Jul 31, 2008

Maybe we could rob Peter to pay Paul

Two items in today's news provide quite a contrast:

The first, from the Daily Executive Briefing you can get as a member of SME (really, you should join), says that we ought to spend our tax money to bail out companies that couldn't figure out things that Toyota and Honda have been doing right ---

The AP (7/31, Thomas) reports that car companies "could receive up to $6 billion in direct loans to modernize their assembly plants to build gas-electric hybrids and advanced vehicles under an agreement reached Wednesday by Senate budget leaders." Of those funds "$300 million would help research and develop advanced batteries critical to plug-in hybrid vehicles," Sen. Debbie Stabenow (D-Mich.), "who has sought the funding," said.

The Detroit News (7/30, Shepardson) added that the $6 billion "for Detroit's Big Three automakers, which have struggled to raise funds in a weak credit market," would be "in low-cost loans." According to Stabenow, "the Senate [will] consider a second stimulus package in September, which will include a portion of the $25 billion in loan guarantees over five years for auto plant retooling." Stabenow explained that "she had won an agreement from Senate Majority Leader Harry Reid to include the $900 million in funding" necessary for Congress "to back the $6 billion in loan guarantees for automakers." Senate Democrats described the "$300 million funding for advanced battery research" as "necessary 'to help resolve problems in developing long-term, cost-effective storage systems, the biggest hurdle to bringing plug-in hybrid or pure plug-in vehicles to the marketplace.'"

The Detroit Free Press (7/31, Hyde) notes that the legislation "will run into the election-year politics...and Democrats did not offer details on how they would pay for the measure. The Bush administration has said it opposes a sequel to the $168-billion stimulus program passed in February." Senate Democrats argued that "the bill would create about 200,000 jobs, including 60,000 in the auto industry through the Advanced Technology Vehicles Manufacturing Incentive Program."

The other came via Google News from Market Watch. You won't be surprised at that -

Exxon Mobil on Thursday said second-quarter net income rose 14% to $11.68 billion, or $2.22 a share from $10.26 billion, or $1.83 a share in the year-ago period.

Really, if we want to give money to automakers, why don't we make the oil companies - whose prices have killed sales of higher-profit vehicles - some temporary help? Then we can continue to waste oil on unrealistic commutes in SUVs, but we could buy some time for the Detroit Three (they're not the Big Three anymore) to rationalize their product line and figure out how to reduce costs to the point where they make some profit on prices that represent value to the customer.

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