Caribou Coffee: Ending My Boycott

In the past, I have been boycotting Caribou Coffee because they were bought out and majority owned by Arcapita (formerly First Islamic Bank of Bahrain). As part of their ownership, Arcapita required Caribou Coffee to have an official policy of adhering to Sharia (Islamic law) with regards to their business, whicn included bans on interest and pork.

Even though Caribou was certified to not be supporting overseas groups involved in terrorism, I did not want to support Arcapita's middle-eastern Muslim investors, so I refused to patronize them.

However, I am changing my position. According to this article, Arcapita has sold a large portion of its shares in Caribou, and now only owns about 25% of the company. Arcapita may be the largest single shareholder, however, the public now owns most of the company.

By the way, you still can't get pork at Caribou, in case you were wondering.

Digging Into "Dealergate", Part II

Doug Ross continues to assert that the Obama administration chose to close Chrysler dealers based on their political donations, but he relies on some one-sided data, hanging a lot on the closing list.

For my second look at the issue, I thought I'd look locally. What I did was tabulate the Chrysler dealers in the greater Metro Detroit area which are on the closing list, and also the ones on the stay-open list and take note of their political donations. Here are the results:

Closing:
Dealer, Donations

FORTINBERRY R

MCDONALD R

MONICATTI R

PENSKE R

RUSSO R

TAMAROFF R

VIVIANO R

Remaining:

Dealer, Donations

DEEBY R

FISCHER R

MCINERNEY R+D

MEADE AFIT PAC

MILOSCH R

MOORE NADA PAC

PENSKE R

RIEHL NADA PAC

ROBBINS R

SCOTT R

SNETHKAMP R

VIVIANO R

Metro Detroit Chrysler dealers who donated did so overwhelmingly to the Republicans.

The only example of a Metro Detroit Chrysler dealer who gave money to Democrats was "Hoot" McInerny, who gave large amounts to both sides. It would also be very bad press for Chrysler to try to axe McInerny's dealership, because he is a well known local personality and a big philanthropist.

I don't think you can argue any political bias in Metro Detroit, based on the data.

No Obvious Political Bias In Chrysler Dealership Closings

Update: Blogger Marla Singer at Zero Hedge did some actual statistcs on the entire dealer open and closing list, and found a small correlation between open dealers and donations to Hillary Clinton's campaign, but not a very significant difference between Democrat and Republican giving overall (0.93 vs 1.05 odds ratio of being closed, D vs R).

The blogger Doug Ross did some digging, and discovered that very few of the Chrysler dealers on the closing list gave political contributions to the Democrats in the last election cycle, and most of the ones that did give gave to Republicans.

In his original post (here), Ross found that out of a collection of 39 dealers he checked, 4 gave half or more of their contributions to Democrats (10%)

As much as I would like to believe it to be true, I don't think it is. There is a major flaw with his analysis: he didn't bother to check the dealers that are staying open to see how their political contributions broke down.

My hypothesis is that Chrysler dealers, being small businessmen, are more likely to donate to Republicans than Democrats, for predictable reasons. Like any small businessmen, car dealers want lower taxes, a lower minimum wage, fewer regulations, etc.

The list of Chrysler dealers that are staying open is here. This is a list of the dealers whose contracts will be assumed by the new Chrysler-Fiat.

What I did was go down the list and copy names into the search box at OpenSecrets.org until I got a clean hit. I did this until I got 25 dealers with donation records for the 2008 election cycle. The results can be considered randomized, since we don't expect a correlation in the alphabetical name of the dealership with their political affiliation (or geographic location).

Result: 23 dealer principals donated to Republicans, 2 donated to Democrats, or about 10%.

If you run these numbers through a binomial distribution, you get a 2-tailed P-value of 1! That means that the hypothesis that the two distributions are identical is correct. Chrysler dealers (and probably all auto dealers) who donated for the 2008 election cycle overwhelmingly supported the Republicans.

Here is my "raw data", if you want to spot check me.

