Working to resolve the crisis in Central America

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Christine Wade has a terrific take on what is occurring in Central America in the World Politics Review with The U.S. Contributed to Central America’s Migrant Crisis. It Must Help Fix It.
Finally, the administration should recognize the crisis that exists not on the southern U.S. border, but some 1,500 miles south in Guatemala, Honduras and El Salvador. Actually addressing that humanitarian crisis requires improving access to official U.S. ports of entry, restoring the Central American Minors Program—which allowed minors in the Northern Triangle who had parents legally living in the U.S. to apply for asylum from their home countries—and re-evaluating the administration’s policy on gender-based and gang-related violence. Those with legitimate claims for asylum should be able to make them and have them processed expeditiously.
The United States, across multiple administrations, has contributed to the current crisis in Central America in many ways. It has a role to play in remedying it.
As are the solutions, the causes of instability in Central America's Northern Triangle are complex. I have little confidence in the Trump, Hernandez, Morales, and Sanchez Ceren administrations working together to address the root causes of the instability and the needs of those who have already been displaced. However, these are a number of more limited policies and investments that could make life better for hundreds of thousands, if not millions of the region's people.

Christine includes some of those policies in her article as does Stephanie Leutert in Foreign Affairs. Victoria Sanford also had a good op-ed in the New York Times with ‘Criminals?’ Hardly. That’s Who the Caravan Flees.

Australian Politics 2018-11-14 15:45:00

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Collateral damage of the debased #MeToo crusade

Janet Albrectsen  is generally right below but her claim that no conservative should copy the unscrupulous tactics of the Left is rather idealistic. A prophet long ago warned "Sow the wind and reap the whirlwind" (Hosea 8:7).  The Left deserve a taste of how their bad behaviour affects people

In the latest outpouring of #MeToo miasma, former ABC managing director Michelle Guth­rie claims former chairman Justin Milne touched her inappropriately on her back. It was “unprofessional” and “icky”, she told ABC’s Four Corners on Monday evening. Guthrie has gone public amid a war of words over who said and did what to whom just before she was sacked and he resigned.

Let’s just say that Guthrie is a woman in her early 50s who stood on equal footing with the former chairman. She chose not to make a formal complaint at the time. Who knows what happened? And, quite frankly, who cares?

More of us are concerned about Ashleigh Raper. The ABC journalist became an innocent ­casualty when powerful men ­decided to exploit the #MeToo zeitgeist for their brutal political games. Before we get to that, if it is true, the alleged behaviour of ­former NSW Labor opposition leader Luke Foley towards Raper at Christmas drinks in 2016 was shameful. More than that, if a man puts his hand on a woman’s back, slides his hand inside her dress and rests his hand on her backside without consent, that is assault. At a press conference last week, Foley denied the allegations and said he planned to launch defamation proceedings. Given there was a witness, this sordid tale has a way to go yet.

Women are right to be just as outraged about Foley’s alleged ­behaviour as the contemptible and uncontested actions of NSW Liberal minister David Elliott and federal Liberal MP Eric Abetz who exploited the #MeToo zeitgeist for their partisan political pur­poses. A month ago, under the coward’s cloak of parliamentary privilege, Elliott alluded to Foley’s actions against an unnamed ABC journalist. Elliott’s actions made it impossible for Raper to remain ­silent.

A week later Abetz also mentioned an alleged “assault”, “sexual assault” and “indecent assault” while grilling ABC management at a Senate estimates committee. His base motives forced the ABC’s acting managing director into the ridiculous position of saying the matter would be investigated, even though Raper had not made a complaint.

Who gave these two men the right to set the hares running about an ABC journalist who was allegedly harassed or assaulted by Foley?

Elliott and Abetz knew that Raper had chosen to stay silent. She did what many, many women do in the same circumstances. She decided to get on with her life, in her case as a political journalist. She did not join the public #MeToo campaign that started a year later. Up until last week, Raper made no public comment or formal complaint.

