Wednesday, December 17, 2008

Best Auto Bailout Solution

Donald Trump, in an interview today, gave one of the best answers I've heard recently on how to solve the question of whether to bail out the Big Three:


"The government should offer $35 billion in DIP financing to Detroit."

DIP is shorthand for debtor-in-possession financing.  For the auto industry it'd be very hard to get from the private sector but the US government can certainly do it.  Essentially, like the airlines-many of which have continued to fly while in Chapter 11, it would work like a pre-packaged bankruptcy where GM or Chrysler would be able to operate largely shorn of onerous, decades old obligations to the UAW and states' laws regarding distributorships.    Consumers can be confident that the car companies will continue to exist and make good vehicles and cover their warranties.

Of course the howl from the unions and the left in the Democratic party would be tremendous because it would make bankruptcy a sensible option.

Donald Trump knows about chapter 11 operations as he's taken a number of his companies through it.

In my pessimistic view I think Detroit gets a lifeline.  I would not be surprised at all if they got it from President Bush who may have deep personal sympathy for the autoworkers.   The view here of course is that for Detroit to emerge as viable, going concerns a drastic change in the current structure is required.   At least Bush should leave this rather tough decision for the Messiah aka Obama.   I would be pleasantly flabbergasted if Obama let Detroit go.

Ain't gonna happen - someone will bail them out.   And we will come to regret it.

Climate Change Buffoonery

FoxNews has a good article in response to an alarmist AP offering on Monday which called global warming a "ticking time bomb":

Scientists fear that what's happening with Arctic ice melt will be amplified so that ominous sea level rise will occur sooner than they expected. They predict Arctic waters could be ice-free in summers, perhaps by 2013, decades earlier than they thought only a few years ago.

Unfortunately, it appears that this is not only bad science, but bad basic science:

James O'Brien, an emeritus professor at Florida State University who studies climate variability and the oceans, said that global climate change is very important for the country and that Americans need to make sure they have the right answers for policy decisions. But he said he worries that scientists and policymakers are rushing to make changes based on bad science.

"Global climate change is occurring in many places in the world," O'Brien said. "But everything that's attributed to global warming, almost none of it is global warming."

He took issue with the AP article's assertion that melting Arctic ice will cause global sea levels to rise.

"When the Arctic Ocean ice melts, it never raises sea level because floating ice is floating ice, because it's displacing water," O'Brien said. "When the ice melts, sea level actually goes down.

"I call it a fourth grade science experiment. Take a glass, put some ice in it. Put water in it. Mark level where water is. Let it met. After the ice melts, the sea level didn't go up in your glass of water. It's called the Archimedes Principle."