ProfessorBainbridge.com

What I'd like for Christmas before the Apocalypse

I've been reading a lot of post-apocalyptic fiction lately and watching some of those zombie TV shows, so when I saw a Top Gear blurb on the nuew Mercedes unimog, I knew that what I wanted for Christmas is a Unimog-based customized and luxed out RV. With front and rear 50-caliber remotely operated weapon stations to deal with zombies and a MK19 Mod3 40mm grenade machine gun ROWS to service your larger mutants. Plus, of course, you'd want tear gas cannons to fend off the starving masses, solar panels, water purification, biodiesel generation capability, etc. In sum, something like this:

But with lots of guns.

Government Motors flopped

The WSJ has the details:

From sport utes to sports cars to soccer-mom vans, every industry segment is thriving—with the notable exception of the alternative-fuel vehicles into which Washington has sunk billions of taxpayer dollars.

Chicago Economist Luigi Zingales on Crony Capitalism and the Crisis of the West

Musing on the implications of the Eurozone crisis:

Americans should be concerned for a deeper reason. High deficits, high debt and unsustainable entitlements are symptoms of a common disease infecting Southern Europe and the U.S. That's crony capitalism, a problem with which I, having lived in Italy, am unfortunately familiar. ...

For the U.S., the moment to act is now, before the cancer of crony capitalism metastasizes. The tax code needs an overhaul that eliminates special treatment and bans any form of corporate subsidy—starting with too-big-to-fail banks. We must find ways to introduce more competition into sectors such as education and health care, while expanding economic opportunity for those at the lower end of the income spectrum. And we must curb the political power that large industry incumbents have over legislation. Not only does it distort legislation, it also forces new entrants to compete on lobbying instead of concentrating on making more innovative and cheaper products.

It is not too late for the United States, but the clock is ticking. We have already begun to look like Italy. If we don't do something to stop that soon, we will end up like Greece.

via online.wsj.com

Has Top Gear Jumped the Shark?

I yield to no one as a fan of BBC's Top Gear, but even I am having a hard time defending the current series (#18) on BBC America. It feels tired, formulaic, and lazy. The (more obviously) scripted sections, like tonight's tiresome bit about making a car chase for the Sweeney film, have been unfunny snooze fests all series. In the Sweeney bit, in particular, Clarkson and Hammond seemed to be just mailing it in. 

To be sure, nothing's been quite as cringe worthy as the wedding car bit from series 15. Instead, it's just dreadfully monotonous. It seems like we've heard all these jokes a 1000 times and seen minor variants on the same segment dozens of times. It seems like they're just going through the motions.

I'm still prepared to defend Clarkson, May, and Hammond when they go off the PC reservation. 

I just never thought I'd have to defend them for being lame.

Democrats drive wimpy cars

Don Surber (HT: Instapundit):

From Strategic Vision, the Top 5 most popular models by political party choice:

Democrats                       Republicans
1. Honda Civic Hybrid         1. Ford Mustang Convertible
2. Volvo C30                      2. Audi A8
3. Nissan Leaf                    3. Mercedes GL
4. Acura TSX Wagon            4. Ford Expedition
5. Ford Fiesta Sedan             5. Ford F-150

Notice ... the only car in the Democratic Top 5 that  is hot is the Volvo .... An Acura TSX is fine. But the wagon version?

Notice the lack of displacement (I think no V-8s) and horsepower on the left side, as well.

Weak cars = weak policies?

The 100 most beautiful cars of all time

Any list that purports to list the 100 most beautiful cars of all times that doesn't have the Jaguar E-type in the # 1 slot is highly suspect. Any list that purports to list the 100 most beautiful cars of all times that has the Lamborghini Countach at # 1 (as opposed to #1 on a list of cool cars, outrageous cars, wild cars) is highly suspect. Oddly, someone has compiled just such a highly suspicious list.

The other GM bailout

The WSJ's editorial on Obama's GM bailout includes a shout out to my friend and coauthor Mark Ramseyer and another friend Eric Rasmussen:

In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, "Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets." Thus a Democratic Administration gave "a massive tax benefit to one of the party's biggest supporters." The other problem is that the move put Ford and GM's other competitors at a disadvantage, as bailouts always do.

The paper to which the Journal refers is Can the Treasury Exempt its Own Companies from Tax? The $45 Billion GM NOL Carryforward (July 1, 2011). 

