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Saturday, July 16, 2005

The Fall of Detroit?

Continuing on with a theme of unmitigated negativity I read an interesting article concerning the current status of auto manufacturing in this country. Evidentally Canada now out produces the US in manufacturing cars. Why exactly? What does Canada have that we don't? For one they have government backed health care.

I don't care what side of the aisle you are on in terms of the political spectrum, but this country being the only one outside of sub-saharan Africa not to have socialized health care is wrecking what little manufacturing base we have left, and for that matter harming entrepreneurs. Can you imagine opening up a restaurant in this day and age, with miniscule profits, and then on top of it all having to pay all your employees' health care? The Republicans say they are on the side of the small businessman, but I can't see how that can be when they are shafting him with expenses that make his business uncompetitive with foreign ones. It's no wonder that jobs are being exported to other countries. It's just cheaper, especially when foreign countries will subsidize a business by paying the health care bill.

The argument that socialized health care would prevent medical scientific progress is a poorly done argument that is usually trotted out by drug companies in defense of their continued fleecing of Americans. You mean Europe hasn't produced anything scientifically? Or Asia? Scientists invent for status all the time, not just for money. We are no longer the leader in medical research in the field of cloning or stem cells anyway because of further myopic policy making by our leaders. The only correlated activity with private healthcare is outrageous expenses by doctors and drug companies.

You might be saying at this point, doesn't the US have the greatest health care in the world? Why tamper with it? That's news to me because our infant mortality rate is higher that many socialized medicine countries, and our life expectancy is lower than many as well. Ask any doctor, which is healthier: seeing a doctor regularly for checkups, or waiting until the last minute in an emergency. Clearly the former is the way to go, and the latter is incredibly risky. Unfortunately many Americans do the latter because they can't afford any other way. The result? Lower average life expectancy, and higher infant mortality. Many poor Americans think pregnancy is just having the baby, because that's all they can afford. Here's an informative link from the American Medical Student Association.

A successful capitalist economy relies on government support, contrary to the libertarian fantasises of many Americans. Governments are responsible for roads, water to desert cities, product oversight agencies that stop corporations from making dangerous items, the cleanliness of the air we breathe, etc. China is heralded by many conservatives as the way to run things, well they are incredibly socialized, far more than we are. Their workers have mandated vacation days, and you guessed it, they have socialized medecine. Many corporations there are owned in part by the government, and tariffs on foreign goods are astronomical.

I believe this country is selling out its domestic manufacturers. The auto market is not a level playing field. Japanese car companies are backed by their government, as well as the German ones, to a much greater extent than our companies. The tariffs on their cars into this country are miniscule. To some extent foreign competition has improved American cars, but I would argue government oversight is the real factor in improving them, and all cars sold in this country for that matter.

I expect some real disagreements by people reading this entry, but there's one thing that cannot be argued against. We are losing manufacturing jobs to foreign countries.

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Friday, July 15, 2005

A Brief Quote Concerning Doomsday

The Car Connection has a brief mention of future gas prices for America. I can't find a link so here is the quote in its entirety:

Higher Gas Prices Here for the Year


Gas prices will stay at current levels through September and may even go higher, with no drop in sight through the end of the year, according to the government's Energy Information Administration. The EIA, a unit of the Department of Energy, says that gas prices will average $2.25 a gallon through at least the beginning of September, about 35 cents a gallon more than it cost in 2004. Prices will remain high throughout the year and will likely stay at $2.20 a gallon through all of 2006 as well, the EIA adds. Gas prices have risen in the past two weeks to an average of $2.32 nationwide because of summer travel, the impact of Hurricane Dennis and the uncertainty of future weather in the energy-producing Gulf of Mexico.


