“Many Americans have already bought their last car”

(11 am. – promoted by ek hornbeck)

In his most recent missive, “Presto Change-o“, James Howard Kunstler shares his thoughts on bailing out the big three American automakers.

The dilemma is essentially this: the consumer economy we all knew and loved has died. There will be pressure from nearly every quarter to keep it hooked up to the costly life support machines even though it is dead. A different economy is waiting to be born, but it is nothing like the one that has died. The economy-to-come is one of rigor and austerity. It is not the kind of thing that a nation of overfed clowns is used to. Do we even have a prayer of getting to it, or are we going to squander our dwindling resources on life support for something that is already dead?

A case in point: the car industry. The Big Three, all functionally bankrupt, are now lined up for bail-outs from the treasury’s bottomless checking account. Personally, I believe the age of Happy Motoring is over. Many Americans have already bought their last car — they just don’t know it yet.

The changing reality that is our cratering, consumer-driven economy won’t stop the big three automakers from asking for a bailout, what big automakers don’t understand is that many people would rather buy cars that are a few years older such as these fiat spider hardtop for sale classifieds, and aim to keep them for as many years as they can in order to keep their expenditure low.

Meanwhile, President-elect Obama wants to tie any kind of automaker bailout to increased regulations, according to the Washington Post.

“Certainly he wouldn’t believe in it being a blank check,” said an Obama adviser, who spoke on condition of anonymity due to not being authorized to speak publicly on the topic. “He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns.”

Congress has already allocated $25 billion for the automakers, but as if to prove Kunstler’s point, the CS Monitor reports “The Big Three are in such bad shape that they may not even qualify for the loans Congress approved in September.” Congress offered the automakers a deal, they could have $25 billion in loan if they used it to develop more fuel-efficient vehicles.

The Department of Energy wrote the rules of the program in almost record time, but since then, the economy has dropped into a bottomless pit and U.S. automotive sales are equally abysmal. The DoE’s rules state the automakers must be “financially viable”.

Under the DoE rules, to qualify for a loan, automakers or parts manufacturers have to demonstrate that they won’t need any more federal money to complete the project. They also have to demonstrate a “reasonable prospect” that they can repay interest and principal on the loans when they come due.

Applicants have to submit documents proving their liquidity, statements from their lenders that say they’re not behind on any other loans, and – here’s the kicker – “financial projections demonstrating the applicant’s solvency through the period of time that the loan is outstanding.”

No freaking way the automakers are going to be able to document they’re solvent enough to qualify for these loans.

Kunstler believes there are only two reasons why the automakers should be rescued now:

One, because we need somebody to manufacture engines for military vehicles, and two, because we need somebody to manufacture rolling stock for the revival in passenger railroad service that will have to be a centerpiece of the future economy if we want to remain a civilized nation.

So war machines and passenger trains – that’s it.

The LA Times suggests that Strict conditions are almost certain for an automaker bailout.

Environmentalists want government mandates to shift Detroit’s output to more fuel-efficient, lower-polluting vehicles. They also want the automakers to drop legal challenges to California’s new vehicle emission standards…

Other advocates are seeking new leadership in corporate boardrooms and executive suites, plus commitments to more competitive products.

Meanwhile, “Industry supporters say adding tough conditions to aid could hamstring automakers further and put as many as 3 million jobs in jeopardy.”

Everyone is living in the past and in serious denial about the state of the nation in Kunstler’s view. According to his crystal ball, Kunstler sees “global trade relations wither”, which will  “thrust” the United States back to its own devices. And, the reason why, oil has become somewhat cheaper is because of the financial collapse, not because petroleum resources are not limited.

So without being able to rely on China to manufacture goods for us, Kunstler predicts that “We’re going to have to resume making things in the USA again, too, probably at a more modest scale, and probably fewer things than we are used to.”

Change is coming in ways we’re not ready to accept, but in order to make the right investments we have to give up the idea of an auto-centric America. In Kunstler’s view, Americans are mistaken when they think the solution is to retool the automakers to make more fuel-efficient vehicles and develop hybrids. Our American car culture of suburbia and multiple-lane freeways are no longer possible. We need to realize this before we waste America’s remaining resources keeping the 20th century alive on life support. Change is possible though.

Self-evident necessity will prompt different behavior and different ways of doing things. Sooner or later, the new arrangements will self-organize — if we don’t squander resources defending an unsustainable status quo.

So, if Kunstler is correct then the big three need to be rescued, but in doing so, we should redirect their manufacturing efforts to supporting a sustainable 21st century and not clinging to 20th century.

What will we decide our future to be?