The New York Times has an interesting piece today comparing automotive rescue plans to earlier government intervention in the railroads. As apt a comparison as it might be, the piece ultimately advocates exploring an option for the auto rescue based on Conrail, the government-owned rail holding company created in 1976. If the American Leyland model worked for trains it might just work for autos, right? “The ideological debate already in progress,” says Wharton prof Peter Cappelli, “is whether government should actually direct the auto companies, stepping into management, or passively give them more loans, and then get out of the way.” Hows that for a choice?
Since the two options have been chosen, the Conrail experience shows how the former option could work. After all, congressional activism in railroad restructuring created Conrail out of several failing railroads in 1976, cut its employment in half and returned it to profitability by 1981. Conrail was then taken private and persists to this day as CSX, stubbornly preventing Acura from selling its Civic rebadge in the US.
Success? Possibly. But the infrastructure-heavy nature of the railroad business makes it far more similar to traditionally-regulated businesses like energy and landline telecom than durable goods manufacturing. Competition is far more vibrant in the auto industry than in train transport, meaning that rationalization or “right sizing” alone can “fix” railways but for automakers the right business structure is only half the battle.
Actually building products that consumers respect and desire is something that government can’t conjure up with either blank checks or active nationalization. But since those are apparently the only options on the table, it’s time to flip a coin.
Actually building products that consumers respect and desire is something that government can’t conjure up with either blank checks or active nationalization. But since those are apparently the only options on the table, it’s time to flip a coin.
A train is a train is a train, but a Civic is not a Cobalt.
It’s not like GM and Chrysler don’t have any good products. Why not identify the factories of each that are the most profitable and close the rest? For a fraction of the road we’re on now, the government could partially fund a smaller VEBA and health care expense. A smaller lineup at Dodge, Jeep, Chevy and Cadillac survive the fallout.
It’s not like GM and Chrysler don’t have any good products. Why not identify the factories of each that are the most profitable and close the rest? For a fraction of the road we’re on now, the government could partially fund a smaller VEBA and health care expense
You seem to be assuming that just because the factories were closed, that the workers wouldn’t keep their union rights, including VEBA and health care.
A smaller lineup couldn’t “survive the fallout” unless either Chapter 11 or government reorganization takes the obligations to those extra workers off the companies’ hands. (And puts in onto the taxpayers’, perhaps.)
LOL at that photo!
This would be one time where you could allow yourself some Autoblog thought bubbles.
I’ll leave the rest to the B&B…!
“Where is your hand?” (1/2 awake response) “Between two pillows…”
“THOSE AREN’T PILLOWS!!!” (both jump out of bed)
“how about them Lions?” “Yeah, yeah!”
God, how I miss the comedy of John Candy.
The ideological debate already in progress is whether government should actually direct the auto companies, stepping into management, or passively give them more loans, and then get out of the way”
Take the first option, because the second is obviously not working. Step in, take names, kick ass.
This isn’t nationalization. It’s corporate welfare, which is altogether worse.
Conrail, which is actually only 42% owned by CSX and 58% owned by Norfolk Southern, didn’t become profitable until well after the industry was deregulated by Congress under the Staggers Act. Conrail was IPO’d in 1987 and bought jointly and then separated by CSX & NS in 1998.
In reference to the auto industry, they would have to be “deregulated” too which means massive restructuring of their labor agreements. If that doesn’t happen, it is unlikely any meaningful results would be realized.
More likely it’s gonna be like AmTrap… just gimme a little each year to keep 10 million jobs going….
Also we can bring a factory to your town!
The idea that mass transit will work in any meaningful way in America is at best a dream for the 22nd century. There’s simply no fast way to transform the country to a mass transit model.
I lived in Tokyo for several years, and learned some lessons about infrastructure and real estate from that experience.
1. Everybody has to move.
You have to have mass housing near the train stations. Once you live far enough from the station that you need a car, you’ll use the car unless parking is more hassle at the destination than at the station.
2. Shopping patterns have to change.
Once you’re on mass transit, you’re not realistically able to do a week’s grocery shopping in one trip. You can’t carry the weight.
This means that you either have to have a lot of shops close to your home, or shopping delivery services.
3. A “critical mass city size” has to exist to support mass transit.
If you don’t have a large enough population using the mass transit, you can’t support running enough trains to make the use of trains practical. You need to be able to support multiple trains per hour at a reasonable price. Otherwise they’re a PITA or too expensive.
Let’s say that your work starts at 8 a.m. and it’s a 10 minute walk from your house to the station and another 10 minute walk to work from the station to the office. But trains only run from your station at 6:30, 7:30, and 8:30 and take 20 minutes to reach your office station.
You have to take the 6:30 train in order to be on time for work at 8 a.m. The 7:30 won’t reliably get you there in time. Yes, it’s true that it’s theoretically possible, but not in the real world. A couple of traffic signals go against you at the crosswalk or it takes you a little longer to do the walk in the snow. So, you’re leaving the house at 6:15 to be at work at 8.
Note that this is AFTER you’ve found work that’s only 10 minutes from a station AND an apartment or house that’s only 10 minutes from the station.
Also note that a house that’s only 10 minutes from the station is going to command a price premium.
Also note that I haven’t yet mentioned the joys of your 20 minute per day stroll carrying the groceries in the rain, sleet, or snow.
I’d just like to point out that slicing off the unprofitable passenger service from the railroads was a large part of (eventually) getting Conrail back on its feet. Amtrak continues today and no one thinks it will ever become profitable.
Now if we could just jettison the parts of the auto industry that don’t work…
@Lokki:
Well, we could have built things that way, but chose not to. Doesn’t mean we can’t start now.
Transit can work in a large percentage of the country that houses a large percentage of the people. You don’t have to walk to the station, (though that’s ideal.)
I use a lot less gas in my 7 minute drive to the train station than I would in a 2 hour traffic-choked commute by car. And, again, I don’t have to walk to get groceries – I take my car once a week. No big deal. But I have the option to walk to a few places: a drugstore, restaurant, etc when I want and avoid the hassle of driving.
It’s not all-or-nothing. Nobody is saying confiscate all cars. But too many people in America have no choice. Improving transit is only about offering more options.
The answer is plain and simple: it doesn’t work.
Want a proof? Just look at the dozen of state owned auto makers in China. They either went under when the economic reform started, or found a foreign partner (and all they could contribute to the partnership was land and local connections).
There were plenty of smart people in those factories. Just that the system doesn’t work.
Whoever paying for those cars will have the ultimate say as in which auto makers are to survive. And the result is pretty clear…
“The answer is plain and simple: it doesn’t work.”
Renault 1980s-mid 1990s.
Not the most powerful automaker in the world, sure, but I’d be doing cartwheels right now if GM was in the same shape Renault was at the end of government ownership.
The USA as it was is officially finished.
If you like Peter Schiff and Jim Rogers you will enjoy Marc Faber (Dr. Doom)
http://www.youtube.com/user/MarcFaberChannel
“I lived in Tokyo for several years, and learned some lessons about infrastructure and real estate from that experience.”
You forgot the part about firebombing the place so that you can start over with a blank slate.