Abstract:  To discourage firms from trying to buy and sell tax deductions, Sec. 382 of the tax code limits the ability of a firm that acquires another company to use the target's "net operating losses" (NOLs). Under the Troubled Asset Relief Program (TARP), the Treasury lent a large amount of money to GM. In bankruptcy, it then agreed to trade that debt for stock.

GM did not make many cars anyone wanted to buy, but it did have $45 billion in NOLs. Unfortunately for the firm, if the Treasury now sold the stock it acquired in bankruptcy it would trigger those Sec. 382 NOL limitations. Suppose the newly reorganized GM did start making cars that consumers wanted. It would be able to use only a modest portion of its old NOL’s -- if any.

Treasury "solved" this problem by issuing a series of "Notices" in which it announced that the law did not apply. On its terms, Sec. 382 states that the NOL limits apply whenever a firm's ownership changes. That rule, the Treasury declared, did not apply to itself. Notwithstanding the straightforward and all-inclusive statutory language, GM would be able to continue to use its NOLs in full after the Treasury sold its stock.

The Treasury had no legal or economic justification for these Notices, which applied to Citigroup and AIG as well as to GM. Nonetheless, the Notices largely escaped public attention -- even though they potentially transferred substantial wealth to the most loyal of the administration's supporters (the UAW). That it could do so illustrates the risk involved in this kind of manipulation. We suggest that Congress give its members standing to challenge such manipulation in court.

Another Obama "green" company in trouble

President Obama's "green" industrial policy took a huge hit when Soyldra went down the tubes amidst charges of crony capitalism and so on. Now another beneficiary of centralized "green" planning is in trouble. Autoweek reports that:

Work on the Fisker Nina family sedan has temporarily halted at the Fisker Automotive plant in Wilmington, Del., while the carmaker and the federal government hash out details of the company's $529 million Department of Energy loan. The interruption has resulted in the layoff of 26 people at its Delaware plant and a number of contract engineers at Fisker's Anaheim, Calif., headquarters.

And the WSJ reports that:

Fisker spokesman Roger Ormisher said ... his company wasn't in peril. "We are still continuing to raise equity. We raised $260 million in the last three or four months," he said. The company said in a statement that it had raised $850 million in equity from private sources. But the future of the Nina and the 2,500 jobs in Delaware will depend on whether Fisker can revive the federal loans, or replace them, Mr. Ormisher said.

"There comes a point where you say, 'We can't keep putting money into that project,' " he said.

At the very least, it's another bump in the road for industrial policy.

The 100 worst cars ever

Edmunds announces their list of the 100 worst cars of all time. Sadly, I've owned two of them. Four counting cars that belonged to my parents but got handed down to me when I was a lad.

Musing about my next car

Long time readers know I'm a car nut. I'm currently driving a Mercedes E 550, which I like a lot in many ways, but isn't exactly the sportiest car I've ever driven. (I miss my 911 a lot. Trading it was the right choice at the time, for complicated reasons, but still....)

I occasionally ponder what to do when the lease expires next year. There was an interesting article in today's WSJ on Euro concept cars, which got me thinking. I thought the Volvo was especially attractive (but for the clam-shell doors).

As long time readers know, I've been a coupe guy for quite a while. The 911 was preceded by a M3 convertible, which was proceeded by the X5 error, an interregnum over which it is best to pass quietly, which was proceeded by a 328 convertible, which was proceeded the Jeep Cherokee error (another era about which the less said the better), which was proceeded by a Mazda RX7, which was proceeded by the lamentable Ford station wagon (yes, the one with the portholes).

Unfortunately, I find myself at a stage of life at which 4 doors is at least convenient and arguably essential. So I've been pondering the new 4 door coupes, like the Mercedes CLS, the Audi A7, or the VW CC. I've concluded that they represent an ideal blend of fun, looks, and practicality.

I'd like (read need) to go a lot cheaper than the Mercedes and the Audi, and would prefer to go American. I was thinking that a Lincoln 4 door coupe based on the Taurus SHO would be a real halo car for that brand and a car I'd definitely need to consider when the lease on my E550 expires. The Mustang-based MKR concept from 2007 would likewise fit the bill.

 

But is anybody in Detroit listening?

Of course, in the unlikely event that Corporate Governance After the Financial Crisis hits the NY Times best seller lists when it comes out in a month or so, maybe I'll have to start looking at Panameras. I'm not counting on it, of course, but you could do your part by preordering your copy today.

