Depressing Scenes At The Motor Mall

I drove through the Troy motor mall today. If you are local, you know about it, it is a huge collection of car dealerships clustered together on Maple Road between Coolidge and Crooks. Every major brand has a dealership there, and some minor ones, including Aston Martin, Jaguar, Saab, Lamborghini, Maserati, Bentley.

It was so quiet you would have thought it was Sunday and not Friday afternoon. There were no customers walking any of the lots I could see. Even huge dealerships like Chevrolet and Honda didn't seem to have anything going on. The Saab store looked closed--I couldn't tell if the lights were on. Jaguar also. Even Honda and Toyota were still. Pontiac? Dead.

If people don['t buy cars, everyone will be broke, from top to bottom. The economic impact of the Troy Motor Mall is huge, when you consider the hundreds of salesman, mechanics, accountants, porters, truckers involved. And the restaurants surrounding it.

If you don't need a new car, that's fine. But maybe throw these guys an oil change or something to keep them fed, keep them working. Maybe let the dealer do your next regular service, or take it in for detailing.

But what is our Governor doing? According to Frank Beckman on WJR, she's working on a plan to double car registration fees and gasoline taxes. "In five years you'll be blown away!" she famously said. Now she's working on blowing us away.

Standalone Saturn?

There has much discussion recently in the press about the possible future of Saturn as a stand-alone auto company. One scenario has GM spinning off Saturn to the dealer network, and the independent company would source cars from wherever it could, and sell them as Saturns, much like Sears' Kenmore brand.

There are some major problems with this idea. First, Saturn would have to find suppliers of cars that would be worthy of being sold as Saturns. Speculation centers on Chinese automakers. But the issue here is, none of the Chinese, as far as we know, are ready to enter the U.S. market. Malcolm Bricklin's big plans to bring Chery here with Visionary Vehicles fell apart; so apparently did plans for Dodge to bring a Chery sourced Hornet. I had the chance to examine a Chery car at last year's NAIAS, and I can tell you it was not up to North American standards for fit and finish. Even if Chinese Saturns were within a couple of years of being ready for U.S. customers, they would have to be very good to win over a skeptical public.

The other problem is the issue of market capacity. Without big-brother GM adding its corporate heft to Saturn, it would be yet another small import car company, similar to Subaru, Mitsubishi, Suzuki, Kia, and the former Isuzu. It would be another little brand trying for customers, in a market that is oversaturated with nameplates.

Saturn's problem is that it's brand has ceased to represent anything unique. It was started as a moderately priced seller of small cars and wagons with a no-hassle sales experience. It was morphed into a mid-market to up-market seller of decent but unexceptional cars and crossovers (they even had a Saturn minivan!). The only constant was the no-hassle dealership. In this market, basing a car brand around a sales attitude is not going to cut it.

Unless a foreign carmaker buys the Saturn brand and distribution network, I really doubt that Saturn has a future as an independent company. And if someone does buy Saturn, they are going to have a hard time making money.

The Beginning Of The End Of Personal Mobility?

Mark Tapscot is feeling down on the auto business, judging by his latest blog post, here.

In it he points out that the leftist technocrats sweeping in with Obama ultimately want to reduce our use of personal vehicles, and force us to live packed more densely together in cities, and to rely on mass transportation. Their strategy to do this is to make gasoline expensive, keep the road system under-developed, and perhaps down the road tax our mileage.

No, the people now deciding what kind of products will be made by Detroit are working in Congress, the U.S. Department of Transportation and, most crucially, the U.S. Environmental Protection Agency. Virtually to a man, these people hate privately owned cars and the individual autonomy they symbolize.

That means it's not just the kind of cars and trucks produced by the manufacturers' skunk works that are in Washington's cross-hairs, it's the very notion that all individual Americans ought by right be able to buy and drive the vehicle of their choice anywhere and anytime they choose.

I have blogged on this topic before, and i generally agree with what Mark says. However, there are some big roadblocks in the way of the anti-car left.

