Brain-Jockey

A Mad Hatter’s Summer of Events

Written by Audrie Zettick on July 13, 2009

Like Alice at the Mad Hatter’s tea party, taxpayers have recently been assaulted with many wish-it-weren’t-for-real events that make me watch for the white rabbit.  It’s been a Wonderland of events and characters.  Among them:

 

Queen of Hearts: Nancy Pelosi.  Politico recounts how she “whipped” together the votes for Cap and Trade, replacing “off with their heads” with dogged, in-your-face (and perhaps other body parts) persistence.  Worried more about her reputation than the content of the bill, witnesses recounted that she and her sidekicks even surrounded one holdout–Rep. Joe Baca–who then (surprise!) voted in favor of Cap and Trade.   No wonder Congressman Ciro Rodriguez sprinted like a rabbit out of the House chamber after surprising Pelosi with a “no” vote. 

 

The Card-Deck Queen’s Men–The eight Republican Congressmen–called jellyfish by Deroy Murdock but who more resemble the cowed cards–who enabled the House to pass Cap and Tax.   They fell flat on their faces when the Queen appeared, but these Congressmen plus others in vulnerable districts will be trying to paint the roses red as they attempt to cover up their mistakes.

 

Tweedle Dee, Tweedle Dum and Even More Dum: Some of my home state Congressmen who voted for Cap and Trade in spite of the fact that PA gets a majority of its electricity from coal (great editorial here).  It’s been estimated that Pennsylvanians will see over a $3,000 hike in annual electricity fees.  Here’s an estimated impact by Congressional District.

 

The Caucus Race (click here if you don’t remember this part of the story), represented by the G8 and especially India and China on climate change.  In Alice’s story, the animals, led on by the DoDo, have a nonsensical race ending in everyone getting meaningless prizes, with Alice finding her own prize, which she gives to DoDo who presents it back to her.  Yeah, we may be a high consumption society, but it’s our economy and innovations that have given much of the world the freedoms and standards of living that have grown from development.  Having the U.S. commit to harsher standards while India and China go nearly full speed ahead with development is an absurd gesture. Maybe we should all ride bicycles like they do in China.   

 

Plus, even though Climate Change Happens, even THINKING that anything we do will make any meaningful impact on Global climate change is the absurdest gesture of all.  The G8 nations committed to limiting global warming (by reducing carbon emissions) to no more than two degrees.  A large volcanic explosion could do just that and more (will they claim success?).  A closer look at Climate Change science and models shows that all the pain caused to our economy by legislation like Cap and Trade is much greater than the impact on the environment.

 

The Dodo: New York Times columnist Paul Krugman.  He is emphatic that global warming is a bigger threat to America than terrorism.   Enough said.

 

Cheshire Cat: played by Obama.  I considered casting him as the White Rabbit, since you can argue that the American public followed him down the rabbit hole.  The Cheshire Cat might be more appropriate, as this character appears to be wise, yet Alice never knows if the cat is really steering her wrong.  

 

Recent White House policy on Iran was every bit as perplexing as anything the Cheshire Cat said to Alice.  In spite of the recent election-sparked violence in Iran, Iranian officials were originally invited to our July 4 celebration–first time they’ve been invited since the Iranian Revolution.  Then they were disinvited.  Of course, this was after it was clear they weren’t intending to show up anyway.  In Wonderland, this all makes perfect sense. 

 

And proposed health care reform that claims to allow that we keep private insurance while all but ensuring disappearance of private plans is, well, perfectly sensible too.

 

Czar of Czars: Obama.  Maybe we need a remake of Wonderland, featuring the Czar of Czars instead of the Queen of Hearts.   ”With President Obama, the CZAR business has not only picked up.. It has been put on Steroids, Human Growth Hormones, Protein Shakes, Speed, and Epinephrine Shots.”  Motley Fool

 

“Drink Me” potion:  Alas, we the American people are at fault, willing to drink whatever comes our way if it looks to benefit us, darn the consequences.  Growth of Big Government is the result. As Robert Samuelson recently noted: “Without anyone much noticing, our national government is on the verge of a permanent expansion that would endure long after the present economic crisis has (presumably) passed and that would exceed anything ever experienced in peacetime.”  

 

Time to pull ourselves out of the Rabbit hole with a dose of reality.  I wish I’d wake up.

Give Back the Bucks Before Bailout Redux

Written by Audrie Zettick on December 12, 2008

This latest round of bailout mania was similar to buying new tires for a car that really needs a transmission overhaul.  Nice idea, might be needed, but ultimately won’t make much of a difference.

 

  

At the start of bailout mania, it was common knowledge that the companies in trouble from the financial industry were among the biggest contributors to Federal candidates.  Since 2002, the financial sector has given more than $1.1 billion to congressional candidates. This isn’t a partisan issue, it crosses party lines.  

  

And now comes the auto bailout.  

  

 

Some might claim money doesn’t talk, but in this case, it’s screaming.  According to the nonpartisan Center for Responsive Politics (which runs the website OpenSecret.org), House members who voted for the bailout received significantly more money than those who did not.