Well then, that's certainly good news. Gas prices staying at that constant level means without a doubt that mankind has reached the point in its existence where it consumes as much gasoline as is drilled, as it is drilled. Those of you who own General Motors stock would be wise to immediately sell it, as this is as high as it will get until the company is sold to Toyota. Once the employee discount sales rush ends, new SUVs will not sell, even if they are the most beautiful, best handling bulky creatures ever devised. The only chance that gasoline prices will go down lies in the economic activity of the US and China. If either country goes into a recession, that will mean less gasoline consumption, and lower prices. But of course if the country is in a recession, it still won't be able to buy SUVs because it won't be able to afford them. With our own government making short term predictions like the one above, I just can't see any positive economic indicators for the auto industry on the horizon, especially that part of the auto industry that depends on sales of large trucks and SUVs.

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Wednesday, July 13, 2005

Urea or Myea?

It's an absolutely stupid and corny title, but it was all I could think of on the spur of the moment. The picture here is of urea in a powder form. Urea when mixed with diesel exhaust breaks it down into nitrogen and water. Several manufacturers wish to implement their diesel exhaust pipes with urea sprays. This will in turn enable diesel engines to meet the exhaust emission requirements of the US, which are the strictest in the world and hinder car companies from introducing en masse diesel cars. The EPA is worried that urea sprays will break down, and the diesel engines will pollute.

It's an important issue, but it is one that the government needs to deal with. In many European countries, cars must undergo rigorous road worthiness tests, that involve pollution checks and the like. It's something that should be done in this country as well. Yes it seems as an impingement on freedoms, but my ability to breathe air is regularly impinged upon as well. A smog check could also add a urea check, and this could be an additional source of revenue for state governments.

Another worry is that car companies have not established suitable urea sales infrastructure around the country in order to replace and refill cars. My take on this is that if urea can be charged to customers, then car companies will bend over backward to get this chemical to market. Now along with engine oil, transmission fluid, brake fluid, gasoline, antifreeze, and that worthless soap that goes into the windshield spray, car companies and their respective dealerships will have yet another chemical to charge customers with.

Urea should be allowed into the country if the EPA finds that it does in itself cause pollution, and if it really is an effective way of dealing with diesel exhaust emissions. Never before have car companies made a system that sprays into the exhaust, so this is new technology that will undoubtedly have some bumps before being perfected. But with fuel prices increasing steadily, and many not able to afford expensive hybrids, this could be the solution needed to bring diesels onto the market and not retract emission restrictions. The US needs efficient cars, and it needs them now.

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Tuesday, July 12, 2005

Flawed Logic and Gas Prices

As the price of gas rises inexorably and creates a ripple effect in the price of goods and transport, one key issue has become the price of used vehicles. Used trucks and SUVs' values have plummeted while the value of used small cars has skyrocketed according to the Detroit News. Owners of SUVs and large trucks are also selling their vehicles as fast as possible, causing the value of those trucks to fall dramatically since the market for them is inundated. What bothers me about all this is the steadfast refusal of the media to address what is really behind this issue (our planet running out of easily drillable oil), and instead retreating into the box and thinking that the real reason for this historic selling off of SUVs is a myopic narrow reasoning of the situation. Here is a quote from the above article linked above that shows this:

But owners of big SUVs may also be dumping their vehicles because they foresee trouble in new large SUV sales, which are plummeting despite rebates of more than $4,000 by some manufacturers.

Huh? The reason people are dumping their SUVs is because they don't like paying 100 dollars a week at the pump. Only someone like an automotive sales analyst would assume that everyone thinks like he or she does, and makes asset purchases on the basis of future sales of similar assets. There is no evidence whatsoever to back the above claim, but there is plenty of empirical data and evidence to support the claim that higher gas prices lead to consumers purchasing more fuel efficient cars.

As long as the media and economists everywhere refuse to see the big picture and convince car companies that plummeting truck sales are really just an anomaly and not a trend, we will see continued failures and missteps by companies, and thousands of jobs lost. To truly analyze an industry, one must look beyond sales statistics and realize that there are many industries that function to support the auto industry. Dramatic changes in the oil industry, the steel industry, the plastics industry, etc. means dramatic changes for automakers. No amount of analysis of sales statistics will reveal to you that the price of oil is behind customer's changing taste. It's time for the products to reflect this new data.

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