Obama and the automakers

The Hill reports that:

The country’s automakers should ditch their focus on SUVs and trucks in favor of smaller, more fuel-efficient vehicles, President Obama said Monday.

“You can’t just make money on SUVs and trucks,” Obama said during a town hall forum in Cannon Falls, Minn. “There is a place for SUVs and trucks, but as gas prices keep on going up, you have got to understand the market. People are going to try to save money.” ...

The president said his administration “turned around” the U.S. auto industry and is calling on automakers to change the way they do business. “They are gaining market share for the first time in years, but what we said was, ‘If we are going to help you, then you have also got to change your ways,’ ” he said.

(1) So the community organizer who has never made a payroll or run a business thinks he knows better than the market what cars people wnat to buy?

(2) Obama didn't turn around the automakers. Ford did fine all by itself. Chrysler got a foreign savior. GM and Chrysler both got to screw their creditors and other stakeholders without having to go through an orderly bankruptcy reorganization.

Hybrids don't necessarily help the environment

Autoweek reports that:

Car buyers who think they are helping the planet by choosing a hybrid vehicle to aid in cutting emissions don't always get the biggest bang for their buck, according to an environmental interest group.

A report from the Union of Concerned Scientists shows that some hybrids come at a much higher price tag than their similarly equipped, conventional-powertrain counterparts, yet offer little in the way of environmental gain.

These not-so-green hybrids compromise their value or eco-friendliness in a variety of ways.

For example, rarely is the hybrid powertrian offered on a vehicle's base model. That forces customers to take premium features that are packed with the hybrid version, adding to hybrid's price disadvantage.

Other times, a hybrid might not be built to achieve fuel-saving performance in the most cost-effective manner.

Well, duh, as fans of Top Gear have long known:

Toyota gets a partial win

Inside Line reports:

In a major victory for Toyota, the federal judge overseeing the multidistrict litigation over alleged acceleration defects in Toyota vehicles has drastically limited the number of claims against the automaker.

The ruling says that only California car owners — not those in other states — can take advantage of the state's favorable consumer-protection laws. The action drastically cuts the size of a potential class action against Toyota filed on behalf of consumers and calls into question speculation that the Toyota litigation could cost the automaker upward of $3 billion if it lost the federal case....

U.S. District Judge James V. Selna ruled on June 8 that consumers who relied on Toyota's guarantees of reliability and safety should not be allowed to pursue economic damages under California's state law if they lived or purchased their vehicles in another state. California laws could conflict with those of other states, said the ruling. In addition, California's statute of limitations for the economic-loss claims is more generous than many other states.

The suits stem from a recall of more than 8 million vehicles worldwide, mainly related to complaints of sudden acceleration. Toyota has used a NASA and National Highway Traffic Safety Administration study to argue that the lawsuits are without merit.

On May 13, Selna refused the automaker's request to dismiss the litigation, saying that Toyota owners had alleged enough facts establishing overpayment, loss in value or loss in usefulness with regard to the vehicles in question.

That last paragraph is the one that caught my eye. Basically what the judge is saying is that plaintiffs can prevail under California law against a mostly innocent manufacturer where negative publicity and resulting price declines are caused by an unholy combination of anecdotes about driver error, rapacious plaintiff lawyers, and an unscrupulous mainstream media. What a great state I live in!

Washington Post blasts Obama's auto accounting

The Washington Post (of all places) fact checked Obama's claims about how successful his auto industry bailout has been and concluded

What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan.

Ouch. But it gets better (or worse, I suppose):

"weasel words"

"sleight-of-hand accounting"

"chicanery"

"another impressive-sounding but misleading figure"

"quite a straw man"

It sounds like something from Red State, not the MSM, which makes it doubly impressive.

Skeel on the Auto Bailout

Law professor David Skeel's one of the smartest guys I know and a leading expert in bankruptcy law, so when he publishes a major op-ed in the WSJ, I pay attention. Today, the Journal gave him many column inches to unravel the Obama administration's claims re the auto bailout:

If the government hadn't stepped in and dictated the terms of the restructuring, the story goes, General Motors and Chrysler would have collapsed, and at least a million jobs would have been lost. The bailouts averted disaster, and they did so at remarkably little cost.

The problem with this happy story is that neither of its parts is accurate. Commandeering the bankruptcy process was not, as apologists for the bailouts claim, the only hope for GM and Chrysler. And the long-term costs of the bailouts will be enormous.

Skeel goes on to make his case in considerable detail. Great stuff. Go read the whole thing.