DEEBY	R
AKINS	R
SMITH	R
MELLOY	R
SANZI	R
MCKAY	R
SIX	R
UDD	R
ANCIRA	R
ANDERSON	R
NOKES	R
HOSSLER	R
MAROONE	R
MORELAND	R
HADDAD	R
ALBRO	R
THOMASON	D
WYANT	R
BAUMANN	R
LANPHERE	R
SPITZER	D
BENSON	R
BERGERON	R
BERGSTROM	R
GERBAZ	R

Comparing The Cash For Clunkers Bills

There are two competing "cash for clunkers" bills in the House.  One is more left-leaning, HR520, and the other is more populist, HR1550.  Both bills aim to do the same thing: encourage people to scrap older cars to buy new ones.  But they are very different in how they do so. 

In fine high school government class style, I will now contrast the two bills.

Key Differences:

Definition of a "high polluting" or "high consumption" automobile.

HR520: Average (city+highway weighted average) fuel economy of <18mpg.

HR1550: A car built before 2001.

Definition of a "fuel efficient automobile"

HR520: 2003MY or later, <$45,000 price, Tier II Bin 1-5 EPA emissions, 

25% better fuel economy than current or future CAFE standards.

HR1550: 2009-2011MY, <$35,000 price, Tier II Bin 5 emissions.

Voucher Amount:

HR520: New car voucher: $4,500 for 7 year old or newer car, 

$3,000 for 8-10 year old car, $2,500 for 11+ year old car. 

Used car voucher: $3,000, $2,000, $1500.

HR1550: $4,000 for US assembled 27 hwy MPG+, North America 30 hwy MPG+, 

or US light truck 24 hwy MPG+; $5,000 for US assembled 30 hwy MPG+, 

or US assembled work truck (registered commercial); 

$3000 for a NA assembled light truck with 24 hwy MPG+

Both bills require the old vehicle to be destroyed.  Parts other than "engine block and drivetrain" can be recycled, but the titled body, engine block and transmission must be destroyed.

HR520 is obviously geared towards fuel economy.  It doesn't care what kind of car you buy, as long as it is 25% better than the current requirements--which will greatly limit what kind of vehicles would qualify.  It also won't help you unless you are driving something which is relatively thirsty.  A typical case might be a trade-in of an old SUV or pickup truck.  

For example, the current standard is 27.5MPG (combined) for cars and 23.1MPG for trucks, so to qualify for the HR520 voucher now you would have to buy a passenger car that gets at least 34.4MPG or a light truck that gets at least 28.9MPG (combined).  The list of vehicles that would currently qualify is short: small and mid-sized hybrids such as Prius and Fusion, Smart, VW TDI, Toyota Yaris, Mini, Ford Escape Hybrid.  HR520 may give more benefit as time goes on, because more fuel efficient cars will appear, ahead of the tougher CAFE standards.

I think HR520 would have an unintended side effect of boosting the residual values of used large engined vehicles.  Cars that would have been worth $700 (like this one) would be worth much more, because they could be bought and titled just to qualify for the voucher.

 

HR1550 is designed to be more of a short term shot in the arm to the auto industry.  It very broadly defines what a "polluting" and "clean" vehicle is, because it isn't really about being green. It is only in force for several years, and heavily favors U.S. assembled or NAFTA vehicles.  This favoritism could cause trouble at the WTO, although it does include transplants such as Honda who have plants in the U.S.  

I prefer HR1550, because it would be better for the Detroit 3 in the short term.

SF Mayor: Closet Engineer

San Francisco's mayor Gavin Newsom is, apparently, a secret engineer. He thinks designing cars that get big fuel efficiency numbers at an affordable price is easy. From the Detroit News:

"With respect to Detroit, it is not good enough to advance by 2012 an ambitious strategy of having 14 different models at GM of hybrids -- when hybrids are yesterday's technology," Newsom said at a conference here sponsored by Newsweek on the future of the auto industry.

He said automakers must move more quickly to plug-in hybrids, noting hybrids like the Toyota Prius have been on the market since 1997.

"We need a very dramatic shift in mentality of Detroit," Newsom said.

Hybrids are "yesterday's technology"?!?

They still aren't entirely affordable, and not every model can make a profit at market prices. The batteries are still very expensive, as well as the power electronics and drivetrain. Hybrids still haven't caught on in volume, with one model (Prius) breaking the 100,000 unit/year sales rate.

