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Technological Obsolescence (30% of the problem): (1) the products are obsolete.
By now, cars should be able to get 100MPG (equivalent mileage), be able to pro-
tect occupants in a 40MPH crash, and cost no more than $3,000/year in O&M
(operating and maintenance costs); (2) the labor force is obsolete as it does not
have the training nor skills to work with advanced materials and drivetrain
components; (3) the manufacturing facilities are obsolete in that they are not
geared to mass produce the cars of the future;
Expensive Labor Costs (15% of the problem): (1) domestic hourly labor costs are
higher than the wages paid auto workers in the U.S. working for foreign auto
manufacturers; (2) employer-based health insurance is one third more expensive
than the single payer health care offered in other industrialized countries causing
manufactured goods in the U.S. to be much less competitive in global markets;
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For any rescue to succeed, the federal government needs to assist in creating the
market conditions for the domestic auto industry to succeed. Otherwise, no amount
of capital spent to rescue a specific auto manufacturer will be sufficient. What is re-
quired are regulations that encourage the manufacturers to:
reallocate labor and capital towards technological innovations that enable the
fleet to become successively less dependent on fossil fuels with each new tech-
nology adoption cycle;
create a capital structure that can support the necessary R&D at scale; and
develop a cost structure that is competitive with that of any country in the world.
Implement feebates program for stimulating demand and retooling national trans-
portation fleet to more than double CAFÉ total fleet mileage within 7-10 years.2
This is a self-funding program that requires $20 billion in stimulus funds for seed
capital to initiate the program; 3 and
1 In Venezuela and Saudi Arabia, gasoline use is subsidized and costs twelve cents and forty-
five cents a gallon; in Europe a gallon of gasoline costs $9.00 because it is heavily taxed, with
revenues going to support single-payer national health care and public transportation. The
U.S. has the lowest cost for gasoline among industrialized countries. Thus, between 1980 and
2008, oil use in the U.S. is up 21% whereas in the United Kingdom oil use has remained flat
from 1980 to now, while in France it's dropped 17% (Energy Information Administration).
2A feebates program is a self-financing system of fees and rebates that are used to shift the costs
of externalities produced by the private expropriation, fraudulent abstraction, or outright de-
struction of public goods onto those market actors responsible for the taking of the public
goods in question” (Wikipedia).
3 Registered vehicles rated less than 40 mpg/combined mileage would pay a prorated annual
fee. Registered vehicles with greater than 40 mpg/combined mileage would receive a prorated
annual rebate.
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Under the recapitalization, a trust, the National Transport Trust, will recapitalize
each automobile manufacturer that agrees to receivership with between $50-$100
billion in 40-year debt at a nominal interest rate of two percent (2%) and sell $50-
$100 billion in equity in the public markets for a debt/equity ratio of 1:1 for the
recapitalization.
The Trust shall be the sole arbiter for choice of members for boards of directors
for each company until the company generates retained earnings to retire sixty
percent (60%) of outstanding originating debt;
Until all recapitalization debt has been repaid and for ten (10) years thereafter, all
antitrust provisions of U.S. law will be waived for collaborative R&D programs
initiated by U.S. auto manufacturers.
The U.S. government will make available from its national research laboratories
its advanced materials patents for the development of lightweight, high-impact
chassis and frames, patents for high-energy battery technology; and
The Trust shall provide up to $5 billion to purchase other patents for advanced
drivetrain, braking, and other technology for use at no charge by each auto com-
pany agreeing to receivership and recapitalization provisions in this Plan. The
objective is to produce vehicles that are ever safer and more fuel efficient with
each new advancement in technology.
Offer a Medicare for All health insurance for all domestic auto workers. 4 Pay for
this program through a Surcharge on fossil fuel usage.
4Single payer health care would save more than $650 billion per year. See McKinsey Quarterly,
“Why Americans pay more for health care” (December 2008).
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Part of this vision is to develop a closed materials cycle where chassis, constructed of
carbon fiber, are recycled back to the manufacturer for retrofitting with the latest
drive train, electronics, and updated lightweight composite-honeycomb body panels
every 3-7 years. I envision three basic sizes of chassis upon which all light-duty vehi-
cle models are based. Drive train power is provided by plug-in hybrid/diesel en-
gines. These vehicles are useful for city or highway travel, in all weather. Brakes are
four-wheel disk.
The new GM serves primarily as an assembler of vehicles and holds the intellectual
property associated with the design, engineering, procurement, marketing, and dis-
tribution processes. Assembly, using flexible-programmed robots performing small
batch processes for vehicles on order (as opposed to assembly for inventory), occurs
in virtually every state of the United States.
Refurbishing and remanufacture for retrofitting new components can occur locally.
[By increasing the modularity of components and reducing the scale of assembly, I
believe it is possible to improve build quality while reducing finished costs.] Thus,
the prospect of ‘junked’ cars is obsolete. This is a closed cycle that essentially ‘locks’
(switching costs are very high) the consumer into GM vehicles purchases from year-
to-year.
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Such market incentives for speeding-up technology adoption cycles are win/win: for
the new GM in selling new technology vehicles, for the nation in creating many
thousands of new domestic jobs, and for the Federal government in promoting poli-
cies to curb carbon emissions, reduce dependance on foreign oil, and in producing
solid annual GDP growth to reduce annual federal spending deficits.
With this strategic vision, GM again becomes an integral part of the U.S. economy,
regains the trust and appreciation of the public, positions itself in a competitive pos-
ture than is unmatchable by other car manufacturers, and directly meets the envi-
ronmental challenges of the 21st century.
The future for GM can be very profitable. The task is to position the new GM as a
different car company, with a radically different product than other competitors.
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