First, Americans love cars, and even if they can't have fire breathing 300HP V8's, they will find a way to get fun fast cars. If people get the idea that the bureaucrats are trying to take away the great American right-to-drive-what-I-want, there will be some nasty electoral surprises.

Second, Obama is now caught between two opposing forces, which are going to grind up his campaign agenda: the economy and labor unions on one hand, and the green lobby on the other. To keep his promise of saving jobs, and particularly of helping "working families", Obama must prop up the domestic auto industry. If it fails, it takes his economic promises with it. Propping up the auto industry means getting people to buy lots of shiny new cars. The days of cheap V8's are over, but the days of shiny new cars in every other driveway won't be.

Also, as part of the economic stimulus plan, a ton of money is going to be spent on "infrastructure", and some of that is actually going to go to road repair and construction.

Obama's not dumb, he knows that economic fear is what got him elected, and at the end of the day, I expect that he will throw the greens under the bus.

How To Watch A Movie On Your PC, The Fun Way

I recently discovered VLC. VLC (www.videolan.org) is an open source media player application which can handle just about any kind of file you can throw at it, such as VOB (DVD), DivX, XVid. One of the neat things it knows how to do is to play movies at higher rates than normal, with sound.

So, take your average pompous over written Hollywood crap-fest. You want to get through the story but you don't want to waste 2 1/2 hours to do it. Throw the DVD (or DivX, or whatever) into your computer, fire up VLC, and watch it at 2x or 3x. Slow it down for the important parts, the ones that actually advance the plot, then speed it back up again for the filler. There's also comedic value in watching people deliver their lines sounding like chipmunks.

Dissecting The Stimulus Bill

I spent a few minutes combing through the final version of the economic stimulus bill passed by the U.S. Congress (the huge PDF files are availible here). Here are some highlights, with regards to automotive and transportation related spending.

Divisiion A, Title IV: Energy

• $2 billion for grants for manufacturing advanced batteries and components, to be produced in the U.S.
• $3.4 billion for "Fossel Energy Research and Development". This includes $800 million for "clean coal" research, $1.5 billion for carbon capture and efficiency improvements, and money for geology research for carbon sequestration.
  
• $10 million for administrative costs for the Advanced Technology Vehicle Vehicles Manufacturing Loan program.

Division A, Title XII: Transportation

• $27.5 billion for highway, rail, and port infrastructure spending\
• $105 million earmarked for Puerto Rico highway program
• $550 million earmarked for transportation improvements on Indian Reservations and Federal Lands: $310 million for Indian reservation roads, $170 million for park roads, $60 million for forest highways, $10 million for the Refuge Roads program
• $1.3 billion for Amtrak
• $100 million to fund high fuel economy vehicles for the federal fleet, including gasoline hybrid vehicles, plug-in hybrid vehicles

Division B, Title 1

• Sec. 1008: new vehicle sales tax deduction: sales taxes on new vehicles are federally deductible, for vehicles which cost less than $49,500 and for taxpayers with income below $125,000 ($250,000 married joint filers).
• Sec. 1141: tax credit for plug in hybrid vehicles, $2,500 plus $417 for each kWH of battery capacity in excess of 5 kWH, maximum of $5,000. Phases out after the first 200,000 such vehicles sold after December 2009.
  
• Sec. 1142: tax credit for plug-in electric (battery electric) vehicles, 10% of the cost of such a vehicle, capped at $2,500. Vehicle must have battery capacity of at least 4 kWH, less is allowed if 2 or 3 wheels. 2 and 3 wheel vehicles qualify for the tax credit.
• Sec. 1143: tax credit for plug-in conversion kits, 10% of the cost of a conversion, not to exceed a cost of $40,000 (credit capped at $4,000).
  

A few observations. First, lots of pork in the highway portion, with earmarks specifically for Indian reservations and park roads.

The federal tax deduction for a new vehicle purchase sales tax is nice, but not a huge incentive. Consider: $20,000 vehicle, sales tax of 6%, deduction is $1,200. And if you are leasing, your tax deduction might only be half of that, or less, depending on the value of the lease.