If the California legislature had any cojones, they would tax vehicles with poor fuel economy, or institute a high fuel tax. But they won't because then the voters would throw them out of work.

So instead, they shout at Detroit, "Build us a unicorn!", as if Detroit has unicorns stashed away in the basement of ever R&D lab, under digital lock and armed guard.

Things just aren't that simple.

The Warranty Insurance Signal

The Obama administration's decision to offer government backing for GM and Chrysler warranties is a clear signal of the direction they expect the companies to go in. If Obama thought that GM and Chrysler had viable business plan, with a good chance to restructure their obligations further, there would be no need for the warranty backstop.

What this signals is that Obama thinks there is a good chance that at least one of the companies will in fact wind up in bankrupcy. In which case, government backing of warranties is key to keeping public confidence high enough to keep the businesses running.

The Beginning Of The End Of Personal Mobility?

Mark Tapscot is feeling down on the auto business, judging by his latest blog post, here.

In it he points out that the leftist technocrats sweeping in with Obama ultimately want to reduce our use of personal vehicles, and force us to live packed more densely together in cities, and to rely on mass transportation. Their strategy to do this is to make gasoline expensive, keep the road system under-developed, and perhaps down the road tax our mileage.

No, the people now deciding what kind of products will be made by Detroit are working in Congress, the U.S. Department of Transportation and, most crucially, the U.S. Environmental Protection Agency. Virtually to a man, these people hate privately owned cars and the individual autonomy they symbolize.

That means it's not just the kind of cars and trucks produced by the manufacturers' skunk works that are in Washington's cross-hairs, it's the very notion that all individual Americans ought by right be able to buy and drive the vehicle of their choice anywhere and anytime they choose.

I have blogged on this topic before, and i generally agree with what Mark says. However, there are some big roadblocks in the way of the anti-car left.

First, Americans love cars, and even if they can't have fire breathing 300HP V8's, they will find a way to get fun fast cars. If people get the idea that the bureaucrats are trying to take away the great American right-to-drive-what-I-want, there will be some nasty electoral surprises.

Second, Obama is now caught between two opposing forces, which are going to grind up his campaign agenda: the economy and labor unions on one hand, and the green lobby on the other. To keep his promise of saving jobs, and particularly of helping "working families", Obama must prop up the domestic auto industry. If it fails, it takes his economic promises with it. Propping up the auto industry means getting people to buy lots of shiny new cars. The days of cheap V8's are over, but the days of shiny new cars in every other driveway won't be.

Also, as part of the economic stimulus plan, a ton of money is going to be spent on "infrastructure", and some of that is actually going to go to road repair and construction.

Obama's not dumb, he knows that economic fear is what got him elected, and at the end of the day, I expect that he will throw the greens under the bus.

Bailout Debate, Part 2a: More On Corporate Jets

A few data points to consider:

According to the Center for Responsive Politics (http://www.opensecrets.org), in the last several years, Rep. Gary "tin cups" Ackerman (D-NY) has accepted $31,131 in lobbyist funded travel.

Since 2006, Nancy Pelosi has accepted $29,361 in lobbyist funded travel.

From 2005-2006 Harry Reid has accepted $43,879 in lobbyist funded travel.

Nancy Pelosi was given a Boeing 757 so she could fly herself and her retinue from San Francisco to Washington D.C. non-stop, "for security reasons".


Will Speaker Pelosi downsize her plane so she will appear more modest to the taxpayer, who is directly funding her travels? Maybe she could fly commercial?

The New Mazda 3: Happy Happy Happy

I have always been a fan of the Mazda3, which is a spunky little car that doesn't make you feel like you are an underachiever for driving a compact car.

But when I saw the face of the new design, blech.

From this angle, it looks good:

Image courtesy of Edmunds

But from this angle:

Image courtesy of Autoblog

It just looks so damn happy. To me, "zoom zoom" should have a touch of mean, not a huge toothless smile flying down the road. In a way, it reminds of me some Japanese anime critter. Just make the side mirrors into big flowing ears.

