a sustainable auto industry

Dartmouth economist Matthew Slaughter:

On Sunday, President-elect Barack Obama asked, "What does a sustainable U.S. auto industry look like?"

Well, it looks a lot like the automotive industry run by "foreign" car companies that insource jobs into the U.S. In 2006 these foreign auto makers (multinational auto or auto-parts companies that are headquartered outside of the U.S.) employed 402,800 Americans. The average annual compensation for these employees was $63,538.

At the head of the line of sustainable auto companies stands Toyota. In its 2008 fiscal year, it earned a remarkable $17.1 billion world-wide and assembled 1.66 million motor vehicles in North America. Toyota has production facilities in seven states and R&D facilities in three others. Honda, another sustainable auto company, operates in five states and earned $6 billion in net income in 2008. In contrast, General Motors lost $38.7 billion last year....

Will fewer companies look to insource into America if the federal government is willing to bail out their domestic competitors?

The answer is an obvious yes. Ironically, proponents of a bailout say saving Detroit is necessary to protect the U.S. manufacturing base. But too many such bailouts could erode the number of manufacturers willing to invest here.

Found at Greg Mankiw's Blog: A Sustainable Auto Industry

tough times for detroit execs

Los Angeles Times (November 20, 2008)

But under scornful questioning by members of the House Financial Services Committee, the CEOs conceded that when they came to Washington to plead for government aid, each of them had traveled on a private plane.

"There's a delicious irony in seeing private luxury jets flying in to Washington, D.C., and people coming off of them with tin cups in their hands saying that they're going to be trimming down and streamlining their businesses," said Rep. Gary L. Ackerman (D-N.Y.) "There's a message there.

"I mean, couldn't you all have downgraded to first class or jet pooled or something to get here? It could have at least sent a message that you do get it."

Three executives, three private jets. CNN estimated that the cost of flying GM's $36 million private jet roundtrip from Detroit to DC is about $20,000. I checked some airfares online. Last minute non-stop coach fares on a commercial airline are about $500 and often less. First class tickets are "only" about a thousand dollars more than coach.

Suggestion: Sell the jets.

an underserved market

Found at Greg Mankiw's Blog: An Underserved Market

what's with the detroit auto bailout?

Time for a bailout? GM is near bankruptcy. Ford not far behind, maybe Chrysler as well. The auto industry bailout is a very bad idea, an unbelievably bad idea. The bailout will not solve the problems of the auto industry and just end up causing the taxpayers to waste money to help a very few people in a very expensive way. It avoids dealing with problems rather than confronting them. Let's see why.

Is this going to be hard to understand? Nope. The auto industry's problems are relatively simple and straightforward. (Hey, NO ONE completely understands the financial market meltdown mess.)

The problem? The $29/hr pay gap (Source: CARPE DIEM)

Why is GM (and Ford and Chrysler) seeking taxpayer subsidies when Toyota, Honda, Nissan, Kia, BMW, Daimler, Hyundai and other foreign nameplate producers, who are facing the same contracting demand and credit crunch quietly weathering the storm, are not? Because the latter have costs structures that haven’t been made obsolete and uneconomic by ludicrous union demands (see chart above, data here). ~ Dan Ikenson, "A Cancer on the Big Three."

The Detroit 3 have high legacy costs, costs of giving retirees generous pension benefits and expensive health care with low deductibles and co-pays. Current employees also have these benefits. Thus Detroit has higher costs for current benefits and are required to currently put money in funds to pay the future benefits. These are obligations that the bailout will not and can not change.

This $29 pay gap is the key to understanding Detroit's problem. Everything else, any other reason put forth, is just noise, just a side issue diverting attention from the real problem.

Will bailout help fund better technology? Nope. The problem isn't the lack of technology. The Detroit 3 have invested heavily in new technology. Other auto companies can operate in the US profitably. Other auto companies aren't weighed down by high pension, health insurance, and other labor costs. That is, the $29 pay gap.

You will hear the myth that the US auto industry needs the bailout to invest in better technology in order to compete. Please don't swallow that b.s.

Will bankruptcy throw hundreds of thousands out of work? Nope. Chapter 11 bankruptcy does not mean liquidation. Did US Airways, Delta, United, and other airlines disappear when they went into bankruptcy? Neither will the auto companies. They will reorganize, forcing the restructuring of labor agreements that are the cause of the problem.