The tax credits for plug-in hybrids, battery electric vehicles, and plug-in conversions are mostly window dressing. In the next few years, there won't be very many plug-in hybrds on the market, and certainly there won't be very many battery electric vehicles, in any volume. Eventually, enough products may enter the market to make this tax credit useful to more people, but it will take years to happen. Plug-in conversions are silly, in terms of their economics, and a 10% discount isn't enough to fix it, I don't see them ever being a high-volume business.

The $2 billion for advanced battery manufacturing grants is a good idea, this should provide a badly needed boost for the domestic battery industry, and should recover some lost jobs. A123 systems has already proposed a battery plant to be built in Michigan, pending government funds.

The "clean coal" money, and carbon sequestration projects are not likely to produce much useful result. I'm not sure there is such a thing, really, as "clean coal", at least not by the standards of the green lobby. Scrubbing coal emissions of CO2, and pumping it underground to hide it may be so expensive that it makes coal non-competitive as a power source. This, of course, may be the whole point. I would have liked to see more money for nuclear power subsidies instead.

My New Gadget: WD TV

Up to this point, my favorite a/v gadget has been my Roku Soundbridge wireless MP3 player. But the other day, I got a Western Digital TV HD Media Player, which is one of the coolest gadgets I have ever owned.


What the WDTV does is play just about any type of media file, from all kinds of video formats (DivX, Xvid, AVI, MP4, MKV, DVD ISO, etc.) to photos and music. It will play to your TV through composite video (RCA) or HDMI, and will output in SD or HD. It uses USB for storage, USB flash drives or USB HDDs, and can mount two of them at once. It is cheap, around $100.

The goodness here is in the details, and the simplicity of the device. The user interface is attractive, and easy. The menu response is snappy. The remote is clean, attractive, and works at wide angles to the unit. To play video, you rip your DVDs, or download your webisodes to a USB drive. You carry it over to your TV, plug it in, and after short boot-up time where it indexes the new media, you are in business. It even worked with an old USB 1.1 flash drive. Fast forward/rewind is smooth and responsive. You can zoom in, pan, and zoom out the view during playback. WD has issued several firmware updates since the product launched, which fixed bugs and added features. Firmware updates are easy.


I thought I wanted something like a Popcorn Hour A110, which would allow streaming from my PC to my TV, but they are fairly expensive ($200) and you have to supply the HDD yourself. Also, my previous experience with streaming videos from my PC (Hauppauge MediaMPV) was not stellar, with significant network buffering and transcoding delays. By removing the network capabilities, Western Digital came up with something that is, for the money, more than good enough.

*I'm not a paid promoter or official reviewer, just a happy customer.

House Proposes Plug-In Hybrid Tax Credits

In its version of the Obama economic stimulus package, the House of Representatives has included a disappearing tax credit for plug-in hybrid cars, similar to the confusing disappearing tax credit for non-plug in gasoline hybrid cars.

The credit consists of $2,500 per passenger car, plus $417 for each kWh of battery capacity over the first 4 kWh. The credit is limited to $7,500 for a vehicle with GVW less than 10,000lbs, but does increase to $10,000 for a vehicle with GVW up to 14,000lbs, and up to $15,000 for vehicles with GVW up to 26,000lbs.

The credit will start to phase out 3 months after 250,000 plug-in hybrids have been sold in the U.S., dropping to 50% for the next 6 months, then 25% for the next 6 months, and then going away completely.

So, for example, the Chevy Volt with its claimed 16 kWh battery would qualify for $2,500 + 12 * $417 = $7,500 (what a coincidence!)

SEC. 205. CREDIT FOR NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

(a) Plug-in Electric Drive Motor Vehicle Credit- Subpart B of part IV of subchapter A of chapter 1 (relating to other credits) is amended by adding at the end the following new section:

`SEC. 30D. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

`(a) Allowance of Credit-

`(1) IN GENERAL- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable amount with respect to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

`(2) APPLICABLE AMOUNT- For purposes of paragraph (1), the applicable amount is sum of--

`(A) $2,500, plus

`(B) $417 for each kilowatt hour of traction battery capacity in excess of 4 kilowatt hours.