For contrast, here is the old one, not quite as happy:

Image courtesy of Edmunds

Bailout Debate, Part 4: Alternatives

Cheap loans are not the only way to aid the domestic auto industry, there are some other policies that might be a big help in the longer term, and insure the success of the short term loans. Here are a few:

1) Encourage demand. Congress could offer tax credits for people who buy a new vehicle (it could be only for fuel efficient vehicles, to pacify the Democrats). Congress could make interest on new vehicle loans tax deductible.

2) Limit supply. If we placed import tariffs on certain foreign manufacturers who are determined to be unfairly supported by their governments, or whose governments don't allow free entry to U.S. made cars (Hyundai/Kia, for example), we could help domestic car sales. Or, perhaps, import tariffs on car makers who do not meet CAFE standards (BMW). Ronald Reagan is credited with saving Harley Davidson by slapping a 45% import tax on foreign made motorcycles.

3) Buy vehicles directly. The federal government could go on a buying spree, and replace most of its fleet of official vehicles with new ones. It could also give grants to the states to do the same. Consider all of the cars and trucks that the military, police, and other agencies must have.

4) Ensure availability of car loans. The government could take steps to require banks who have accepted TARP funds, and who are in the car loan business, to write car loans to people who have jobs and reasonable credit scores.

Bailout Debate, Part 3: Motivations

I think that some of the motivations behind the mostly Republican anti-bailout and mostly Democrat pro-bailout positions are not the ones commonly being discussed.

The Democrats want to loan the Detroit 3 in part because they owe the UAW big for the recent election victories. If the Detroit 3 slide into Chapter 11, the UAW will be hurt very badly, as an oganization. The Democrats, and Obama in particular, have a goal of making unions stronger (card check). Says Newt Gingrich:

To reward the unions that helped produce its electoral victory, the newly empowered Democratic Congress is proposing that American taxpayers pony up $25 billion to bail out the Detroit Three automakers, Ford, GM and Chrysler.

The House Democrats have written loan legislatio which has strings attached (you can read it here), which require the Detroit 3 to make "greener" cars:

‘‘(1) achievement of the fuel efficiency require10
ments and commencement of domestic advanced
technology vehicle manufacturing as authorized in
the Energy Independence and Security Act of 2007;

The House legislation also bans excessive executive compensation and "golden parachutes", which is more populist pandering and soak-the-rich, as usual.

The Republicans don't want to loan the money outright, but instead keep demanding that the Democrats re-write the already passed (and previously commented on by me) Advanced Technology Vehicle Manfacturers Assistance Plan to remove the environmental requirements, and spend the money as aid right away. This is because they want to jam the environmental lobby, I suspect.

The Democrats want the original $25 Billion ATVMAP left in place, and another $25 Billion carved out of the TARP funds. So, sort of unmentioned in all of this, is that the Democrats are really advocating for $50 Billion in low-cost loans--$25 Billion now, and $25 Billion later.

Some Republicans and conservative commentators are saying that Chapter 11 protection is a smarter choice for the Detroit 3, so they can shed their legacy obligations. What this really means is, "let's stick it to the UAW".

Bailout Debate, Part 2: Corporate Jets, SO WHAT?

Several of the Representatives brought up the fact that, gasp, CEOs of big companies fly in corporate jets.

Rep Ackerman (D-NY):

"There's a delicious irony in seeing private luxury jets flying into D.C. and people coming off of them with tin cups in their hand. It's almost like seeing guys show up in the soup kitchen in high hat and tuxedo...Couldn’t you all have downgraded to first-class or at least jet-pooled together?"

Look, these guys are payed like $5000/hr. I can see how it would be silly to have them waste time going through security pat-downs at Detroit Metro. You want them kept busy.

How many of the congressmen have accepted free rides in the "private jets" of lobbyists? How many have used taxypayer funded military transport?

And what about this private jet here, the Obama express?


Hitting the CEOs for flying corporate planes is nothing more than grandstanding and class warfare.

That being said, apparently the CEOs don't have anyone with half a brain working for them in PR--surely, some in the business could have predicted that the press and Congress would jump on them if they showed their high status.

Bailout Debate, Part 1: GOP is CRAZY

There is so much I'd like to write about the Washington debate over making an emergency loan to the Detroit 3 that I don't have remotely enough time to do so. But I'll throw up a few thoughts over the next day or so.

