Got the Loan! - Now where does the NEW POSITIVE CASHFLOW come from?

[44 mpg by 2010]

LOANS for Short Term Survival ... But What GM Urgently Needs Is Positive CASHFLOW!

The current Federal loans for the Detroit auto industry are necessary for immediate survival (at least for Chrysler and GM). Although survival is highly questionable for Chrysler even with loans much larger than those currently under discussion.

The loans currently in place will not guarantee survival until "new" product is developed, produced, and introduced into the market in about 12 to 36 months (maybe even later). These "new" products are achieved with high cost of resources (money, time, and manpower) with the intended purpose of displacing "current" product with, hopefully, a "more desirable" set of offerings to stimulate greater demand. But there are NO GUARANTEES that demand will materialize for this incremental product improvement! Since these incremental products are generally NOT radical or IMMEDIATE, they will probably only displace sales of traditional product and NOT generate a noticeable POSITIVE CASHFLOW even after 18~36 months or so!

So ... HOW can GM generate the urgently needed IMMEDIATE ... NEW ... POSITIVE CASH FLOW for OUR economy?

Here is an idea that requires no taxpayer dollars, can be done quickly, requires no major investments by GM (including lead time), addresses a previously neglected US automotive market segment, and CAN GENERATE ... NEW ... POSITIVE CASHFLOW almost IMMEDIATELY!

Simply waive, for 24 months, ALL import, tariff, safety, and emissions restrictions on new vehicles achieving more than 44 mpg(US) [53 mpg(Imperial)] combined cycle and that satisfy Euro Step IV (or Step V) emissions [should require DPFs for diesels] plus current Euro safety standards. This waiver can be granted by Presidential Executive ORDER under the War Powers Act because oil imports/energy independence are National Security Issues. Or, it can be done more slowly by Federal legislation.

As soon as the waiver goes into effect, GM, with their European/Asian partners, could begin importing this class of vehicles and selling them through their existing dealerships for IMMEDIATE CASH FLOW utilizing their current excess European inventories and production capacity. During the 24 month waiver the consumer gets the opportunity to buy and use/experience an entirely new class of vehicles. Meanwhile, GM (and Detroit) discovers consumer preferences, retools/retrains manufacturing to DOMESTICALLY manufacture the newly clarified preferred product set. This same 24 month waiver period would also be used to bring this "new domestic design and production" into compliance with US emissions and safety standards.

This strategy requires no alteration of the "traditional" automotive product set since these "temporary imports" address a previously undeveloped market segment. The actual observed sales rates will be used to adjust future production strategies and volumes!

This is a minimum resource/cost, quick response solution for Detroit to start generating REAL POSITIVE CASH FLOW (in OUR weak economy) through temporary use of their excess non-domestic product and production capacity while they retool domestically for a more appropriate domestic product set based on known consumer acceptance/purchase rates. This would be a serious jumpstart to a new level of fuel frugal automotive product with lower emissions requiring unusually low business risk. It might, in the simplest form, just require putting emissions abated FUEL FRUGAL Euro type power trains into existing US vehicle designs.

Of course, if the GM and the rest of the Detroit manufacturers did not wish to participate in the distribution of these 44 mpg plus vehicles through their dealerships, the consumer would be free to import on their own or through importers.

Here are some of the benefits ... IF ... demand in this "new" segment is real and significant and then Detroit and others commit to and quickly built these "new existing" FUEL FRUGAL vehicles within the US in relatively high volumes, we could "kill 16 birds with one stone" ... not limited to quick response, positive cash flow, expanded domestic market demand, job creation, improved economy, increased tax revenue, reduced fuel consumption/emissions/oil imports, stronger/more creative domestic auto industry/industrial base, improved National Security ... .

Note that there should be no immediate shift in demand for Detroit's traditional product since these imported vehicles are outside the existing market characteristic (unless of course, the traditional purchases are a result of "unsatisfied pent up demand").

And of course the most important thing ... domestic volumes could potentially EXCEED 20 million units annually within 4 years because of the opening of this previously "untapped" fuel frugal segment (to the benefit of industry, work force, the individual/business consumer, economy, and tax revenues). And ... if the market expands ... there is the opportunity for more domestic auto industry jobs (posssibly 1 to 6 million new jobs).


Just in case there is any question that these vehicles exist, please see what GM and Vauxhall already have that are rated 53~77 mpg(Imperial) combined cycle [approximately equivalent to 44~64 mpg(US) combined average] in the UK at
http://www.vcacarfueldata.org.uk/sea...lConSearch.asp
and for specific vehicle characteristics
http://www.autocar.co.uk/SpecsPrices...AndPrices.aspx

Sadly, it appears that Chrysler has nothing in this fuel economy range even in Europe which raises, even higher, the question of future viability!

NOTE: It is true that a significant portion of the current 44 mpg plus vehicles are diesel. Have you considered that Detroit has, on average, been selling between 0.5 and 1 million non Tier 2 Bin 5 compliant diesel "light vehicles" (averaging about 17 mpg) annually for more than 8 years. However, apparently Audi, BMW, Mercedes, and VW FUEL FRUGAL turbo diesels have already successfully achieved California emissions compliance and 40 mpg, and greater, combined average with Honda, Nissan and other not far behind.


The down side of this plan is that … IF Detroit fails to respond responsibly with quality and cost effective product in a timely manner, then they will loose even more market share. It will just be quicker.

At least this has the opportunity for NEW ... POSITIVE CASHFLOW!

This idea WAS shared with Whitehouse staff on 12/14/08.

Will GM take the risk?