How much does the $25,000,000,000 bailout of Detroit cost?

(I’m talking about the proposed second bailout. We already gave Detroit a $25 billion bailout in September.)

Over the next few years, several Plugin Hybrid Electriv Vehicles (PHEVs) will come on the market, from Toyota, Nissan, and other manufacturers.

(You’ve heard more about the Chevy Volt than any others, in a desparate attempt by GM to make up for lack of innovation with an expensive marketing push. We were making plug-ins a century ago, when they competed against flex-fuel vehicles. GM’s position on innovation is better shown by the EV-1, where GM threatened to sue Western Washington University for driving theirs)

So how much does the $25,000,000,000 bailout of Detroit cost?

Well, consider than such a plug-in electric vehicle can achieve greater than 100 miles per gallon in normal driving conditions. Swap out the standard gasoline engine with one capable of running an 15% ethanol blend (E-85), and you should get about 500 miles per gallon of gas (with the bulk of the power typically coming from either electricity or ethanol).

So how many vehicles capable of 500 miles per gallon could we subsidize with the funds needed for the $25 billion bailout? How many PHEV-E85s could we help America purchase for the money that is going to go into saving the skins of people ot put the Detroit Three in this mess?

If we make the provide a subsidy of $1500 for each plug-in ethanol-burning electric, that means we could subsidize the purchase of 1,666,667 500 mile per gallon of gas vehicles for the cost of the Detroit Bailout.

President George Bush and President-Elect Barack Obama have a choice: investing in saving GM and the UAW, or invest in freeing ourselves from foreign oil.

Bush’s job seems easier: all he needs to do is hold tough through January 20, by which time GM should declare bankruptcy.

Obama has to choose between investing in the future or investing in the latest and greatest in 1950s ideas.

I hope both of them are up to the job.

4 thoughts on “How much does the $25,000,000,000 bailout of Detroit cost?”

  1. Indeed, a better bailout strategy would be to subsidize a mass movement towards next generation vehicles, either plug-ins, all electric, flex fuel or some combination. I think the best way to handle it would be to set massive refundable tax credits valid during 24-36 month window. This would stimulate both manufacturing and sales (I think the salesmen and other employees of the dealerships are overlooked in the discussion of bailing out “Detroit”). After that 2-3 year window closes, we should pay ourselves back for the cost of the “bailout” by raising gas taxes to two dollars a gallon.

    This would help assure that, as the Core emerges from the recession, we will leave certain petrol states (Russia, Iran, Venezuela) to reap what they have sowed.

  2. The opening of this story from the Detroit Free Press [1] is illustrative of the hidebound, old-fashioned, non-innovative, legacy aspect of GM and the UAW:

    Kandy O’Neill is a fifth-generation General Motors Corp. worker whose great-grandmother worked in the factories during World War II.
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    When asked last week if she and other UAW members should sacrifice more now to save GM from bankruptcy, she has a simple answer: No.

    Ffifth-generation industrial jobs? Irresponsible contracting? Claims to what the company did in World War II?

    Let’s hope Bush and the Senate GOP can stand firm enough to make sure no bailout becomes law [2]…

    WASHINGTON (AP) — Top Republican senators said Sunday they will oppose a Democratic plan to bail out Detroit automakers, calling the U.S. industry a “dinosaur” whose “day of reckoning” is coming. Their opposition serious raises doubts about whether the plan will pass in this week’s postelection session.

    Brent, you’re exactly right, we need to invest in the future, not the past.

    [1] http://www.freep.com/article/20081116/BUSINESS01/811160362/1014
    [2] http://www.google.com/hostednews/ap/article/ALeqM5gA2mr12dJLiWM1QN59MYfpM9OQfwD94G51H01

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