These were not men in shining armour acting on behalf of Raper when they pursued Foley and the ABC respectively. The two Liberal politicians were acting for their own craven purposes; they knowingly disregarded her choice to ­remain silent. It is especially rank behaviour from two men who dress daily in the moral garb of ­social conservatives within the Liberal Party.

On Friday morning Elliott ­requested privacy. What a joke. Elliott and Abetz ignored Raper’s right to privacy, forcing her into the public domain against her will to damage Foley and embarrass the ABC.

Elliott’s late apology on Saturday only compounds the stench. This is politics 101: a politician apologises only when it becomes untenable not to do so. And even then the apology is predictably lame, a means of deflecting bad behaviour rather than serious reflection about what he did wrong.

We can all agree then that Raper became collateral damage when two senior Liberal men ­exploited the #MeToo crusade for their own political purposes.

But here comes the part that will cause some women conniptions, as is often the case with #MeToo: many women have man­ipulated the social media campaign for their own purposes, corrupting its focus and undermining its credibility. That doesn’t excuse the mistreatment of Raper by the men involved in this sleazy saga. It adds insult to injury that both sexes have used #MeToo for their own ulterior motives.

When millions of women, each with their own agenda, jumped aboard the #MeToo movement early on, it became a train wreck waiting to happen for men and women alike. This early exploitation was an open invitation to others to use the same confected emotion and rage for their personal and political purposes too.

Perhaps if the early champions of #MeToo had demanded a more disciplined focus on serious harassment and sexual assault, their campaign would not have gone off the rails in the way it has. Those who are so outraged over Raper’s treatment should have had the foresight to see this coming. Some unintended consequences are predictable even early on.

Instead, #MeToo became a shoddy conduit for political causes and trivial episodes. And a clique of female supporters would not countenance debate that veered from their fast-forming orthodoxy. They discouraged discussion about how we define sexual harassment and treated those of us who suggested some nuance, context, due process and less prudery as traitors to the sisterhood. The same women so quick to condemn men for exploiting claims of sexual harassment will not concede that women have done the same. Outing a man ­because he didn’t turn out to be Prince Charming and the sex was bad was lumped in the #MeToo basket with everything from a wink and a wolf-whistle, leaving their cause badly damaged.

Three key words suffice as evidence of the wicked manipulation of the #MeToo movement: women, Democrats and Kavanaugh. Even the American Civil Liberties Union exploited the emotion-laden #MeToo zeitgeist to try to stop Brett Kavanaugh becoming a Supreme Court justice. A group that includes civil liberties in its name is prima facie dedic­ated to due process. Not when it came to Donald Trump’s choice for the Supreme Court. Here, the ACLU used unproven and highly contested claims by women to ­oppose Kavanaugh’s nomination.

The debasement of the #MeToo movement made it ­inevitable that it would be exploited by men and women and people of all political persuasions. Last week, during a fiery White House press conference, a Trump aide took the microphone from CNN’s Jim Acosta. Later that day Acosta’s press credentials were suspended and Trump’s press secretary, Sarah Huckabee Sanders, accused Acosta of “placing his hands on a young woman just trying to do her job as a White House intern”, calling it “absolutely unacceptable”. The video shows Acosta’s hand brushing the intern’s shoulder as she takes the microphone from him. But in an age of confected #MeToo outrage, everyone gets a shot at emoting over even the most trivial #MeToo matter.

Now that a Republican president and two Liberal politicians in Australia have exploited this hashtag crusade for their own tawdry ends, maybe more backers of #MeToo will concede that its early corruption encouraged precisely this outcome: a political free-for-all where women have become collateral damage too.

SOURCE 






Australia's annual wage growth the highest in three years

Despite leadership troubles, a conservative administration has still delivered the goods.  Even if a conservatve administration does no more than block the destructive Left from power, it can still do a lot of good

Hourly pay rates across Australia rose 0.6% in September quarter, meeting expectations, and have now increased 2.3% over the past 12 months for the highest annual growth rate in three years.

