Subsidising the oil burning industry

George Monbiot has this story from the northern hemisphere about ‘the other bail out’:

Last week, George Bush agreed to lend $25bn to US car manufacturers. It’s a soft loan, which will cost the government $7.5bn (1). Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.

It has already crossed the Atlantic. Yesterday European car makers demanded that the EU hand them E40bn ($54bn) in cheap loans to match the US subsidy(2). Where will the public spending spree end?

Monbiot then has a fairly detailed look at car makers’ failure to get to grips over the last decade with simple environmental measures such as reducing the average emissions (grams of CO2 per kilometre) produced by their cars.

 What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have ten rows of sliding beads or 100. In 1974 a stripped-down 1959 Opel T-1 managed 377 miles to the US gallon (160km/l)(17), which equates to 15 grams of CO2 per kilometre(18). There is no technical reason why the maximum limit for mass-produced cars shouldn’t be 50g/km.

Meanwhile, one company that doesn’t need bailing out by governments, and whose products get a lot less than 120 g of CO2 emissions per kilometre is Giant Manufacturing, “the world’s largest bicycle-maker which sold a record 460,000 units last month and is heading for its best year ever.”

Sadly we don’t have a strong local Kiwi-made bike industry here in New Zealand to compete with Giant (or a car manufacturing industry either for that matter). Which is a shame, because it is the sort of high-skilled, future focused industry that should have a place on our shores if we could only give it the support it needed to get established.  Giant shares are slightly down about 5 percent on their value from this time last year, whereas the Dow Jones industrial is down about 40 percent. Ford and General Motors are down 75 percent and 85 percent respectively. I know which one I think looks the best bet for  future investment as peak oil arrives.

9 Comments Posted

  1. Sam Buchanan,

    – “Bloody workers ruining the economy by demanding pensions, health schemes and decent pay…”

    You seem to imagine that it would be possible, in a free market, for a company to maintain above average profits through a policy of under-paying workers. That can never happen.

    You don’t seem to grasp that the market sets wage rates, not companies. Contrary to what you imagine, a free market ensures that profits are competed away to the minimum level, because companies have to compete for workers by offering the best benefits package. How do you think Toyota factories in the US attract workers, if not by offering the best deal? Why do you think Wal Mart gets multiple applicants for each position, if not by offering the best package?

    Hence a dynamic free market favours workers, not employers.

    Labour cartels exist to extort above-market rates from employers.

    On this occasion, the notorious UAW has extorted such vast salaries and generous pensions for the hundreds of thousands of retirees that at least two of the big three have been walking bankruptcies for years.

    That’s fine. That’s the market. Let them go bankrupt. Let the retirees lose the unsustainable pensions they extorted.

  2. “The UAW looks out for all ITS workers and here’in lies the problem”

    That’s what you get in a free market – everybody out for themselves, regardless of the consequences for everyone else. Funny, some people still think this is a good idea.


    The UAW looks out for all ITS workers and here’in lies the problem, they would rather see all their workers out of a job than some.

    I think the UAW would like to see detroit stay the same with their members all collecting handouts from the american taxpayer.

  4. You greens should all head to Detroit in order to witness what a union can do to a city. Even if GM, Ford wanted to build good cars they can’t thanks to the union deals done back in the 60’s 70’s. The smartest thing for GM to do is to go bankrupt. If I had the money I’d walk in their buy the bankrupt GM fire every worker and then hire them back with out the pensions, etc. My focus would be on hiring the guys who work in the plants and not the pencil pushers who got GM into the postion its in. Once you’ve re-hired everyone minus the union then i’d get down to making good efficient cars.

    Of course the above isn’t going to happen, the union has to have its way. Union pension schemes here in the US are all out of control and the worst ones are the state funded pension schemes, New Jersey spends so much money trying to fund the union pension schemes.

    Living here in the US has really turned my off of unions after witnessing the damage they can do.

  5. “Making bikes? “Highly skilled”? Good grief.”