[There is overcapacity in the auto industry: too many plants producing too many cars to remain profitable even in good times. There will be some job loses due to plant closings whether or not any of the Detroit 3 go into bankruptcy. This is a side issue that has nothing to do with the bailout.]

However, let's get back to the real problem of labor costs. That is, the $29 pay gap. Reducing labor costs is the only real solution. That will only happen if GM and its two US rivals seek bankruptcy protection. Unions and politicians will never agree to reduce these costs if they have a choice.

The myth of automakers and parts suppliers having massive job losses will be voiced. Please don't swallow that b.s.

Any other myths? Yes. Several. The Detroit 3 are better companies than their public perception. It is not a matter of producing gas guzzling SUV's and trucks or making cars that are lousy. (For more: 6 myths about the Detroit 3)

The myth that there are major reasons other than the $29 pay gap will be voiced. Please don't swallow that b.s.

Who gets bailed out? The auto execs may keep their jobs if they stay out of bankruptcy. The bailout will help maintain the value of their stock options.

More importantly, you must understand bailout's main goal is to bail out Big Labor; to keep the high-priced union benefits that are the cause of the problem. Big Labor wants the $29 pay gap to remain.

Is there a leak in the bottom, a gap between the boards?

Got a better idea than the bailout? Yes. Like in the photo above, we need to fix the leak or the bailout will not work. Realize the Detroit bailout, or loans, will not solve the problem of the $29 pay gap. The loans will not allow them to do anything to become more profitable as long as the $29 pay gap remains. The loans will just subsidize the pay gap until the money runs out. The Detroit 3 will still not be able to compete and probably won't be able to pay back the loan.

A solution? Let them go into bankruptcy and go as quickly as possible. That is the only practical way the $29 pay gap can be removed or reduced.

If you want to bailout the pension funds or subsidize other labor benefits then go ahead. It will be a lot cheaper to do so directly rather than have it trickle down through the auto companies.

Or let the federal government guarantee pensions. Oh wait a minute...it does that already!

Got a link with a good explanation? Try this one:

The Becker-Posner Blog:
Bail Out the Big Three Auto Producers? Not a Good Idea-Becker

Be blessed.
RB

P.S. The auto bailout is altogether different than the financial bailout. The financial bailout was and is intended to keep capital markets functioning, not to protect the workers and fat cats on Wall Street. For example the bailout of AIG didn’t help, nor was it intended to help out AIG. With a financial sector seized up, you get a depression. With it only sort of seized up, you get a lost decade – like Japan in the 1990s – stagnant growth and high unemployment. It is absolutely essential to get the financial markets working.

almost certainly innocent?

The December issue of National Geographic arrived yesterday. The cover story "The Real King Herod" had this large-print statement inserted on page 42, "Herod is best known for slaughtering every male infant in Bethlehem in an attempt to kill Jesus. He is almost certainly innocent of this crime."

I found this claim interesting. So I started reading the article. In the first paragraph of the text (p.40) the author offered as his only evidence for his conclusion, "...that there is no report apart from Matthew's account."

The very next sentence states that Herod certainly had killed "three of his own sons, along with his wife, his mother-in-law, and numerous other members of his court." Later the author claims they were killed because their "frequent conspiracies brought out Herod's cruelty and paranoia" (p.46).

Would Herod ever order mass murder? According to the author Herod did indeed order "...his army to imprison a crowd of leading Judean citizens in the hippodrome in Jericho, and to massacre them when his death was announced" (ibid).

Hmmm.... Paranoid. Cruel. Fond of killing people, especially when threatened. How would such a guy react to the Magi stopping by his palace to ask directions to the location of the new king of the Jews (Matthew 2:2)? That new king would be replacing Herod.

Let's put this together. Good-looking (as we can see on the right) but quite paranoid Herod kills at the hint of anything that threatens his position as king. There is a historical account of Herod sending the Magi to Bethlehem with instructions to return and let him know the precise location of the usurper to his throne. When they don't come back Herod has all the baby boys two years old and under killed in and around Bethlehem (Matthew 2:1-16). This slaughter of non-Romans in an unimportant town isn't noted in the very few Roman records surviving to the present.

Sound far fetched? Apparently it does to the author, as well as to the editors of National Geographic. They conclude King Herod is almost certainly innocent.