Part 1: The GOP is CRAZY*.

The Republican party just got kicked to the curb by the American voting public. Not only did Obama win, resoundingly, but the Republican party managed to lose seats in the House and Senate, and is in danger of not even being able to filibuster effectively, because of a very slim 1 or 2 seat bulwark.

The GOP lost partly by losing the closely contested states of Ohio and Indiana. Which happen to be big automotive states.

It is nearly impossible for the GOP to put together a winning electoral map without Ohio.

Forget economics. Even of the Republicans are right (I don't think they are) that Chapter 11 protection is the best road , if the Democrats manage to stick in the voting public's memory that Bush and the Republicans fiddled while GM burned, the future gets dimmer in the midwest for the Republican party.

And if the doomsayers are even half correct, and a collapsing GM takes down suppliers, and other companies with it, if the Midwestern unemployment and home foreclosure rates skyrocket--the Republicans are dead.

DEAD.

Because people will remember who was in power when it started, and they will remember who sat there during the committee hearings and shook their fingers at the CEOs and lectured them that Chapter 11 was the best for everyone. And if people start to forget, the Democrats will gleefully remind them.

If the Republicans want to have a chance at regaining power any time soon, they had better come to the table with better ideas for the Detroit 3 than "let them fail, then we'll sort it out".

*I write this as a registered Republican, and former campaign volunteer (2004).

The Walmart Paradox

I went to my local Walmart today, to grab some assorted stuff. The place was packed, on a Sunday afternoon, with people of all backgrounds.

Interestingly, I saw a few cars with Obama stickers in the parking lot, and this made me wonder. Isn't this ironic? The left in general, including Obama, have long been pounding Walmart for their resistance to labor unions. Walmart has been accused of squeezing suppliers, being stingy with health insurance for its employees, and many other sins. So why are Obama people shopping at Walmart?

Could it be the low prices?

And what will happen those low prices, if Obama and the majority Democrat congress have their way, and make it easier for unions to organize by eliminating secret ballots and instituting card check elections? Aren't Obama's supporters trying to undermine the very thing they are using to save money?

And have you noticed, how some liberals, would-be defenders of the "working people" love to hammer Walmart as being a "white trash" magnet. But isn't it the "working people" who shop at Walmart, to stretch their paychecks further? And the very phrase "white trash" is inherently racist, because of the implied contrast to non-white trash.

Kroger, which is unionized, does not have elderly or disabled folks employed as greeters and return checkers, while my local Walmart does. Kroger's employees have gone on strike, causing inconvenience to their customers.

I am unrepentant Walmart shopper. I don't care if I am seen as downwardly mobile by my high-brow neighbors. I often shop at Target, the darling of the bargain hunting style conscious types, but I will not avoid Walmart if they have something I need.

Where else can you go to buy a wireless G router, and also score a good deal on pickles, pumpkin pie components, 9mm ammunition, toothpaste, and motor oil?

A Quick Tour Of The $25 Billion ATVMAP

Last night, the Dept. of Energy released a preliminary rule which gives the details of the $25 billion government program offered to automakers to help meet the new CAFE standards. The official name is "Advanced Technology Vehicle Manufacturer Assistance Program". I spent some time reading the paper over, and thought I'd share some details, many of which are not widely reported. The rule paper is located here.

First, the program has two parts: a direct loan program, and a grant program.

The money in either case is intended only to fund plant upgrades or engineering work for a future product, not ongoing operations. In fact, companies are explicitly prohibited from investing the money, and any investment income from the loans must be returned to the government (611.102, 611.105).

Loan Program:

• To qualify for a loan, a company must be working on an Advanced Technology Vehicle. An ATV is defined as a vehicle which has at least EPA Tier II Bin 5 emissions levels, and will have fuel economy that is at least 125% of a "substantially similar" vehicle from 2005. (611.2)

To determine how vehicles are binned for CAFE improvement requirements, DOE binned vehicles into 17 classes, such as Compact Sedan and Compact Performance Sedan. Vehicles are binned by EPA size class and also power/weight ratio (for the "performance" designation".