`(b) Limitations-

`(1) LIMITATION BASED ON WEIGHT- The amount of the credit allowed under subsection (a) by reason of subsection (a)(2) shall not exceed--

`(A) $7,500, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of not more than 10,000 pounds,

`(B) $10,000, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 10,000 pounds but not more than 14,000 pounds,

`(C) $12,500, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

`(D) $15,000, in the case of any new qualified plug-in electric drive motor vehicle with a gross vehicle weight rating of more than 26,000 pounds.

`(2) LIMITATION ON NUMBER OF PASSENGER VEHICLES AND LIGHT TRUCKS ELIGIBLE FOR CREDIT-

`(A) IN GENERAL- In the case of a new qualified plug-in electric drive motor vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable under subsection (a) shall be allowed.

`(B) PHASEOUT PERIOD- For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the total number of such new qualified plug-in electric drive motor vehicles sold for use in the United States after December 31, 2008, is at least 250,000.

`(C) APPLICABLE PERCENTAGE- For purposes of subparagraph (A), the applicable percentage is--

`(i) 50 percent for the first 2 calendar quarters of the phaseout period,

`(ii) 25 percent for the 3d and 4th calendar quarters of the phaseout period, and

`(iii) 0 percent for each calendar quarter thereafter.

`(D) CONTROLLED GROUPS- Rules similar to the rules of section 30B(f)(4) shall apply for purposes of this subsection.

`(c) New Qualified Plug-in Electric Drive Motor Vehicle- For purposes of this section, the term `new qualified plug-in electric drive motor vehicle' means a motor vehicle--

`(1) which draws propulsion using a traction battery with at least 4 kilowatt hours of capacity,

`(2) which uses an offboard source of energy to recharge such battery,

`(3) which, in the case of a passenger vehicle or light truck which has a gross vehicle weight rating of not more than 8,500 pounds, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

`(A) in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and

`(B) in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,

`(4) the original use of which commences with the taxpayer,

`(5) which is acquired for use or lease by the taxpayer and not for resale, and

`(6) which is made by a manufacturer.

I Windows 7 Beta Test

For fun, I downloaded the Windows 7 Beta DVD ISO from Microsoft. I made a second partition on my second HDD, and installed it. It was painless, and didn't take long.

Windows 7 is, so far, running like a champ. It seems about as responsive as Vista, no worse in my unscientific opinion. It recognized all of my hardware, such as my TV tuner card, video card, and monitor, and is talking to my network. It is the "Ultimate" version, which means it comes with Windows Media Center, which is nice.

If you have about 16 gigabytes to spare, give it a whirl it isn't bad.

Video: IAF Hits Rocket Launchers

Amazing video from Israel's air force showing Hamas' rocket launchers being destroyed on the ground.



These primitive rockets, with no guidance abilities, are being launched wildly into Israeli towns. They are a classic terror weapon, like the buzz-bombs of the Luftwaffe.

Video: Johns Hopkins Mousetrap Car Slalom

Remember that mousetrap powered car project you had to do in high school physics class? At Johns Hopkins University, engineering freshmen have to go the next step and make a mousetrap car that does a slalom and then drives straight to the finish line. Video below, hat tip to If It's Got An Engine. When I was in school, none of my engineering professors were as cute as the one in the video.

GMAC Bank

I was looking around at who had the best CD rates in our ever-lower interest rate era, and I found that GMAC Bank has very nice rates, 4% for 1 year, compared with the average of 2%. I am planning on taking them up on it. 4% 12 month CDs are not growing on trees right now.

Now, before you shout that GMAC may go bankrupt, and eat my deposits, know that GMAC Bank is FDIC insured. So even if GMAC did go bankrupt, and GMAC Bank is a division of GMAC, FDIC would step in, and in a few days I would have my money back.