    Compared to New Zelanders usual pastimes – cuttng down trees, catching fish, slaughtering sheep and milking cows, it probably qualifies.

    “these commies should be allowed to reap the whirlwind of their own recklessness, greed and stupidity.”

    Bloody workers ruining the economy by demanding pensions, health schemes and decent pay. They should be willing to suffer for the sake of the sacred sharemarket. Do they think that the economy is run for their benefit or something?

  6. Wat

    The decisions about what to sell, what to advertise and what to design and build are not made by unionized workers.

    I note as well that those same workers were able to be used by Toyota and Nissan and Honda to build cars at a profit.

    Now as much as the unions jacked the big three, the big three has been jacking the American consumer… and the American consumer in his completely uninformed and uneducated view ( 20% functional illiteracy in my country ). Basically the whole thing rests on his ignorance.

    Not one of the 3 emphasized efficiency and economy. They’ve improved quality from a dismally parlous state but have yet to match the Japanese products and only barely meet the Korean standards. Overall Wat, the US car industry is “hoist on its own petard” and there is plenty of blame for everyone.

    I excuse the Unions only somewhat because they were only following the examples set by the CEOs and other worthless sh!ts who were running the companies at the time. Only one of them in my memory gets a passing grade and that was Iacocca… the rest were parasites on a dying host. The Unions should have seen it coming.

    With the 25 billion bailout bucket slopping over them the first thing we saw, within less than a week mind, were advertisements for no interest, no money down deals on new SUVs. It looks like the American consumer woke up some however, as SUV sales are still nowhere in sight.

    Aluminium tube extrusion and frame welding aren’t completely amateur hour activities but I’d certainly accept your point that this has little to do with “Rocket Science”… and I’d further allow as that Frog may have overstated the case for a NZ bicycle industry… We COULD have one if we wanted… the shipping costs for the Al to go to China and the Bikes to come back could be NZ wages instead. Not saying it would compete with Chinese wages, just that it MIGHT be feasible here… barely or with only some minor subsidies. Not the kind of easy win that I’d invest in with what little money I can get.

    Peak Energy? – you may be interested in this….


  7. Prove me wrong, Greenies! Put your money where you big mouths are, just as we business owners do each and every day.

    Go on, mortgage your house, as I did. Or put your life savings on the line. Take out a loan. Or don’t you *really* believe in Kiwi Made bicycles?

    Methinks you don’t…..

  8. Of course, the reason the US car companies are in such dire straits is largely because for decades they have had to vastly over-pay in terms of salaries and benefits to a militantly unionised labour force; something normally very much to the liking of you greens.
    Good to see you are condemning the bailout and agree with me that these commies should be allowed to reap the whirlwind of their own recklessness, greed and stupidity.

    “Which is a shame, because it is the sort of high-skilled, future focused industry that should have a place on our shores if we could only give it the support it needed to get established…”

    Making bikes? “Highly skilled”? Good grief.

    I fixed our toaster once. I guess that makes me some sort of a rocket-scientist in your book.

    “…I know which one I think looks the best bet for future investment as peak oil arrives.”

    As the man said, if you really thought it was a good future investment you would go for it yourself, whereas in fact you’re calling for money to be forcibly appropriated from the workers in order to subsidise your fantasy.
    Do you see the difference? Do you see how you’re very cautious with your own money, but don’t think twice about throwing other people’s money around? That’s one important reason why socialism doesn’t work.
    Can you explain, for example, why Raleigh bikes are all made in China yet you presumably envisage a similar venture sustaining a significant number of high-paying jobs in New Zealand? How would that work, exactly?

    And I think we’ve had enough “peak oil” threads for a while, thank you. Two minutes reflection reveals the complete paucity of your argument. We are not interested in oil per se. Oil is just one form of energy, and it’s energy that we are really interested in. Are you saying we’re at “peak energy”?

  9. >>if we could only give it the support it needed to get established

    Here’s a thought.

    Get your membership to sign up as shareholders, put together the venture capital from their savings, and put their money where their mouths are?

    There’s the support. Wonder no more….

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