For this fine bit of historical analysis to make sense, it must rest on the the "educated" inference that any account in the Bible is so extremely unreliable that it is wrong unless proved otherwise.

Lacking confirming evidence of a historical account is a long way from concluding "almost certainly" that the account is wrong

Is it just coincidence that this example of bad reasoning and poor scholarship related to the Christmas story is foisted on readers just before Christmas?

The really sad thing is that these smart people think they are coming to the smart conclusion.

Be blessed.
RB

P.S. I wonder if the folks at National Geographic think O.J. is almost certainly innocent too.

1st john and outsourcing

Saturday morning I was reading the first couple of chapters of 1 John. This letter is amazing in a number of ways. Heard of comfort food? Well, 1 John is my comfort Scripture. When I read it, it calms me down. I feel peaceful. It seems the love of John, which is from Christ, just radiates from the pages and engulfs me.

Engulfed in a sort of bubble of love, I’m thinking to myself as I read, “Yeah that’s nice; gimmee more; ahhh...thank you Jesus." If I'm outside this love bubble and read the verses carefully, I start to wonder if I am really saved. Check out these verses:

Whoever says “I know him” but does not keep his commandments is a liar, and the truth is not in him (2:4).

No one born of God makes a practice of sinning, for God’s seed abides in him, and he cannot keep on sinning because he has been born of God (3:9).

We know that we have passed out of death into life, because we love the brothers. Whoever does not love abides in death. Everyone who hates his brother is a murderer, and you know that no murderer has eternal life abiding in him (3:14-15).

Anyone who does not love does not know God, because God is love (4:8).

This may or may not surprise you, but I don't always obey God. I don't always love people. Sometimes I don’t really like any people at all; many times I don’t like just some people. When I read the above verses while in the love bubble, I feel great. Pop the bubble and it is “oh-oh” time.

John also exhorts us to “practice righteousness" (3:7;10). Yeah, right. With my flesh? Get real. Telling me that seems a lot like exhorting an insomniac to get plenty of sleep.

After complaining to God about this, I then realized that 1 John also shows me how to practice righteousness: remove unrighteousness!

If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness (1:9).

Now this is practical. I can be real with this.

I just need to outsource my righteousness to Jesus!

That works for me.

Be blessed!
RB

Note: All Scripture references are to the English Standard Version (ESV).

on the intolerance of religion

The 20th century gave rise to one of the greatest and most distressing paradoxes of human history: that the greatest intolerance and violence of that century were practiced by those who believed that religion caused intolerance and violence.
~ Alister McGrath, The Twilight of Atheism: The Rise and Fall of Disbelief in the Modern World, p.230
(cited in Timothy Keller, The Reason for God: Belief in an Age of Skepticism, p.5).

For more from Tim Keller, including audio files, click here.

german consistency and islamic scholarship.

Germans are known and stereotyped for their logic and consistency. One of the few joys I encountered studying the German language is the consistency of its grammar and other rules. However one German scholar, Muhammad Sven Kalisch, is in hot water for being as consistent as, well, as a German.

Germany's first professor of Islamic Theology, a native ethnic German convert to the religion, Kalisch "...wanted to subject Islam to the same scrutiny as Christianity and Judaism. German scholars of the 19th century, he notes, were among the first to raise questions about the historical accuracy of the Bible."

Kalisch "...devoured works questioning the existence of Abraham, Moses and Jesus. Then 'I said to myself: You've dealt with Christianity and Judaism but what about your own religion? Can you take it for granted that Muhammad existed?'"

The result was that using similar methodology which led to doubts about the Jesus or Moses ever existing, also led to a similar conclusion: Mohammad probably never existed.

His bosses at Münster University, as well as many academics, are distancing themselves from Kalisch. "Alarmed that a pioneering effort at Muslim outreach was only stoking antagonism, Münster University decided to douse the flames. Prof. Kalisch was told he could keep his professorship but must stop teaching Islam to future school teachers."

German intellectual tradition bows to political correctness?

It is a strange day when Germans are so obviously inconsistent.