This is in contrast with the GMAC Demand Notes (5.25%) or Ford Motor Credit's Interest Advantage (3.9-4.2%), which are unsecured loans directly to the companies. If you are invested in GMAC Demand Notes or Ford Motor Credit Interest Advantage, you should re-evaluate your tolerance for financial risk right away, because I am guessing that you are investing money you consider "safe", but what you are buying is basically a junk bond.

And, by putting money in GMAC, I can help GM by providing badly needed cash to their lending arm, and helping support the Detroit auto industry.

There are some downsides to GMAC Bank. It are online-only, so if you want to be able to talk to a human being about your account, the only option is the telephone. It also doesn't support direct connection through Quicken or Microsoft Money, if you want to download transactions you have to use the manual download feature on your account page.

Note: GMAC did not sponsor this post or influence it in any way.

Windshield GPS MN

Did you know that it is against the law to mount accessories (such as GPS) to the windshield in Minnesota, and recently was in California?

Read here about Minnesota.

California law changes in January 2009 to allow GPS units, but they must be located at the lower left or lower right corner of the winshield.

In other news, Minnesota is considering a law to require Minnesotans to tie their shoes with double-knots, to prevent accidental tripping.

Star Wars Republic Commando On Vista

I recently bought Star Wars Republic Commando, a Lucas Arts squad based shooter. It wouldn't run on my machine ("SWRepublicCommando.exe has stopped working").

I got it running by doing two things: first, I set SWRepublicCommando.exe to run as administrator. Second, in the game, under the graphics settings, I set "bump-mapping" to low.

New Taurus Spy Photos

Autoblog has some good spy photo shots of a modestly camouflaged 2010 Taurus.
The interior looks nice, and looks like it has a lot in common with the MKS interior (notice the steep rake of the center stack). Also notice the Sony audio system.

Photos courtesy of Autoblog

See all pics here.

This is a crucial product for Ford, after the flabby sales (<100K annualized) of the current 500/Taurus. The Taurus should be Ford's flagship. It looks to me like it will be a contender, though we don't know what will be under the hood yet. Will it be the 3.5L V6 from the Edge and Flex, or will it be one of the GTDI engines, like the upcoming 3.5L Ecoboost?

It is also quite a bit more exciting to look at than its closest rival, the Toyota Avalon (yawwwwn).

The Bridge Loan Terms

Here are the terms of the bridge loan announced by President Bush this morning.

Fact Sheet: Financing Assistance to Facilitate the Restructuring of Automobile Manufacturers to Attain Financial Viability

Purpose: The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing.

Amount: Auto manufacturers will be provided with $13.4 B in short-term financing from the TARP, with an additional $4 B available in February, contingent upon drawing down the second tranche of TARP funds.

Viability Requirement: The firms must use these funds to become financially viable. Taxpayers will not be asked to provide financing for firms that do not become viable. If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury.

Definition of Viability: A firm will only be deemed viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan.

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

• Firms must provide warrants for non-voting stock.
• Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
• Debt owed to the government would be senior to other debts, to the extent permitted by law.
• Firms must allow the government to examine their books and records.
• Firms must report and the government has the power to block any large transactions (> $100 M).
• Firms must comply with applicable Federal fuel efficiency and emissions requirements.
• Firms must not issue new dividends while they owe government debt.

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

• Reduce debts by 2/3 via a debt for equity exchange.
• Make one-half of VEBA payments in the form of stock.
• Eliminate the jobs bank.
• Work rules that are competitive with transplant auto manufacturers by 12/31/09.
• Wages that are competitive with those of transplant auto manufacturers by 12/31/09.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.

In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

Note the inclusion of the UAW-busting requirements for competitive wages and work rules, but also note that these are negotiable! This means that when Obama and the more-Democrat congress are seated in 2009, they can soften the blow to the UAW, which I am sure they will try to do.

There is no explicit mention of a "Car Czar", but it would seem that someone would need to be in charge of over-seeing the agreement. It isn't clear if Paulson will be the man, or if another person will be appionted to 0versee the program.

