Just a brief note about four Pacific Union college students who died in a terrible crash early on November 16 2008. Such a needless waste of lives, cut down in their prime age, because the driver was speeding. Just another of the "good externalities" of limiting the mechanical top speed of all road vehicles to 34mph (55kmph) would be the tremendous reduction in tragic deaths and accidents. The California Highway Patrol would probably trim to 10% of its current size. Autobody shops, employing over 240,000 people in the USA at present, would no doubt be reduced substantially, but... that is a good thing!
Deaths from high speed chases...remember this blog when you hear of one.
Sunday, November 16, 2008
The Demise of the Big Three Automakers
Here in the eleventh month of 2008, much media conversation is taking place regarding the massive financial losses at GM, Ford, and Chrysler, and what can be done. Unfortunately, my prescription for low speed will do nothing to help them survive. If a virus of enlightenment stormed the planet, and everyone decided, "Yes, let's limit top speed, to save gasoline and the resources going into building vehicles." the impact would be a negative as far as earnings for the Big Three, going forward. Unit costs for vehicles would drop for materials, even with the addition of a mechanical escapement to limit top speeds. Worse though, the existing national fleet of vehicles would extend their mechanical lives with the reduction in mechanical wear, and fewer crashes. Sales of slower cars manufactured after a "top speed" imposition would probably drop to 50% of current sales. Sales of retrofit drive trains (e.g., small two-cylinder engines and variable-speed transmissions) would be gobbled up by OEMs eager to replace reduced component orders from the Big Three. Ford, GM, Chrysler, are simply too large to be nimble, and would be beat at the retrofit game.
At present, the automakers have worked themselves into a corner from which there is no escape. Competition from better made cars from Nissan and Toyota have forced them to create a quality of car that is more expensive, but is replaced less frequently. There has been a concomitant increase in the cost of labor and materials for this quality, and an inability to reduce costs by workforce reduction. A laid-off UAW worker retains 95% of his working salary.
The US government loan to the managements of these firms will do nothing but allow a swollen inventory of unsold vehicles to increase. Bankruptcy will stop all payments to suppliers, perhaps negate the UAW contracts. The federal government should then make long term, substantial loans to suppliers and unions, to take away the costs to the Big Three as the receivership managements work to restructure the three large automakers into corporations that have an economic future.
Currently, no automaker in its current form, whether Toyota, Honda, Ford, GM, has a future past 2020. We might as well begin the death and rebirth of the transportation industry now in 2008.
At present, the automakers have worked themselves into a corner from which there is no escape. Competition from better made cars from Nissan and Toyota have forced them to create a quality of car that is more expensive, but is replaced less frequently. There has been a concomitant increase in the cost of labor and materials for this quality, and an inability to reduce costs by workforce reduction. A laid-off UAW worker retains 95% of his working salary.
The US government loan to the managements of these firms will do nothing but allow a swollen inventory of unsold vehicles to increase. Bankruptcy will stop all payments to suppliers, perhaps negate the UAW contracts. The federal government should then make long term, substantial loans to suppliers and unions, to take away the costs to the Big Three as the receivership managements work to restructure the three large automakers into corporations that have an economic future.
Currently, no automaker in its current form, whether Toyota, Honda, Ford, GM, has a future past 2020. We might as well begin the death and rebirth of the transportation industry now in 2008.
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