Saturday 13 December 2008

Redrum. Redrum. Redrum.

There are big problems in the US regarding short-term funding of General Motors and Chrysler, and, to a lesser extent, Ford. Having seen the size of the cheque the governments have written to keep the financial system alive, the CEOs each flew down from Detroit to Washington D.C on their own personal jets, then demanded $25 Billion to keep themselves alive for a year, where they believed all their problems would be solved. Hmm.

This is a photo of a place made famous by a Stanley Kubrick-directed Stephen King film: the Shining. The one where the caretaker is persuaded by the ghosts of the hotel that all is problems will be solved if he cuts his family into little bits and then kills himself, because, "All work and no play makes Jack a dull boy". Although the interior is completely different. and there is no room 237 to stay in, its a lovely place to visit; a fantastic climb with a great view of Oregon's Mout Hood behind the building, Mount Hood Lodge. Here though, are how most of the visitors have got there: in cars.

The closest three cars are VW Jettas of different eras: golfs with their luggage removed. Nimble and comfortable. Everything else in the parking lot looks like US product or Japanese toys made to compete: SUVs, Minivans and Pickups. All of which operate on a simple assumption: fuel costs $1.60 a gallon or less. The big three manufacturers had a business model selling overweight truck-based designs with an overweight, under-technological V6 or V8 engine to pull it around, the engine, automatic gearbox and all-wheel transmission adding to the weight and inefficient engine, resulting in SUVs and pickups where doing 20mpg is considered economical; 12-14 MPG bad. The white SUV poking out, a GM Chevy Suburban, probably did 12mpg.

This is the root problem. Fuel inefficiencies and the cost of use. The car manufacturers may blame the credit crunch for killing financed sales (including leasing), but what caused the credit crunch? The collapse of the sub-prime market. And what triggered that? the end of the US boom. And what caused that? Some people (like The Oil Drum) argue that the cost of fuel and hence the cost of driving round the US triggered it. A system that worked at $1.50/gallon struggled at $3/gallon and collapsed at $4/Gallon

Imagine, then if the US had, instead of embracing fuel-inefficient SUVs, had embraced smaller EU-style cars. Cars and "wagons" where a 2.0L engine would be considered big, have a turbocharger on it to make it fun, and deliver a mileage of 35-40 mpg (US gallons here; 4 Litres/gallon). The burn rate of the fleet would be half what it is, so even if the cost of fuel was still above $4/Gallon, it would be affordable. And if the petrol demand of the US fleet was half of what it would be, well, cost of fuel would have been lower even before the recession kicked in. We'd still be vulnerable to the incompetent risk management of the banks, obviously, but maybe things would have been better.

Anyway, it's moot. The US embraced 10-14 mpg toys as what real men drove, and we are all stuffed now. Regardless of whether they get their money or not, the CEOs will be running round the factories like Jack Nicholson with his blood-coated knife, desperately trying to do what it takes to stay in the game. Everything except give up their planes, and the SUVs, of course.

From IMDb:
Delbert Grady: [referring to Jack murdering his wife and son] Mr. Torrance, I see you can hardly have taken care of the business we discussed.
Jack Torrance: No need to rub it in, Mr. Grady.

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