Following King Ludd - Off the Cliff - Massena Blighted
GM profits are down by 90% this quarter. A lot of that is due to the losses by their financial arm GMAC. More ominous however are their continuing loses from the North American car manufacturing operations. The reason: GM is not making cars that Americans want to buy. Is it any wonder that the Massena plant is closing. Those that invoke the “efficiency” of the market place as an almost religious mantra are now seeing that efficiency in its most brutal manifestations. Yes, the “invisible hand” of an unrestrained and unguided market is forcing the closure of the GM Powertrain division in Massena.
GM, like so many American companies, has put short term gains above long term stability. They have refused to invest in the future and come up with fuel efficient cars. In fact, after successfully conducting a leasing trial in southern California, GM crushed and buried the EV1, the electric battery car. Instead, they have scared the wits out of our local union leaders who, joined by our congressman, have resisted government benchmarks for fuel efficiency (CAFE) standards. The last time fuel efficiency was demanded by the congress was in 1976 after the Arab Oil embargos. Since then, Detroit and Big Oil has fought them tooth and nail. That was fine when gas was relatively cheap. It was also fine when Congress, could put its head in the sand about global warming. That was before the ice caps so dramatically started to break off.
During my debates with Mr. McHugh, there was always a question about the CAFE (corporate average fuel efficiency) standards. He has consistently voted against the CAFE standards. In fact, this amendment was sponsored by Sherry Boehlert of the 24th district (Rome, Utica, Cortland). Mr. McHugh’s reason: raising the CAFE standards would eliminate the Massena Power Train plant and 500 good paying jobs along with the additional economic ripples and job loses that would be caused by their loss. My retort to that was that Americans still had to buy cars but they would be buying more fuel efficient cars as directed by the government. My point is exactly what has happened: without government leadership in shaping national policy and goals, the Massena power plant, along with other GM plants throughout the country are on the chopping block. Sherry Boelhert saw that back in 2001. Our economy is indeed a mixed economy where the government does has a role of leadership and that we should not revert to a complete laisse faire purely market economy. It is too “efficient”, particularly when the only goal of corporate America is short term profit. Executive compensation is based on short term gains – a whole new era of robber barons. No wonder there was no investment in our future.
Likewise, he has voted to expand oil exploration and increase the amount available. His solution is to develop more supply instead of conserving. It is exactly what we don’t need. Conservation with more fuel efficiency is so much more effective for both the economy and certainly for the environment.
If it were up the to Luddites of 1811, there would have been no technologic innovation. They too buried their heads in the sand and revolted against new technology. The sad part is that both the energy crisis and the environmental crisis were predictable at least 12 years ago. At every turn, the Big Three and Big Oil have refused to accept their responsibility for long term investment and the Bush - Cheney administration, enabled by our congressman, has sided with them.
There are those of us that believe that the war in Iraq is about protecting our oil interests. For the same $1.2 Trillion that this war is going to cost us, we could provide a hybrid car to nearly every family in the US – halving our gas consumption and at the same time, forcing gas prices down due to decreased demand. What’s more, we would end our mideast oil dependence. But the war is good for Jefferson County. Our congressman associates the war with the success of Fort Drum, keeping it at maximum capacity. Hence, his unwavering support for the war. No matter what he says, there is always an excuse for his support of George Bush and his war.
We are now even a more government subsidized economy than ever. The loss of the Massena plant’s 500 good paying private sector jobs makes us more dependent on the government largess. It’s no wonder the Republicans and Mr. McHugh in particular embrace big government. It make us depend upon it and hence him. It’s good to have people dependent on you if you are an elected government official. It creates electoral constituencies that have a vested interest in keeping in office the hand that feeds them.
So Republicanism has changed from get the government off my back to let’s suck as much out of the government as we can.
Jeremy on 23 May 2007 at 8:26 pm #
The problem with fuel efficiency is that it won’t allow the oil industry and the US auto industry to ramp up for a “hydrogen” economy, which is the only thing that will keep the corner gas station, or its equivalent in business, and allow the petrochemical industry to remain relevant and functioning in the economy.
The use of hydrogen fuel cells, while clean technology, require the production of hydrogen by an inefficient process that looses a great deal of energy when water is converted to hydrogen by electorhydrolysis, the most efficient way to do it. It would require approximately 2,000,000 1.5 MW windmills to provide the power for the clean hydrogen that would be consumed daily by the US vehicle fleet, fueling up through our current 125,000 gas stations nationwide.
At a cost of between $500,000 and $1,000,000 per windmill, the infrastructure cost alone to convert to hyrdogen production would be between $1 and $2 trillion dollars, purely for the windmills to power the electricity needs to meet our vehicle fuel consumption needs for a hydrogen based system.
Hydrogen represents the petrochemical industry’s only viable option to remain an industry after transportation moves from oil based consumption. To support the infrastructure investment needed, clearly windfall profits will be required for a sustained period.
If you want to know why the GM plant is closing in Massena, look to the health care costs for US facilities, versus non-US competitors. Toyota saves $1400 per vehicle for health care costs versus GM because of the Japanese single payor universal health care advantage.
CAFE standards might help make GM competitive, but smart management would do that too. GM’s choice to build SUV’s at a time when Hubbert’s Peak has been reached is bad judgment.
The worry for GM and the big three should be companies like Tesla Motors in California who are working on fast charging capacitors for pure electric vehicles. If you can charge a car for a long road trip in 1 to 2 minutes at a charging station, they hydrogen economy that Detriot is focusing on along with their allies in the petrochemical industry will neve come to pass, especially since Tesla is already with a high performance sports car killing the MPG efficiency of even Toyota’s Prius with their electic car, which averages the equivalent of 125 MPG.