Here is an excerpt of their examples:
This is the table that shows the fuel economy improvement requirement to be considered an ATV:
So for a Compact Sedan, to qualify as an ATV, the proposed vehicle would have to attain at least 42.2 MPG; a Compact Performance Sedan would have to have fuel economy of at least 29.5 MPG.

• For purposes of calculating the ATV's fuel economy improvement, if it is a flex fuel vehicle, its fuel economy must be calculated without credit for flexible fuel operation. That means that if burns E85, the ATV fuel economy is miles per gallon of E85, not gasoline equivalent. This would appear to penalize flex fuel vehicles compared to how they are treated currently.
• A loan applicant must be "financially viable", such that it does not require the government ATV loan to survive (611.100).
• Automakers and parts suppliers are eligible, as long as the the plant improvements or engineering is done in the U.S. So domestic arms of foreign based companies such as Honda could qualify.
• To qualify for a loan, an automaker's fleet average fuel economy (volume weighted) from the most recent year of data must be no worse than their fleet fuel economy in 2005. (611.100)

This is requirement is to make sure that the loans are only offered to companies who are already moving in the right direction with regards to fuel economy. This is probably a meaningless requirement now, because of the market shift to smaller vehicles, probably all of the automakers CAFE numbers have improved, because CAFE is based on sales volumes.

• Applicants must file environmental impact studies and economic impact studies to document how their plant changes will impact the community, both positive and negatively (611.106).
• Projects will be selected for approval based on technical merit, such as amount of fuel economy improvement, as well as other factors such as "economic diversity", and financial health. Older facilities will be given higher priority.
  
• Applicants must pay any workers that it hires to do the plant renovations a "prevailing wage" in the area the work is being done. This is probably a bone for the unions (611.101).
• A borrower can only borrow up to 80% of a project's projected cost (611.105).
• The loan terms are for 25 years, and the borrower may defer repayment for up to 5 years after the project is complete. The interest rate is to be based on "outstanding marketable obligations of the United States of comparable maturity", which I think means 25 year treasury bonds. (611.107) A 30 year U.S. bond currently pays 4.5%.
• The U.S. government gets a lein on any property which is acquired with loan funds, and any assets which are pledged as collateral for the loans.
  

Grant Program:

• If a grant is requested, the grant can be for no more than 30% of a project's cost. (611.204)
• Grants will be given preferentially for projects that re-tool facilities that are at least 20 years old. (611.206)
• 10% of the money used for grants (not loans) each year is set aside for small companies of 500 employees or less, or a consortium of such small companies (611.207).

Some observations.

This is not a "bail-out". The money can only be used for specific projects which are tied to fuel economy improvements. There are some significant strings attached to this program, and though the loans are cheap, they are expected to be repaid, or the government will be able to sieze the collateral of the borrowing company.

The program seems to be somewhat targeted towards unionized labor. There is a bias in the program to older plants (20 years), and plants which are shut down. There is a prevailing wage rule. There is also a carve-out for small suppliers.

This is not a quick fix. To apply for a grant or loan, a company has to generate a large amount of application paperwork, including environmental impact studies, economic studies, financial status information. A company also has to show with computer modelling or prototypes that their proposed project will improve fuel economy by a very significant 25%, and flexible fuels get no advantage in this calculation. The application and review process is likely to take many months if not years.

That is why, even with this program in place, the Domestic 3 are asking the government for direct aid right away.

The financial strength requirement could be a deal-killer for some or all of the Domestic 3 auto makers. If the DOE uses more stringent requirements for financial health, such as low debt/equity ratios, neither GM, Ford, nor Chrysler may qualify.

Obama: Reading The Signs

This is a photo I took near my neighborhood the other morning. It sums up my position nicely.

(c) TheAutoProphet. Photo may be freely distributed and used as long as attribution is given.

Video: Motorcycle Wreck On Board

I don't think the guy was seriously hurt, maybe he learned a lesson?


Crazy Motorcycle Crash Caught on Dash Cam - Watch more free videos

Biker Vs Biker

An amusing contrast. From UrbanGrounds


(Not that there is anything wrong with riding a pedal bike, or anything. I think Palin has better legs).