Public-sector hourly rates of pay lifted 0.6% in the quarter and 2.5% over the year, according to figures released on Wednesday by the Australian Bureau of Statistics.

Private-sector workers received a 0.5% increase in the quarter and 2.1% over the year.

The September quarter result was in line with economist expectations but seemingly below what traders expected, with the Australian dollar dipping in reaction to the data, from US72.35c to US72.21c.

“There was a higher rate of wage growth recorded across the majority of industries in comparison to this time last year, reflecting the influence of improved labour market conditions,” the ABS chief economist, Bruce Hockman, said.

In original terms, annual growth to the September quarter 2018 ranged from 1.8% for the mining and retail trade industries to 2.8% for the healthcare and social assistance industry.

The Reserve Bank has been scanning the economy for signs of stronger wages growth before it considers raising interest rates.

SOURCE 





Australian universities miffed about inquiry into freedom of speech

The government has asked a former chief justice of the high court, Robert French, to review the health of freedom of speech on Australia’s university campuses.

The review will take four months, and French has been asked to assess the framework protecting freedom of expression and inquiry, including the multiple codes of conduct and enterprise agreements that govern campuses.

He has also been asked to consider policy options that could “better promote” freedom of expression, including the development of a sector-led code of conduct to govern university behaviour.

The request comes after a series of controversies on university campuses where students and academic staff have been accused of stifling public debates.

But Universities Australia has questioned why the review is necessary, saying campuses should be free of political interference. [Including interference from Left-Fascist goons

It has also criticised some media commentators for being “very wide of the mark” and “selectively quoting from university policies and codes” to make their arguments about free speech.

Dan Tehan, the education minister, said universities were important institutions where ideas were debated and challenged and freedom of speech had to be protected “even where what is being said may be unpopular or challenging”.

“The best university education is one where students are taught to think for themselves, and protecting freedom of speech is how to guarantee that,” he said.

“If necessary, the French review could lead to the development of an Australian version of the Chicago statement, which is a voluntary framework that clearly sets out a university’s commitment to promoting freedom of speech.”

French said he would respect the “legitimate institutional autonomy” of Australia’s universities while undertaking the review.

“An important object of the review will be the production of a resource including a model code which can be used as a point of reference in any consideration by universities of their existing rules and guidelines relating to the protection of freedom of speech on campus,” he said.

But Universities Australia said the country’s universities had more than 100 policies, codes and agreements that support free intellectual inquiry, ensuring a culture of lively debate and a vigorous contest of ideas.

Prof Margaret Gardner, the chair of Universities Australia, said some assertions in media reporting had mischaracterised academic freedom and downplayed the robust state of debate on campuses.

“Some commentators on free speech at Australian universities have been very wide of the mark – jumping to the wrong conclusions or selectively quoting from university policies and codes,” she said.

“These same conclusions would not meet the threshold test of academic inquiry — informed by evidence and facts.

“They are made by advocates who appear to want government to override university autonomy with heavy-handed external regulation and red tape.

“Despite these incorrect assertions, a wide range of opinions are freely expressed on campus – in the context of Australian law and university codes of conduct.”

Gardner also said Universities Australia had not provided input for the review’s terms of reference.

A press release from Tehan’s office on Wednesday said: “Universities Australia have been consulted on the review.”

SOURCE 





Almost 300 asylum seekers prevented from sailing to Australia in past year

International authorities, with the assistance of Australia, have “disrupted” at least 10 alleged attempts to transport almost 300 asylum seekers to Australia by boat in the past 14 months, documents obtained under freedom of information reveal.

The documents, from the federal home affairs department, record the number of “foreign law enforcement agency” (FLEA) disruptions since 2013.

FLEA disruptions were set up as one of three components of the Abbott government’s border policy – alongside boat turnbacks and offshore detention and processing.