President Bush Speech on TARP Loans

Recorded this morning by your auto blogger for your watching pleasure. See below for transcript.

THE PRESIDENT: Good morning. For years, America's automakers have faced serious challenges -- burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse -- and that the only way they can buy time to restructure is with help from the federal government. This is a difficult situation that involves fundamental questions about the proper role of government. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.

Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay -- and I would not favor intervening to prevent the automakers from going out of business.

But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws -- and provide federal loans to keep them operating while they try to restructure under the supervision of a bankruptcy court. But given the current state of the auto industry and the economy, Chapter 11 is unlikely to work for American automakers at this time.

American consumers understand why: If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available, and you question the value of your warranty. And with consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover.

Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated -- and they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.

The convergence of these factors means there's too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next President to confront the demise of a major American industry in his first days of office.

A more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy -- and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability. This legislation earned bipartisan support from majorities in both houses of Congress.

Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year.

This means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I. So today, I'm announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.

These loans will provide help in two ways. First, they will give automakers three months to put in place plans to restructure into viable companies -- which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success -- and gives consumers confidence that they can continue to buy American cars.

Because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry -- management, labor unions, creditors, bondholders, dealers, and suppliers.

In particular, automakers must meet conditions that experts agree are necessary for long-term viability -- including putting their retirement plans on a sustainable footing, persuading bondholders to convert their debt into capital the companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States. If a company fails to come up with a viable plan by March 31st, it will be required to repay its federal loans.

The automakers and unions must understand what is at stake, and make hard decisions necessary to reform, These conditions send a clear message to everyone involved in the future of American automakers: The time to make the hard decisions to become viable is now -- or the only option will be bankruptcy.

The actions I'm announcing today represent a step that we wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again they can meet challenges with ingenuity and determination, and bounce back from tough times, and emerge stronger than before.

Thank you.

Bush's Comments At AEI

President Bush gave an interview to the American Enterprise Institute, a conservative think tank, today in which he revealed some of his thoughts about the automotive industry. If you want to read the whole thing (and you should), it is here.

MR. DeMUTH: You'll be surprised that I have several questions about the auto bailout. (Laughter.) Let me put it in the context of this discussion. Isn't the Detroit bailout an example of interest groups thinking they can get a better deal from the executive branch than from the Congress?

THE PRESIDENT: That's an interesting way of putting it. First, let me take a step back--I haven't made up my mind yet, So you're assuming something is going to happen. (Laughter.) This is a difficult time for a free market person. Under ordinary circumstances, failed entities--failing entities should be allowed to fail.

I have concluded these are not ordinary circumstances, for a lot of reasons. Our financial system is interwoven domestically, internationally. And we got to the point where if a major institution were to fail, there is great likelihood that there would be a ripple effect throughout the world, and the average person would be really hurt.

And what makes this issue difficult to explain is--to the average guy is, why should I be using my money because of excesses on Wall Street? And I understand that frustration. I completely understand why people are nervous about it. I was in the Roosevelt Room and Chairman Bernanke and Secretary Paulson, after a month of every weekend where they're calling, saying, we got to do this for AIG, or this for Fannie and Freddie, came in and said, the financial markets are completely frozen and if we don't do something about it, it is conceivable we will see a depression greater than the Great Depression.

So I analyzed that and decided I didn't want to be the President during a depression greater than the Great Depression, or the beginning of a depression greater than the Great Depression. So we moved, and moved hard. The autos obviously are very fragile and I've laid out a couple of principles. One, I am worried about a disorderly bankruptcy and what it would do to the psychology and the markets. They're beginning to thaw, but there's still a lot of uncertainty.
I'm also worried about putting good money after bad--that means whether or not these autos will become viable in the future. And frankly, there's one other consideration, and that is, I feel an obligation to my successor. I've thought about what it would be like for me to become President during this period. I have an--I believe that good policy is not to dump him a major catastrophe in his first day of office. So those are some of the considerations that we're weighing.

What was the question on autos? (Laughter.)

