us something.  Toyota’s large vehicles and its luxury models for the wealthy buyers and its truck line have been comfortably profitable on a unit sale basis.  The company's hybrids show only a paper profit - the company is actually losing money on its “gas-electric hybrids and other higher-technology cars” when the huge front-end development costs are factored in.  Some well made German cars with similar low gasoline consumption sell for less and offer the manufacturer a higher per unit profit.  Battery technology is still behind the curve, especially when vehicle unit costs and necessary battery replacement expenses are accounted for.

So the liberal, “save-the-world-AND-GM” crowd is going to attempt the impossible:  Rescue a formerly profitable car manufacturer by forcing it to produce unprofitable, possibly unreliable vehicles.  In the post-bankruptcy rescue plan, effective control of America’s once great American car company will belong to the union and federal bureaucrats.  This is like firing the crew of a 747 and replacing it with disgruntled passengers.  As a gesture, it might feel good for a moment, but your better brace yourself for the crash.

JBG

 

 

oday’s Op Ed, “”, addresses to auto industry bailouts. { LINK }

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