Since the establishment of the new policy there have been 78 disruption operations involving 2,525 “potential illegal immigrants” – the terms used in the documents referencing suspected passengers.

In the year to August there were 10 disruptions involving 297 people, the majority occurring in Indonesia but also in Sri Lanka and Malaysia.

FLEA disruptions are operated by a multi-agency taskforce led by Australian federal police and reporting to the head of Australia’s border enforcement operation, air vice marshal Stephen Osborne, and seek to prevent vessels carrying asylum seekers from leaving international ports including Indonesia.

The taskforce has stationed more than a dozen extra liaison officers in various countries, on top of almost 100 already there, targeting known transport hubs, Guardian Australia understands.

The operations involved weeks or months of intelligence gathering on individual plans for people-smuggling ventures, before local authorities intercepted groups – usually just prior to the point of departure.

The freedom of information documents note 614 arrests since September 2013, as well as 14 arrest warrants.

Most arrests – 489 – occurred in Sri Lanka, followed by 48 in Malaysia and 66 in Indonesia. Thirteen of the 14 arrest warrants were issued in Indonesia.

However the document notes the statistics are “indicative only” as they were provided by AFP posts from advice given by foreign law enforcement.

“Post experience is that results are typically under-reported because arrests in regional locations are occasionally not reported.”

Asher Hirsch, senior policy advisor with the Refugee Council of Australia, said the fact Australia was still working with Indonesian authorities to stop asylum seekers getting on boats “highlights the desperation of people there”.

“Refugees in Indonesia have no basic rights and are living in indefinite limbo and uncertainty. Instead of interceptions and disruptions of potential boat journeys, the Australian government should work with the Indonesian government to ensure refugees have the right to work, education and healthcare, and can remain in Indonesia safely until they find another solution,” Hirsch said.

“A better way to spend this money would be to invest in helping refugees in Indonesia through local initiatives and increasing our resettlement program to share responsibility for refugee protection.”

Indonesia is not a signatory to the UN refugee convention and has no status determination system of its own, and so asylum claims are assessed by the UNHCR.

As of December last year Indonesia was hosting around 13,800 refugees from 49 countries. About half originated from Afghanistan. At least 800 more have arrived in 2018.

The International Organisation for Migration has provided basic healthcare and shelter for around two-thirds of the refugee and asylum seeker population in Indonesia since 2000, under a regional cooperation arrangement between the organisation, Indonesia and Australia.

However in March the Australian government announced it was cutting funding to the IOM, saying it did not want Indonesia to be a “pull factor” for asylum seekers.

In 2017 only 763 people were resettled in a third country from Indonesia, more than half in Australia, according to the Refugee Council of Australia. The US settled 228, but has since cut its resettlement program from more than 96,000 to 30,000.

The IOM also administered the Australia-funded Assisted Voluntary Returns program, offering asylum seekers $2,000 plus airfares to return to their country of origin.

The Australian government refuses to resettle any refugee who arrives in Australia by boat.

Under the other two arms of Operation Sovereign Borders, Australian customs and authorities intercept and return vessels to their point of origin, “when it is safe to do so”, and have in the past commissioned replica Asian fishing vessels to put passengers on when their own vessel is unsafe. Australia was previously using orange lifeboats to do this.

Offshore processing has seen thousands of men, women and children held in detention centres on Christmas Island, Papua New Guinea’s Manus Island, and Nauru, in many cases for longer than five years.

SOURCE 






Climate, economy on govt agenda: Cormann

Finance Minister Mathias Cormann has dismissed a colleague's concern that the Liberal Party needs to do more about climate change to gain support from younger Australians.

WA Liberal senator Dean Smith says the party's diminishing appeal to young voters is the "elephant in the party room" and is being ignored at the government's peril, The Australian reports.

"We are dealing with climate change," Senator Cormann told the ABC on Tuesday. "But in a way that doesn't undermine the opportunity for young people in particular to get a job, to build a career in Australia into the future.

