General Motors: Farwell and Adieu?

The news that General Motors stock hit a 54 year low last week shouldn’t be too much of a surprise to anyone who has been following the company for a while. GM is hemorrhaging money so fast that it will need to raise $15 billion to cover their operating expenses over the next two years. They are now facing the very real possibility of bankruptcy. As a result, GM is now considering laying off thousands of white collar workers and selling off some of their brands.

GM’s problems aren’t new and are only partially related to the current high price of gasoline. Their problems go back several decades, when they started to let their dominance of the U.S. auto market slip away to the Japanese and then the Koreans. GM has lost over half of its market share over the last four decades. It’s now at 20%.

General Motors has had some of the most brain-dead management in the industry, starting with Roger Smith who fostered the worst labor relationships in Detroit. At one point their relationship with labor was so bad that GM's UAW leadership were indistinguishable from suicide terrorists, determined to punish the company even if it meant killing themselves in the process.

GM also suffered from three decades of poor, uninspiring design, where for a while most of their cars pretty much looked like a wedge of cheese.

Like all U.S. auto companies, it took GM too long to figure out that producing qualitiy cars actually cost less, not more, and results in higher customer satisfaction and stronger brand loyalty.

They were also completely clueless on how to compete in international markets. For example, they used to constantly whine about how Japan was unfairly closed to them. When I went to Japan for the first time in 1998, I noticed three things: A.) The Japanese drive on the left side of the road, like the British, B.) there were a lot of German cars on the road, and C.) there were very few American cars. The problem was that the U.S. auto companies took forever to sell cars that were suitable for the Japanese market (i.e., with the steering wheel on the right side). The complete misunderstanding of the market, along with their chronic quality problems doomed GM, Ford, and Chrysler in Japan.

They also have a maddening plethora of largely indistinguishable brands including Chevrolet, GMC, Pontiac, Saturn, Cadillac, and Buick. Let’s not forget about Oldsmobile, which GM shut down a few years ago. Yes, they also have Saab and Hummer, but these are niche brands which are also not doing well.

Finally, years of overly generous pension arrangements have spun GM’s costs out of control. The cost of supporting GM retirees is more than $1,600 per car.

Shutting down a brand is a costly proposition, in part due to state franchise laws. In 2001, GM spent $1 billion to buy out Olds dealers and close some plants. Litigation with dealers dragged on for years and the final cost of shutting downs Olds is estimated to be $2 billion.

Throttling back on production isn’t an easy answer either, given GM’s union agreements which stipulate that they can’t close a plant or lay off workers without stiff penalties no matter how bad the losses become. Plants must run at 80% capacity or more whether they make money or not. Even if it stops its assembly lines, GM must still pay laid-off workers and also foot their extraordinarily generous health-care and pension costs.

So, what’s the answer? I for one can’t think of any reason why General Motors as a single entity makes sense any longer, because they just don't seem to be able to get out from under their own history. They have proven to be too big, old, and stodgy to undertake any serious reform. The only real answer may be to break the company up and let the market reallocate the resources to more productive uses.

McCain’s Military Service not a qualification for the Presidency

On Sunday, retired General Wesley Clark said that: “I don't think riding in a fighter plane and getting shot down is a qualification to be president.” He’s exactly right. In fact, McCain’s 54 years of government “service” make him very unqualified to be President.

McCain grew up in a military family. His father and Grandfather were both career military officers. McCain started working for the government in 1954 when he entered the U.S. Naval Academy. He graduated in 1958 and then went to flight school in Pensacola, Florida and become a Naval aviator in 1960. He received a combat assignment in 1966, where he participated in a bombing campaign of Vietnam. In 1967, while on his 23rd bombing mission, he was shot down over Hanoi. He was imprisoned for 5 ½ years, suffering lengthy solitary confinement and torture.

McCain left the Navy in 1981. He briefly worked for his father-in-law’s beer distributorship, as VP of Public Relations, while he was running for Congress. In 1982 he was elected to the House. In 1986, he won a seat in the Senate, where he has remained for 20 years.

