Upheaval in the Auto Industry

My daughter called me this morning upset because President Obama’s administration, and the President himself, had forced Rick Waggoner to resign as Chairman of General Motors, and is forcing Chrysler to combine in some way with Fiat, as conditions of funding the bailout requests of the two companies.

It is easy to see her point – how can the federal government dare make decisions normally left to Boards of Directors. Do they even have the right?

It is also easy to see the other side of the question – the side I come down on.

Banks with loans to failing companies often refuse additional loans, or cancel existing ones, until the company shows evidence it can repay them. Often banks will tell Directors to hire a turnaround team to fix the problems. With the prospect of failure in sight, most companies do as the banks request. This seems exactly the situation with GM and Chrysler.

As I read in the papers, neither GM or Chrysler has developed a suitable business plan for fixing their troubles.

Now is the time.

Now they are saying to either make the changes or accept the consequences. The administration has ignited a fire under the managements both companies.

The Gasoline Tax Dilemma

A look into the future shows an alarming dilemma in the way our country funds its highway construction and maintenance costs.

The largest funding source for highways is the gasoline and diesel fuel tax. The essence of the future problem is that the fuel tax, over the next twenty years, will decline as vehicles use less gasoline and diesel because of better fuel efficiency and/or the switch to hybrid or electric power sources. As we green our planet, we, in fact, will run out of adequate highway funds.

Starting some six weeks ago, a plan has bubbled around in my head and finally has enough body to it to post it here. Concept only is described. Omitted are the details – I am seeking funding to fully research the concept and its many ramifications and do not want to divulge too many details. And there are many!

The tax plan has three parts:

· A tax that will encourage resource conservation

· A tax that will discourage the use of petroleum based fuels

· A tax that will discourage miles driven

Regarding the last of the three, there has been much written about measuring mileage driven using GPS technology. This rightly causes invasion of privacy concerns, because time and location data from the GPS could be inappropriately used.

In the Schaul concept (clever, creative name) is a system for measuring mileage and collecting a mileage-based tax that does not depend on GPS technology, does not invade privacy, and seems reasonably easy to collect. This may be the greatest value of the concept.

The various parts of the three tax bases adjust easily to replace the amount of fuel tax now collected, and as the fuel tax declines, can continually adjust to keep revenue at a level necessary to maintain our highways and bridges.

There are competing realities here. First, no one wants to pay taxes or add complication to the way they are calculated and collected. Second, the highway infrastructure will gradually wear out if we do not continue to improve it as population grows, and maintain it as wear and tear takes its toll. Making the taxes realistic and based on measurable factors, with easy collection systems seems a good way to proceed.

Your comments are always welcome.