"My view and our view is that we have to continue to take strong and effective action in relation to climate change but in a way that is economically responsible."

Senator Smith's concerns were reportedly fuelled after a Newspoll analysis showed 27 per cent of 18 to 34-year-olds would hand their primary vote to the coalition, compared with 46 per cent who would support Labor.

Population and climate change policies were critical to the coalition's future success, he added.

Greens senator Larissa Waters says the federal government wouldn't know a climate policy "if it hit them in the face". "Young people can spot bullshit artists a mile off, so it's no wonder that young people don't buy the nonsense this prime minister is coming out with on climate," she told reporters in Canberra on Tuesday. "The tragedy is, it's actually better for the economy to transition to clean energy."

A new report on climate change shows it has fuelled the drought, with changing rainfall patterns increasing the risk of water shortages for agricultural and urban uses.

The Climate Council [A private Leftist outfit] report released on Tuesday found the flow of water in the Murray-Darling Basin has declined by 41 per cent during the past 20 years, with fears it will continue to decrease. The catchment produces more than a third of Australia's food.

With no federal climate policy and rising emissions every quarter since March 2015, Australia is lagging behind the rest of the world on climate action, the Climate Council's Lesley Hughes told reporters in Sydney on Tuesday.

SOURCE 

 Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here




Philadelphia Rebuild Paying Price for Soda Tax Shortfalls

The city of Philadelphia is continuing to experience shortfalls in the monthly revenues it collects from its controversial soda tax. As a result of those ongoing shortfalls, Philadelphia Mayor Jim Kenney's Rebuild initiative is being significantly scaled back from the levels that city officials have promised city residents.

The following chart shows the amount of revenue that the city has collected through the Philadelphia Beverage Tax assessed in the months of January 2017 through August 2018. In the chart, the blue "Desired" line shows the amount of tax collections that city officials originally expected to collect throughout 2017, while the red "2017" line shows how much the city actually collected from its soda tax in each month of that year. The red 2017 line subsequently became the city's expected revenue for its soda tax in 2018, whose actual level of revenues are indicated by the green "2018" line.

Desired vs Actual Estimates of Philadelphia's Monthly Soda Tax Collections, January 2017 through August 2018

Through August 2018, Philadelphia is running about $1.6 million short of its expected revenue levels for the calendar year, and about $10.5 million below its original revenue expectation for the first eight months of collections for its soda tax.

City officials passed Philadelphia's soda tax into law by promising to use 100% of the money it would collect to fund "free" pre-Kindergarten programs in the city, community schools, and the mayor's Rebuild initiative, which would fund repairs and improvements to city parks, libraries, recreation centers and playgrounds.

With the city's soda tax collections persistently falling short of expected levels, one or more of these spending programs would have to pay the price by being scaled back, where the city's Rebuild initiative appears to have become the designated loser.

That much became evident last month when Mayor Kenney began walking back promises to fund $500 million worth of improvements to the city's public infrastructure.

The glowing "First 1,000 Days" report [pdf] released Oct. 1 by Mayor Jim Kenney contained 15 mentions of Rebuild, the most expensive and highest profile initiative of Kenney's first term. But unlike past mentions of the heralded program, these didn't include the $500 million price tag that the administration has used consistently since it introduced the program in 2016.

"Through the Administration’s signature infrastructure initiative Rebuild, we're investing hundreds of millions of dollars in our neighborhoods by renovating our aging recreation centers, playgrounds, parks, and libraries," the report reads.

The subtle adjustment to “hundreds of millions” may seem innocuous yet it portends an intentional shift that could result in fewer dollars reaching neighborhoods hungry for functional, decent places to play and learn.

