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December 4, 2008
Feinstein’s Bailout Wrinkle
Posted by Tina
The Detroit News has revealed that California Senator Diane Feinstein will not support the auto maker bailout unless California green carmakers get a piece of the bailout pie:
"I do not support disadvantaging the next generation of American automobile companies in an effort to save the first generation."
The particular company in question is Silicon Valley carmaker Tesla Motors, a company that has already applied for $400 million in EISA loans to build a new plant for their luxury $60,000, battery-powered family sedan. They insist that the original intent of the bailout legislation was to help the big three meet the big price tag of government fuel-mileage mandates but also to encourage auto makers involved in the new alternative vehicles.
I’m not for the bailout. I think the companies should go through the chapter 11 process that the government set up for troubled businesses. I’m also against the government subsidizing start up alternative companies. Henry Payne points out the fundamental problem:
“Commentary: California wants to raid Big 3 bailout cash for green cars,” by Henry Payne
** The trouble with government subsidies, however, is that they shield emerging companies from market demands. A closer look at Tesla reveals a high-tech company in deep financial trouble. *** According to a Nov. 3 issue of Business Week, Tesla looks "a lot like the Motor City." *** The magazine found that, until "a few weeks ago," Tesla had "dreams of one day producing a line of electric vehicles for every purse and purpose. Then the world changed. ... Investors, fazed by the credit crunch, were suddenly demanding tougher terms. (Tesla founder Elon Musk) began retrenching, cutting costs and postponing Tesla's second model, the $60,000 Model S sedan." *** The financing crunch is the second crisis Tesla has endured in a year. Its first electric, a highly anticipated $100,000 sports car, is over-budget by $40,000 per car and Tesla has delayed the launch by six months to find a way to make it profitably. *** Is its federal loan application seed money -- or bailout money? Auto analyst James N. Hall sees a grim future for the company: "If the market wants (electric cars) in the number Tesla is talking about," he told Business Week, "a larger auto company will bury them on cost." **
I keep thinking about the original Hondas. They were small, energy efficient and affordable...the Japanese were serious about getting into the auto industry. What serious businessman today creates a $100 thousand sports car as it’s initial offering? Well, a businessman with a big bloated ego and the mind of a child. These people aren’t interested in providing alternative (green) cars for the masses...they are great big boys playing with their great big toys. Feinstein’s wrinkle will add to government involvement (one of the reasons the Big Three are now failing) and cost taxpayers and customers even more. We may in the end be forced to hunt for car bargains in old barns!
Posted by Post Scripts at December 4, 2008 9:29 AM
Comments
No-no-no!!! If we start getting into these sort of silly side issues it won't stop. This is exactly how we get all this wasteful pork attached to bills. We must simply focus on voting up or down on the auto loans.
This is not the time to being pushing for electric cars and other pie in the sky adventures...millions of jobs are at stake and the future security of the nation.
M'gawd this woman is incredibly stupid ... or perhaps she's clever enough to have a hidden agenda that will make her and her friends richer with our money?
Posted by: Jack | December 4, 2008 8:15 PM
My, oh my, oh my, how things have changed over at GM. I am absolutely positive that I read somewhere Arnold had paid $80K for his Hummer. But you can now get the stripped down model for a paltry $35K.
Heaven forfend we all should subsidize something battery-powered that retails for a mere $60K.
You see, the thing is not how much it costs, but how much of a mess it makes.
Posted by: Libby | December 4, 2008 8:40 PM
Libby your points are not entirely without merit (regarding the mess part anyway).
So, you really don't see any danger in forcing Congress to also fund an electric vehicle manufacturer if they are going to fund GM, Ford or Chrysler? What about forcing them to fund hydrogen fuel cell technology, nuclear energy, solar power, etc.? Why not and where does it end?
All this other junk is not relevant to the issue at hand.
Why bring up Hummers juxtaposition to electric car subsidies is really lame. We never subsidized Hummers, they were a big profit item for GM. Why should we force government to subsidize electric cars because GM sold Hummers?
We have yet to make one practical electric car for every day use! They are still in the novelty stage and they will stay there until we have a breakthrough in technology and despite billions in research, nobody has found a way to make this a practical alternative...they simply don't make economical sense yet.
Posted by: Jack | December 4, 2008 9:39 PM
Jack you are being entirely too reasonable...and besides, Libby apparently believes there is something magical about Democrats being elected to office. Yes by golly, once in Washington they become superhuman, able to fund everything and solve all of the worlds problems FOR-EVER without a single negative consequence.
Libby gleefully suggests: "But you can now get the stripped down model for a paltry $35K."
But if nobody is working who cares?
It's incredible. Does she not see (or is she in denial about) the part these clowns played in creating all of this. Her precious progressive Democrats in Congress created rediciulous regulation and standards, their union buddies made rediculous demands, and their friends and former associates in the financial district made tons of cash while trashing lending institutions...what a record! What a legacy for the democrats in Congress.
The big three can't compete under the weight of it all and a whole lotta folks in those companies (and a passel in support industries) will be outta work or if retired...up a creek.
Government intervention, in sectors from the car industry to Wall Street, is responsible for this mess. Now she expects these same idiots making the same (or worse) policies will fix everything.
I'm not possitive Jack but I believe the article stated that language in support of green carmakers was already part of at least one bill being considered...if the bailout goes through (and you know it will) the little green car makers will get their subsidy.
Wonder when (if) the insanity will end...
Posted by: Tina | December 4, 2008 10:52 PM
I say let Detroit sink or swim on it's own. If the time for gas powered cars has passed and the time for the next thing has come, keeping the big 3 alive on life support is pointless. The unions and the CEO's are to blame for this particular mess and they do not deserve to be helped. The BILLIONS being requested will just be pissed away like the 9-11 funds or the Katrina funds ( don't get me started on "education" funding) with no improvements to show for the "investment".
If we are just going to flush good money down a hole, that hole should be healthcare. I mean, at least in the short term real people will see real returns on the "investment".
I do not pretend to be any kind of authority on how to make something like this work but it is clear that the people running things in the past, present or near future are not any better prepared.
I am sure this will hit a nerve with all of you good people, but this is my opinion and I am voicing it. If you don't like it please input some better ideas. This Country at one time was all about better ideas, bigger ideas, now its all about bigger whiners and bigger bailouts. This stuff has got to stop!
Posted by: Toby Stahler | December 5, 2008 11:41 AM