McCain has virtually no experience in the private sector. He’s never led an organization, built a business, met a payroll, balanced a budget, or had to serve customers in a competitive market to survive. He admits that the economy is not his strong suit because from the time he grew up as a military brat until today, he’s lived in a world of edicts and mandates rather than one of competition. Accordingly, he has demonstrated a propensity for supporting unworkable government solutions, for example with his advocacy for the Eurocrat cap-and-trade system for carbon emissions.

With $4 a gallon gas, the worst housing market in 70 years, a collapsed dollar, and rising unemployment, private sector experience is an essential qualification for the next President. McCain's private sector experience is virtually non-existent.

I have nothing but respect for people who volunteer to serve in the U.S. military. I am a 4 year veteran of the U.S. Air Force. However, Wesley Clark is right -- military service alone doesn’t qualify one to be President of the United States.

The End of Oil Tyranny

Honda’s first commercial fuel cell powered cars rolled off the production line in Japan yesterday. The Honda FCX Clarity goes from 0 to 60 in about 9 seconds. The car can travel up to 280 miles per “fill up”. It can reach speeds of 100 miles per hour. It’s a good looking car and an engineering marvel.

Fuel cells generate power by producing an electrochemical reaction between hydrogen and oxygen to convert chemical energy into electrical energy that powers the car. Fuel cells don’t pollute. The only thing that comes out of the tailpipe is water.

Honda has sold the first few hydrogen cars to some Hollywood celebrities, including Jamie Lee Curtis.

General Motors has also been testing fuel cell versions of the Chevy Equinox for a couple of months.

Unfortunately, the cars are only available in limited markets – the Honda in the Los Angeles area and the GM in New York City and Los Angeles. One reason is that there aren’t many hydrogen refueling stations.

Honda and GM are ready to launch home hydrogen refueling stations to help bootstrap the market. Honda’s home refueling station will operate on natural gas, while GM’s will work off of electricity and solar power.

BMW, Mercedes, Volkswagen and most of the other major car companies have fuel cell vehicles under development. Honda and GM are out in front of the market.

We are witnessing the end of the energy control that the Arab Sheiks, Latin Dictators, and Russian Mafia have over the world.

It will take time, but how cool is that?

John McCain and the American Gulag

Last week the United States Supreme Court upheld the writ of Habeas Corpus. John McCain responded by saying that: the Supreme Court decision protecting habeas corpus "is one of the worst decisions in the history of this country."

Really???

What is the writ of habeas corpus anyway? Basically, it's the right not to be arbitrarily incarcerated by the government without being charged with a crime by a lawful authority. Article One of the United States Constitution explicitly upholds this right.

The writ of habeas corpus is even much older than the Constitution. It was first codified into law in England by the Maga Carta in 1215.

In old Soviet Union, and many other countries in the world, the government could imprison you, and hold you indefinitely without charge for as long as they wanted. John McCain apparently thinks that jailing you without cause is a wonderful idea. Now he is angry that the Supreme Court won't throw away over 200 years of American law and almost 800 years of Western Civilization.

Just what country do you think you are living in Mr. McCain?

John McCain: Space Cadet

This week brought us an incredible amount of bad news that bodes ill for our future, as well as John McCain’s bid for the White House.

Oil prices made their largest single day increase ever on Friday, surging nearly $11 a barrel to $139. This was after an increase of $5.50 the day before. The unemployment rate rose to 5.5 percent in May from 5 percent -- the largest monthly increase in 22 years. The Dow Jones industrials declined nearly 400 points, the biggest drop in more than 15 months. The already weak dollar plunged against the Euro and gold prices registered their largest increase in six months. Russian President Dimitry Medvedev warned that the world may be headed for the worst economic decline since the Great Depression.