If Congress would just give US companies a level playing field with single payor universal health care, we might be in a better place to compete with Toyota.
Publius on 23 May 2007 at 8:35 pm #
Once again a superb commentary by Theophilus, who is responsible for the McHughWatch Blog. Why isn’t there an editor in the North Country or Central New York with the verve and foresight to run a regular Theophilus column in his or her newspaper? The citizens of the 23rd congressional district deserve better than to be misrepresented by a slick career politician, who is a lackey of one of the most incompetent, deceitful and corrupt administrations in the long history of our republic. Let’s hope that the union leaders, who have been filling Congressman McHugh’s political war chest year after year with the hard-earned political contributions of their rank-and-file, will finally realize that the interests of the working men and women of the 23rd district would be better served by a Represenative like Theophilus, aka as Dr. Bob Johnson.
Theophilus on 23 May 2007 at 9:43 pm #
Jeremy –
All excellent points. You’re preaching to the choir with regard to healthcare costs.
Our healthcare system, or should I call it our “sickcare” system, is killing both us and our economy. Even if the Big Three, including GM, had the foresight to make a car to compete in Europe and Asia (50 - 70 mpg) they would loose because of the $1400 surcharge added to the price because of the way we both finance and waste our healthcare dollar.
Thirty one percent of our what we pay for healthcare goes to non-medical administrative costs. Because of multiple payers with myriads of plans, insurance company profits and extraordinary regulation that hinders, if not hurts, patient care, we need a single national health insurance program where everybody is covered AND everybody pays, including the business sector. We could cut back our healthcare spending from 15% of the GDP to 10% of GDP and get our companies competing again.
I have always maintained that the most important economic issue facing us is healthcare financing.
Jeremy on 24 May 2007 at 12:40 am #
You too are preaching to the choir in regards to the administrative costs, but I would beg to differ about our most serious economic problem. It is on the list, my top would include in this order:
1. Cost of transitioning from an oil based energy system to a renewable or nuclear based energy system at a time when we have leveraged our economy to unsustainable levels. Einstein said it best, “the most powerful force in the world is the power of compounded interst” or something similar, as a nation we will certainly learn that lesson soon, but it couldn’t come at a worse time. The last time any nation faced this kind of energy crisis was Britain at the dawn of the industrial age when their was a tree shortage and they converted to coal. Before that it was the Roman Empire with an agricultural crisis that collapsed the empire and sent Europe into the Dark Ages. Renewable is the preferable choice, but nuclear might be the only practical choice at least initially.
2. The national debt, both consumer, home mortgage, corporate, and governmental debt. We are overleveraged for non-infrastructure and capital asset purchases. We are financing daily needs rather than infrastructure as has been the traditional role for debt in our society. This is occuring in no small part because of the tremendous tax that has been placed on working class Americans in the form of stagnant real wages and inflation and especially the hyper-inflation of the 1970s that hasn’t been factored out of the economy to date.
3. Overproduction in our agricultural sector, the last time this happened was the late 1920s, what followed wasn’t pleasant and occured simultaneous with a major shift in the economy, then agriculture to industrial, now, oil, to whatever as the energy supply.
4. The 14:1 leverage ratio through options and derivatives in the global capital markets that has been of prime concern to one of the world’s most successful investors Warren Buffet because he studied the history of the 1929 crash and markets have remarkable similarities because of this factor today.
5. Unfunded off the books government liabilities for Social Security that dwarf the on the books debt. Most economists agree there are nearly $40 trillion dollars in unfunded liabilities for the government through the Social Security system. We certainly don’t have leaders with the guts to acknowledge that we cannot afford to pay for this program any longer, which is going to hurt the economy in a big way because so few baby boomers are taking their last chance to prepare for retirement during their final years of work.
6. Lack of financial education in America generally and amongst baby boomers in particular.
7. The meager work ethic of the majority of the generation entering adulthood now, coupled with an entitlement mentality.
8. The assesment of American Civil Engineers that suggests that we need $1.6 trillion dollars in infrastructure investments during the next 5 years just to maintain the status quo, but don’t have the money to make the investments.
9. The drain on the economy due to our current health care system would be next.
10. The waste of resources on the war in a time when we really need to be dealing with a considerable number of pressing economic problems.
Jeremy on 24 May 2007 at 7:22 pm #
If you want to see an interesting aspect of reducing health care costs in the US that nobody is discussing, you should check out the post at
http://loomingstorm.blogspot.com
titled “New Patent Law=Lower Prescription Drug Costs!”
McHugh Watch » Twelve Squandered Years in Power on 02 Jun 2007 at 11:12 pm #
[...] He could have voted for CAFE standards to assure that GM would make cars that Americans and the rest of the world wanted to buy. But he continually voted against them, and GM is now headed for a nose dive along with 500 plus Massena jobs. [...]
Greg F on 15 Jun 2007 at 8:45 am #
This is a myth. No car company is anywhere close to those numbers.
CAFE
cj on 04 Jul 2007 at 11:11 am #
I am in the local car business and have been for the last 30 years I agree the us car companies in the past have been less then perfect but the current crop of autos are extemely well made I caution you that the new cars we sell are from a company located in JAPAN. I have seen the warranty cost of our new skyrocket since 2002. Why you ask. A company cannot expand as quickly as honda and toyota and not suffer quality problems. The president of toyota just appoligized to the us toyota dealers because in his opinion the quality of the average toyota is below par. But the real problem is a lack of citizenship. I am a prime example since I do not sell american cars but if I could do it over I would. When someone buys a import car for some odd reason they beleive they are smarter then someone who bought american. How in gods name do we think that we can continue to buy from china japan and korea and be able to be a growing economy. HOW i ASK I beleive we must learn to accept responsibility for our actions and actually learn to give a damn about our fellow man and find a way to support him