 

  

“House Democrats voting to bail out Detroit’s Big Three have collected 44 percent more money, on average, from auto manufacturers, dealers and unions than Democratic opponents of the bill. Republican supporters have collected 62 percent more than opponents in their party.”

 

 Can’t wait to see the Senate figures.

 

 

 Bankruptcy versus Bailout: Where Money Counts 

 

 

For the automakers, one of the major differences between the option of bankruptcy and the government bailout is the effect on the unions.  Bankruptcy would virtually guarantee that union contracts become null and void and/or must be renegotiated. With a government bailout, there is no guarantee of union concessions.  (As a condition of the bailout, Sen. McConnell fought for a legislative alternative that would have required the unions would lower their wages to equal those of foreign car manufacturers who had plants in the U.S.–it didn’t fly)

 

 

This why we should all be worried about bailout redux: the United Auto Workers PAC gave $1,899,950  to Democrats in the 2008 election ($12,500 was also given to Republicans……this maybe buys a lug nut, not new tires).  

 

 

The money being thrown around by the auto industry itself is more evenly distributed  but GM, Chrysler and Ford still gave significant money.  Auto dealers traditionally give more to Republicans, most likely because their perspective is small business…policies traditionally supported by the GOP.  

 

 

 

Nancy Pelosi, in the 2008 cycle, received  $10,000 from the AFL-CIO  (which includes the United Auto Workers.  Rahm Emanuel received $4,000 directly from the UAW. Might sound paltry until you look at the big picture:    

 

 

“The UAW ranks 16^th in “heavy hitters”  for donations since 1989 — having given $25,188,550 (98% to Democrats)”

 

 

As Politico.com reported, Chrysler, GM and Ford spent $926,500 on federal candidates and political committees in 2008 — $167,500 of it during the period between Oct. 16 and Nov. 24 alone.

 

 

Since analysis shows a trend in how members of Congress vote on this issue based on donations, I call on our elected officials to give back the 2008 donations that appear to be creating a conflict of interest.

 

 

No new tires…..I want a new transmission.  

Tough Love for Detroit: No “Just-In-Time” Bailouts

Written by Audrie Zettick on November 19, 2008

“Google” a phrase like “Detroit auto bailout” and you’ll find thousands of articles, many bemoaning the state of the Big 3 U.S. automakers.  Search on the terms “Honda Indiana Plant” and you’re likely to get a bunch of hits showing articles from 2006 (like this one from CBS News) lauding the possible opening (and lobbying for) an American Honda manufacturing plant in Greensburg, Indiana.  

 

Be careful when you read your list of hits, though.  You might miss the one or two about the Honda plant that opened this week.  Yes, opened.

 

On Monday, a Honda plant with over 1,000 employees (expected to eventually employ 2,000 or more workers) opened, beginning the manufacture of the Honda Civic.   This follows expansion of a Toyota plant in Lafayette, Indiana, where the Camry began assembly earlier this year. 

 

As it should be, Honda is able to respond to marketing and economic conditions by producing the smaller more fuel-efficient Civic.  Toyota is contracting in some areas, adjusting labor and lowering SUV and truck production, to respond to conditions that favor the smaller Camry and Prius hybrid. 

 

It’s not that the Big Three don’t adjust.   They have tended to overproduce regularly, resulting in having too many cars to move (much to dealer complaints) and the resulting special incentives and worker layoffs.  Of course, prices then rise as, eventually, demand and supply meet a critical point.  This past summer, Chrysler shut down all plants for two weeks.

 

On the other hand, Toyota historically has held fewer days of inventory than the Detroit automakers.  Most of the time, this keeps them in strong financial position.  Sometimes it backfires, such in this past summer when consumers seeking smaller fuel efficient cars were forced to look elsewhere due to a 6-month waiting list at Toyota.  The irony: Toyota’s demand was up at a time when sales dropped dramatically for U.S. automakers. 

 

The difference between Toyota’s and Chrysler’s periodic shutdowns is more than scale.  These include:

 

• Lean Manufacturing: Toyota’s just-in-time inventory (or Lean Manufacturing) approach is part of a larger strategy that allows them to adjust where and what models they make.  Toyota’s renouned approach allows them to cut waste all along their production process. 
• Business risk:  The downside of running lean–running short of cars–has less of an impact on them then overproduction and carrying the inventory at the plant or at the dealers. 
• Economic Impact:  Toyota’s temporary labor reductions and model reshuffling affects the local economies less than Detroit’s actions.  Among the strategic measures implemented by Toyota: shutting production at all plants for two extra days in December, laying off some temporary workers and eliminating one shift making the Toyota Tacoma at the California-based plant they share with GM.  Compare this to Chrysler’s shutting down for two weeks or laying off 1,000 workers.  

 

We’re not talking cost of labor here, we’re talking plain old business planning.  What makes lawmakers think that bailing out the Big Three will change their management practices?  Or, more frighteningly, having government at the helm (a la Pelosi) will result in effective management? 

 

Yes, there will be regional economic fallout, but it’s time for tough love for the U.S. auto industry.  Detroit sees us as a source of funding.  Toyota and Honda see us as consumers, and plan accordingly.  I vote for the latter.