Fixing Detroit

[sailaway21]

A few thoughts on how Detroit might be fixed in a way that would maintain it as a capitalist enterprise and simultaneously not doom us to driving Sam Rayburnmobiles.

One of the obvious questions that has arisen during this debate over another bailout for Detroit is how they manage to make such a tidy profit selling cars in Europe while struggling here. The simple answer is that they make cars that Europeans want. It's more complex than that but, the point remains, you cannot build and expect to sell cars that people do not want. And there is a difference in what Europe wants and we want in the US. The best-selling vehicle in the US is a pick-up truck. You cannot give a pick-up truck away in Europe. Why do we not see though those nice high mileage cars that Vauxhall, Opel, and Ford build there here?

Part of the answer lays in the high labour costs associated with cars in the US. Part of it also lays in the fact that small, high mileage cars in the US are the least profitable, given those equal labour costs. The other part is the market. When Americans go out to spend some serious change on a car they tend to want something that reflects the amount spent. That usually means size and horsepower. Both are antithetical to good gas mileage. The small cars that get good mileage are not only small but inexpensive. It's the only way they sell. To get smaller cars with good gas mileage to sell and to get the manufacturers to put more features on them that bigger cars enjoy, gas prices need to be substantially higher. Absent that, they'll never sell in quantity nor will the profit margin increase on them.

Btw, I'm ignoring the UAW wage issues for purposes of this post. I'm not ignoring their impact but just acknowledging that they are a handicap that Detroit works under that must be addressed sooner rather than later.

We need higher gas prices for a couple of reasons. The most important is that there will never be a move towards any type of more economical transportation without them. The second reason is that our roads are falling apart. To the shock of many I'm sure, I'm advocating higher gasoline taxes. but with a twist.

Let's deal with the federal government and how they've helped to get us in this mess first. Two aspects of the problem rest solely in their hands and are likely to get worse, not better, under any type of "car czar". The first is the federal gas tax. The second is the CAFE standards.

The federal gas tax is a needless political boondoggle that ensures higher gas prices, poorer roads, and an excess of money spent on transportation systems that nobody uses. I believe that my state gets back something like 91 cents on the dollar for every dollar it sends Washington. The other nine cents goes to either building a bridge to nowhere or it goes towards trying to make the subways in New York work. In fact, New York itself steals money from it's tolls on it's bridges in and out of the city to fund mass transit that nobody really wants to ride. It might be justifiable if it's mass transit system worked. Like the auto industry we're criticizing, too much of mass transit money goes to over pay it's employees. Other cities, like Detroit itself, have fallen for the perennially popular canard that is light rail. Light rail systems sit disused across the country, confounding their proponents who not only prophesied success but revitalization of the areas served. Typical government boondoggles in conspiracy with contractors and unions made the construction of these useless systems a huge drain on limited resources. The way we build roads now, and light rail, is best typified by how the Big Dig in Boston was done and not how the millions upon millions of interstates were constructed in the 50's and 60's.

There is a solution to this. Eliminate the federal gas tax. Keep the actual tax but turn it over to the states and let it become part of the state gas tax. And let the states build and repair their own damn roads. The states could then raise or lower the tax as they felt necessary. The federal approach of one size fits all does not work. Roads in the north cost far more to build and maintain than roads in the south. The construction season is nine months long in a good year and there is this nasty little factor called frost that is the demise of most northern roads decades before similarly built southern roads show any wear. The state know what they're doing. While we're at it, let's get rid of the federal prohibition on making interstates toll roads. You now have to jump through a federal hoop to get a bridge toll or highway toll on a federally funded road. This is bad not only for roads but for traffic management. As an example, flexible bridge tolls have led to much reduced congestion, and wasted gas, on bridges where they've been tried. People leave earlier or later to avoid the higher toll, resulting in smoother flows of traffic across the board. States should be allowed to conduct their road building and their traffic management in a way that would make both more cost effective.

The next federal boondoggle is the CAFE law. This legislation looks to see what cars Detroit has sold and mandates that the corporate average be currently 27.5 miles per gallon. There are holes in this you can drive a truck through but the bottom line is that manufacturers are penalized for every car they sell that a buyer wants. That makes Detroit less competitive with foreign manufacturers. It also unnecessarily skews the marketplace by making smaller cars a "loss-leader". You're not going to make anything on a smaller car anyway so Detroit strips it down until it's suitable only for college freshman use. Sell enough loss-leaders and you get CAFE off your back. Detroit needs to make a good profit on every car it sells. Higher gas prices will ensure that.

The states need to fix their roads and, if they increase gas taxes, they can do so in a way that their citizens will see tangible results. Their citizens will naturally seek more fuel efficient vehicles as a result. Road projects will be judged on their merits locally. And historically industry has rewarded those states and communities with transportation infrastructure by flocking to those areas.

Another way of increasing gas prices that actually benefits us all is through insurance laws and premium collections. Many states are now no-fault states attempting to curb the proliferation of law suits stemming from auto accidents. The fly in that ointment is the uninsured motorist. In most states you can go down and buy a auto policy and pay $100 down, receiving a certificate of insurance. You then register your car but elect to pay no more insurance thus driving around uninsured until it's time to renew your plates. There are insurance penalties for doing this that amount to one being placed in assigned risk and paying a higher premium but, nothing that really prevent you from doing it again as long as you can say with a straight face that you stopped driving the vehicle for the last ten months!