SOURCE:
Jolt From an Islamic Theologian
The research of Muhammad Sven Kalisch, Muslim convert and Germany's first professor of Islamic theology, is causing outrage among Muslims. His theory: The Prophet Muhammad probably never existed.
» Full Story in Wall Street Journal (15 November 2008)

an economist's advice to mr. obama

From Harvard economist Greg Mankiw, former chairman of President Bush's Council of Economic Advisors:

Greg Mankiw's Blog:
Memo to the POTUS-elect


For a related post on economic advisors:
random thought....no random walk: economist quick quip

the grand weenie of the disciples: peter’s great wimp-out

I have always admired Peter despite his famous denial of Christ. At least Peter tried to hang around to find out what was happening to Jesus while everyone else ran off. All four Gospels have accounts of Peter's denial. However in John 18 there is an added detail. A detail I’ve supposedly read many times but this morning I seem to have noticed for the first time. After the arrest of Jesus,

Simon Peter followed Jesus, and so did another disciple. Since that disciple was known to the high priest, he entered with Jesus into the court of the high priest, but Peter stood outside at the door. So the other disciple, who was known to the high priest, went out and spoke to the servant girl who kept watch at the door, and brought Peter in. The servant girl at the door said to Peter, “You also are not one of this man’s disciples, are you?” He said, “I am not.”
~ John 18:15-17 (ESV)

So Peter wasn’t the only one not to run away; there were two disciples who trailed Jesus. The other disciple had connections which allowed Peter and him to enter into the court of the high priest. Now this is what I find strange. The other guy with connections is known to be a follower of Jesus. We know this by the servant girl’s question asking if Peter was also a disciple; also meaning in addition to the disciple who got him in to the court.

What was Peter thinking when he denied Christ? It must have been really quite obvious since he was following Jesus with a known disciple of Jesus. As if Peter’s Galilean accent wasn’t enough of a tip-off. That is one extreme wimp-out, denying the obvious. The other guy went in there knowing that everyone knew he was a disciple.

This morning I suddenly lost my respect for Peter. It turns out he was the Grand Weenie of the Disciples.

Then it happened. It usually happens when I judge others. It seems whenever I point my finger at someone I soon notice that three others are pointed back at me.

Just before his denial, maybe at most one or two hours before, Peter had pulled out a sword and was ready to take on a whole squad of Roman soldiers in order to try to stop Jesus from being arrested. That was not a good move for someone who was worried about dying.

Peter was no coward in the garden.

What happened? Maybe it was the same sort of thing that has happened to me far too many times. I take a stand; maybe I have victory over some temptation. I think, “I’ve licked that sin, full-of-faith, mighty man of God that I am.” Soon after I cave into the same sin as a result of some temptation that is minor by comparison. It is often an embarrassingly minor temptation at that.

Nope. I think I have Peter beat for deserving the title, “Grand Weenie of the Disciples.”

It was Peter’s flesh that caused him to pull out the sword in the garden. It was Peter’s flesh that later caused him to wimp out in the court of the high priest. Peter didn’t, and I won’t, have victory by relying on the flesh. If you struggle in the flesh with sin, you end up fighting flesh with flesh. That is foolish. What is going to win? Sinful flesh!

How did we become justified, achieve victory over sin when we were saved? Repent and receive the grace of God. How do we achieve victory over sin after we are saved? The same way: Repent and receive the grace of God. Past guilt of sin, present failures, and future unfaithfulness all are dealt with in the same way: Repent and receive the grace of God.

Remember dear soul, how you then were led contrary to all that your experience, and your feelings, and even your sober judgment said, to take Jesus at His word, and how you were not disappointed. He did receive you, and pardon you; He did love you and save you –you know it. And if He did this for you when you were an enemy and a stranger, what think you, now that you are His own, will He not much more fulfil his promise?
~ Andrew Murray, Abide in Christ (5th Day, italics added)

I am learning, albeit excruciatingly slowly, not to struggle with sin; to lose all self-confidence in my self-effort. Sometimes I remember to not even attempt to partner with God so as to leverage my prideful, fleshly strength with God’s strength. Should I think for even a second that God wants to use His strength to glorify my flesh, to glorify the utter corruption of all that is in my nature?

I need to remember that my confidence comes from knowing that being justified by faith, I have peace with God. The righteous shall live by faith. My confidence is that He put sin to death and that he will continue to put sin to death. He is my justification. He is my righteousness.

When I forget all that, when I struggle with sin, when I fight the flesh with flesh, when I think that my own strength is even partially necessary, that is when I set the stage for me becoming the Grand Weenie of the Disciples.

Be blessed.
RB