If this wasn't bad enough, an Israeli Transportation Minister Shaul Mofaz said that his country will attack Iran if it doesn't abandon its nuclear program. In addition, Israeli paper Ha'aretz reported that Prime Minister Ehud Olmert was in Washington trying to convince Bush to set aside our own intelligence estimate that Iran halted its nuclear program in 2003. Instead, he wants Bush to use the data presented by Israel, which says that Iran is still actively pursuing nuclear weapons capability. Daniel Pipes, who is a neo-con political commentator, told the National Review that if Obama is elected, George Bush will attack Iran in the remaining weeks of his presidency.

What was John McCain’s response to all of this great news? Well, he wrapped up the week by telling a town hall meeting in Florida that he wants to send a man to Mars to "inspire" the American public, as they were inspired when Neil Armstrong walked on the moon in 1969.

I’m sorry Mr. McCain, but dredging up a stale idea from the 1960s in a sad attempt to pretend that you have some vision is not going to fill our gas tanks, prevent Americans from dying in yet another senseless war, or put you in the White House.

McCain and Obama: Environmental Twins

John McCain’s endorsement of the Eurocrat “cap and trade” system for limiting carbon emissions demonstrates once again that the GOP has virtually become the Democratic Party. Of course, this isn’t the first time McCain has promoted this idea. In 2003, McCain and his good buddy Joe Lieberman introduced a “cap and trade” bill in Congress.

Europe’s experience with “cap and trade” demonstrates that it doesn’t work. Electricity costs have skyrocketed. Due to the lobbying of politically connected companies, most European countries participating in the program have higher carbon emissions today than they did when the treaty was enacted in 1997.

“Cap and trade” does little to help the environment and costs too much. Its only purpose is to further politicize the economy.

In the meantime, venture capitalists and entrepreneurs in Silicon Valley are pouring money and resources into solar energy technologies. New companies are springing up. Established companies are retooling to provide solar cells in addition to microchips. For the first time in years, high tech factories are being built in Silicon Valley.

The price of solar electricity is still a bit high, but it’s becoming more competitive. Electricity prices in the U.S. range between 5 and 18 cents per kilowatt hour. Abengoa Solar is building a 280-megawatt solar plant in Arizona that will produce electricity at 15 cents per kilowatt hour. The hundreds of millions of dollars being invested in solar technologies in Silicon Valley will ensure progress towards making solar energy competitive to conventional sources of electricity.

Solar energy requires a lot of sun. Nevada is one of the sunniest states in the nation. It’s also the seventh largest state in the country, covering 110,567 square miles. The federal government owns 86% of it.

Here’s a modest proposal for Bob Barr to differentiate himself from his rivals – auction off a portion of federal land in Nevada to companies who will use it to build solar farms. Couple this with a tax holiday for companies that generate clean electricity. This will do a lot more to reduce carbon emissions than the bureaucratic schemes of the McCain-Obama twins.

Bob Barr Democrats

It looks like Barack Obama has won the Democratic nomination. Congratulations to him. My guess is that he is going to be the next President. Not because he’s so great. Rather because George Bush has ruined the party that Barry Goldwater, Ronald Reagan, Newt Gingrich, Bob Barr, Dick Armey, and others tried to build.

Obama has a big challenge ahead, namely that white, blue collar voters in the industrial Midwest don’t seem to be inclined to vote for him. The big question for Bob Barr is how he turns these “Hillary Democrats” into Barr voters.

One thing that Barr should propose is to bring our troops home to save our manufacturing base. The U.S. spends countless billions of dollars every year stationing troops in Japan and South Korea. These countries respond by doing everything they can to put GM, Ford, and Chrysler out of business. They are able to compete effectively because their total tax burden is significantly smaller than ours, in part because we are subsidizing their military defense. We need to end the huge defense subsidy that American taxpayers are shelling out to over to 130 countries around the world and then use the savings to cut taxes to help make us more competitive.

We know why McCain won't propose this – he is admittedly clueless about the economy and he is too vested in his antiquated Cold War view of the world to make any real change. I do find it very odd that Obama won't talk about this either. Perhaps his elitist disposition makes him too tone deaf to the plight of blue collar Americans to care.

This gives Barr an opportunity to win over a lot of folks who voted for Hillary in the primary, while upholding our American libertarian values at the same time.