Philadelphia is reliant upon the taxes it collects through its soda tax to support the borrowing it needs to fund the Rebuild initiative. With those revenues falling over 17% short of the city's original expectations, the mayor has scaled back the city's planned commitment for the Rebuild initiative from $500 million to $348 million, a 30% reduction. The difference between the percentage for the city's soda tax revenues and its funding commitment confirms that the Rebuild program is bearing a disproportionately larger share of Philadelphia's failure to collect its desired level of revenue through its soda tax.

That outcome could have been avoided if only Philadelphia's residents were more willing to pay the city's soda tax instead of engaging in tax avoidance behaviors. It's as if they don't care enough about what city officials want....

1 in 54 Chance of U.S. Recession Starting Before November 2019

The U.S. Federal Reserve boldly took no action to increase short term interest rates in the U.S. at the conclusion of its 7-8 November 2018 meeting, leaving them at their current target rate of 2.00% to 2.25%, the level to which they had set them back in September 2018.

The risk that the U.S. economy will enter into a national recession at some time in the next twelve months now stands at 1.9%, which is up by roughly three-tenths of a percentage point since our last snapshot of the U.S. recession probability from late-September 2018. The current 1.9% probability works out to be about a 1-in-54 chance that a recession will eventually be found by the National Bureau of Economic Research to have begun at some point between 8 November 2018 and 8 November 2019.

That small increase from our last snapshot is mostly attributable to the Fed's most recent quarter point rate hikes on 26 September 2018. Since then, the U.S. Treasury yield curve has very slightly flattened, as measured by the spread between the yields of the 10-Year and 3-Month constant maturity treasuries, which has only contributed a very small portion of the increase in recession risk in the last six weeks.

The Recession Probability Track shows where these two factors have set the probability of a recession starting in the U.S. during the next 12 months.

U.S. Recession Probability Track Starting 2 January 2014, Ending 8 November 2018

We continue to anticipate that the probability of recession will continue to rise through the end of 2018, since the Fed is expected to hike the Federal Funds Rate again in December 2018. As of the close of trading on Friday, 9 November 2018, the CME Group's Fedwatch Tool was indicating a 76% probability that the Fed will hike rates by a quarter percent to a target range of 2.25% to 2.50% at the end of the Fed's next meeting on 19 December 2018. Looking forward to the Fed's 20 March 2019 meeting, the Fedwatch Tool indicates a 53% probability that the Fed will hike U.S. interest rates by another quarter point at that time. Looking even further forward in time, the Fed is expected to hold rates steady for a while, then hike them by an additional quarter point in September 2019.

If you want to predict where the recession probability track is likely to head next, please take advantage of our recession odds reckoning tool, which like our Recession Probability Track chart, is also based on Jonathan Wright's 2006 paper describing a recession forecasting method using the level of the effective Federal Funds Rate and the spread between the yields of the 10-Year and 3-Month Constant Maturity U.S. Treasuries.

It's really easy. Plug in the most recent data available, or the data that would apply for a future scenario that you would like to consider, and compare the result you get in our tool with what we've shown in the most recent chart we've presented. The links below present each of the posts in the current series since we restarted it in June 2017 and, barring significant events, our next update will be in December 2018.

Previously on Political Calculations

Sunk costs


In 1972, I talked my dad into buying a Saab 99. Saab was mainly an aircraft company financed by the Wallenberg Bank in the late 1930s to build fighters for the defense of Swedish neutrality. After the War, they decided to take their skills into automobile manufacture. They hired the rising star of Swedish industrial design, Sixten Sason, who would go on to design the Hasselblad camera that NASA sent to the moon on Apollo 11. So a company full of aircraft expertise built a car they believed would be better with a little airplane built in. The 99 was brimming with innovation. For example:
  1. The structural integrity of the passenger compartment was superb. Monocoque, stressed-skin design combined light weight with a crazy-strong roof. Saab's early promotion included winter rallying. Their driver rolled his car so often while continuing the race he got the nickname Carlsson på taket (Carlsson on the roof).
  2. The cockpit was the first real manifestation of sound ergonomics. The seating and driving position was excellent. The instruments were clear and easy to understand.
  3. Four-wheel disc brakes had multiple backup systems.
  4. It was versatile with a fold-down rear seat.
  5. And it was the only sorted-out front-wheel drive car sold in USA. (In snowy Minnesota, that was a big deal.)
Saab is no more. by 1990, every car-maker on earth had a version of the Saab 99. Some, like the Toyota Camry, had taken all those good ideas and refined them significantly. Cheaper and more reliable is a winning combination.