MR. DeMUTH: The President-elect said--

THE PRESIDENT: Oh, you said Congress and the executive branch.

MR. DeMUTH: Yes, yes.

THE PRESIDENT: Well, just remember a majority of Congress voted for a plan that we thought was a good plan. It didn't get the requisite votes in the Senate in order to move it on, but there was a majority vote if you add up the House and the Senate. So the Congress, in one way, expressed its will for a way forward with some--with a plan, or a strategy for viability.

MR. DeMUTH: But there must be some question in your mind whether the two political branches are better at bankruptcy restructuring than a bankruptcy court. I mean, we do have a law.

THE PRESIDENT: Absolutely.

MR. DeMUTH: Do you think when everybody stops--

THE PRESIDENT: I think under normal circumstances, no question the bankruptcy court is the best way to sort through credit and debt and restructuring, no question. These aren't normal circumstances, that's the problem. This is a hard issue for political people, because people never know how bad it could have been. And so the decisions you make are easy for people to say, why did he do that? Why is he wasting our money on this? Or, why is he doing that? Because without a catastrophe, the reasoning doesn't, it just doesn't really make it down to the grassroots.

People look at, "My money being used because Wall Street got excessive." And I make the case that I didn't want to do this. It's the last thing I wanted to do. Nevertheless, I felt compelled to do it, because it would make life worse for you. We lost 533,000 jobs last month. What would another million jobs lost do to the economy? What would that do to the psychology in markets? What would that do--how would that affect the working people? And so as you can tell, we're all in, in this administration. And if need be, we'll be in for more.

So, bottom line, "normally bankrupcy would be best, but now is not normal. I haven't made up my mind yet what to do".

Update:

Bush said basically the same thing this morning, when he announced loans from the TARP for GM and Chrysler.

IIHS Crashes Small Cars

The Insurance Institute for Highway Safety, IIHS, is an insurance industry funded organization which does its own crash tests, in parallel to the NHTSA. IIHS' tests are more severe than NHTSA's, and are much harder for automakers to score well on.

For example, in the latest round of small car crash tests, the Chrysler PT Cruiser fared miserably in the IIHS side impact test, which uses a high barrier to simulate a mid-size SUV or pickup truck hitting a passenger car in the side. However, the PT Cruiser got a 4 star rating for side impact from NHTSA.

Top Gear Reviews Tesla, Breaks It

This is a hilarious segmeent from BBC's Top Gear show, in which Jeremy Clarkson evaluates a Tesla roadster, and breaks 2 of them. The first one overheats its motor, and has to be parked for a while, and the second one has a brake failure. Clarkson also reports that he only got 55 miles range out of the car.



This shows how difficult it really is to be in the car business and build a quality product--there are more ways for cars to break than they have parts. Even starting with an existing platform (Lotus Elise), the Tesla apparently isn't ready for mass market use.

2Wire Gateway Problems

Ugh.

The last few weeks, my 2wire DSL gateway (model 2701) has been behaving very badly. I can run wired all day long, no problem, but if I used 802.11b or 802.11g connections, the gateway actually drops the DSL link at random intervals. Sometimes it will run a few minutes, sometimes it will only run a few seconds.

I have googled until my eyes are dry looking for solutions, but so far, nothing concrete. Lots of people report the same sort of problem, and the only answer I can seem to find is "use a different router".

Anyone out there have the same issue?

If I find something, I'll post it here.

Update


I have determined that the problem is with the 2wire gateway. If I use a Linksys router and turn off the wi-fi on the 2701, I have no problems, and no dropped access. My 2wire box must have an issue with running 802.11b/g and DSL.

I spoke to AT&T (India) which forwarded me to 2Wire (Phillipines). 2Wire indicated that they could not find anything wrong with my gateway. I asked them if they could arrange a replacement, and they said they normally would--but since I bought my unit second hand, the warranty does not transfer.

My solution is to use the DSL modem part of the box only, and use a separate Linksys wireless router for the wi-fi. So far so good.

So be warned, 2wire won't honor their warranties unless it is original installed equipment!