A solution is to charge the basic insurance liability costs at the gas pump. anything over the basic liability, medical, and property damage would be a rider to your policy you'd have to contract for with an insurance agent as is done now. The basic minimum policy that all states require their drivers to carry would be bought at the gas pump! This has a number of benefits. It eliminates the uninsured driver. We're all insured because we bought gas. It also treats drivers more equitably insurance wise. Currently you can get a policy that is based upon miles driven but it's not realistic. Most policies start at 15,000 miles or less, which is the national average per vehicle. If you're a little old lady who drives to the grocery and church to the tune of 5,000 miles per year you pay the same as your neighbor who drives 15,000. Of course, if you payed at the pump you'd pay less as that little old lady and you'd pay even less if you drive a car that got good gas mileage. The high mileage drivers wouldn't like it but then, they're the ones on the road more and more at risk insurance wise. The biggest effect though would be to raise gas prices in an honest way, while providing a tangible benefit, and making high mileage cars more desirable.

The next administration is going to likely have a "car czar" and it's difficult to see how that will be good for either Detroit or us. Under those CAFE standards mentioned above cars that use ethanol or alternative energy get the manufacturer a break. They don't actually have to use less gas to do so...they just have to be politically correct cars. So a hybrid Cadillac Escalade is a fuel-efficient car while a Mercury is not! If a car get's 26 miles per gallon it's part of the problem. If it get's ten miles per gallon but runs on E-85 or switch grass or recycled french fry oil it's an energy star special. Let's throw all this crap out the window and let people buy what they wish based upon market forces and their ability to pay. Because the alternative is going to be something on the order of the old Chech Lada running on batteries that are always going dead. Detroit is going to go along with all of this, complete with the usual UAW wages, because they're going to be able to be US government certified in what they produce.

In the meantime, how's about the government telling the auto companies to go pound sand and file for bankruptcy so we can have "change you can believe in". And at the same time, let's get the government out of the car business. We don't need CAFE standards and we don't even need safety standards. We just need higher gas prices and we can let Americans buy what they damn well choose.

[Giulietta]

copy and paste again are we???

[danjarch]

Sway, I'll pick the first bone. Insurance through the pump would make me pay for the guy who's got 11 points on his license and a history of wrecks. Add in that the state governments are known for being easy targets for welfare, medicare, and rental assistence fraud. I can see it now. Guy's buddies car just blew a gasket, so back his car into the side panel. Body work worth more then the beaters worth. Buddy gets the check, sends guy couple hundred for a new bumper then buys another beater.

[sailaway21]

Dan,
All of those would be adjusted through a rider. The pay at the pump wouldn't address the difference in driving records nor the fact that the guy who hit you was in a diesel Chevette when he backed into your Ferrari. Those are, in the big picture, small fries. Medical and liability are the biggies in insurance and that guy with eleven points who hits you now probably doesn't have it anyway and no assets to go after.

ps
You're not going to believe this but I got the idea from some guy I heard on NPR years ago! Heck, even I don't believe it! I've torn it apart and I think it's workable and better than what we've got but, keep the criticisms coming as I'm sure there's much I haven't considered.

[KODAD]

I like it. I'm a big supporter of states rights. Get the money out of DC and into the states coffers. Easier to keep track of and would generate more public interest in the way we govern ourselves. I'd like to see what other downside this group can come up with, as I can't see any.

[danjarch]

I also a big fan of states rights but the chances of getting DC to give up the gas tax is about the same as getting a snow cone in hell. Remeber the Reps we're going to get DC out of the local schools and now we got the "No Child Left Behind Act". Any attempt to change the fed rate on gas would likely back fire and wind up costing us far more. Probably wind up telling states what they had to charge and what they could spend it on, then take it away from them if they tried to do anything else with it.

No I'd favor the state government just raising the taxes on they're own and deciding what to do with it. Leave the fed alone. I don't think the govenor or the legislature here in Texas even have the back bone to peg the current tax to the price of gas, much less raise it.

I'm Ok with toll roads but if you think about it they encourage bigger vehicules rather then small. You pay per axle not weight so I pay the same for my F250, four door with the full size bed that wieghs 8500lbs when empty, as the guy in the Honda civic. Same goes for that class b box truck that weighs in at 24,000lbs. Your basicly overcharging the comuter that could use far less expensive bridges and roads to subsidise bigger trucks.

Back to the Liability thing though. I could see this quickly becomeing a nightmare for the law abiding. Waiting months to get your car repaired, finding out the shops that got the contract to do the work for the state have lobbied and won exemptions from lawsuits to keep the price down. Then the crap about who has to pay for damages, this guy hadn't changed his registration to this state but has lived here for ten months and his insurance company is trying to say the state should cover it. Then what if someones license is suspended or revoked, is he still covered? I know your not a fan of national heath insurance. I would think that most of the same reasons would apply here.

[xort]

national health care for autos?
Sway, have you lost your mind?

[Giulietta]

Hey Sway...here is a solution for that problem...CLICK

[chucklesR]

Has anyone here ever tried to import a car made in Europe to European standards into the U.S.?
Try it some time and find out why it can't be done - safety requirements et. al.

One of the differences in fuel economy is the safety equipment and
requirements.

When I was stationed in Sicily I drove a Toyota MR2 that I brought with me. Toyota didn't sell them in Europe. I sold mine to a local for a premium and bought a Ford, built in Germany to US specifications, what a nightmare.

[sailingdog]

Apparently, the bailout was killed because the UAW refused to cut their pay starting in 2009... taking the short view... since, if the big three go under, the UAW won't have much of a reason to exist.