Right now, Tesla is at least as far out in front of the EV pack as was the Saab 99. Below is an excellent description of the institutional problems facing the established car companies. They have BIG bucks invested in a way of producing a product that is rendered obsolete by fun, comfortable, exciting, electric cars. Yes, they are dragging their feet. But giving what they face, you would too.

The cautionary tale of Saab is a reasonable outcome for Tesla. Yes, its competition will lag. The Germans, Americans, and Japanese may well be hindered by the Institutional inertia. But that leaves the Koreans and the Chinese. Either one has the potential to swamp Tesla.

Why Automakers Try To Slow & Stifle The EV Revolution

November 11th, 2018 by Zachary Shahan

This is a repost from two years ago. The story is more or less the same today. The original title was, “What goes on in the minds of auto execs?”

I’ve had a lot of fun recently while highlighting 50 “tips” for slowing the electric car revolution and writing about what the end of gasmobiles could look like, but the discussions left some people scratching their heads. Why would automakers conscientiously try to delay a switch to electric vehicles? Why would they not try to create attractive electric cars once they were shown how popular Tesla’s models have been?

I’ve written about this plenty of times before, such as here, here, and here. The short summary is this:

A transition to electric cars threatens the “financial health” of conventional auto companies. Many shareholders would be pissed to see so much investment in gasoline car technology “wasted.” Executives who built their careers on engine expertise would become much less valuable. Automakers would have to shift much of their business strategy, operations, factories, and workers. They’d be tossing many highly valued patents & knowledge down the drain.

However, that’s all just a simple summary. It hit me that a more detailed theoretical rundown would help more people to visualize the problem — to understand why BMW is trying to compare the 330e to the Model 3 in advertisements, why Ford is boasting about range on a plug-in hybrid that has only 22 miles of electric range and is advertising its cars using Captain America, why most electric models sold in the US aren’t available in most US states, why no automakers other than Tesla have cars with superfast charging, why Chevy isn’t creating this car (which a consumer designed) and BMW isn’t creating this one (which a consumer designed), why Fiat’s CEO told people not to buy the Fiat 500e, why Toyota is still hyping hydrogen, etc.

With the long preface out of the way, let’s dive into a thought experiment.

Numbers (… Fake Ones)

I’m not going dig through decades of investments from big auto companies, but below are some fake numbers from automaker “Bord” to play with in order to get rolling….
Bord has 84 factories
$84 billion has been invested into these factories
18 of these factories (~21%) are engine factories
6.5 million Bord vehicles were sold in 2017 for $150 billion in revenue and $7 billion in net income
Bord had a 6.5% automotive gross margin in 2017
Essentially, Bord is making 6.5 million vehicles a year ($150 billion in revenue, $7 billion in net income) using factories that it put $84 billion into (with $17 billion going into the engine factories alone). After adding in cash used for other overhead, operations, etc., Bord walks away with a healthy little profit each year and sends some of that back to investors.

The Groundbreaking Q4 2018 Bord Shareholder Letter

Now, let’s say that Bord’s CEO sees that electric vehicles are the future, that they’re already essentially competitive, and that the most logical thing for the long-term health of the company is to switch to electric vehicles fast. Mr. Constable C. Smuggins, CEO of Bord, tells shareholders in a shocking quarterly letter:

We are planning to switch over 100% to electric vehicles in the next 3–5 years. We would do it sooner, but it takes time to create these new EV models and ramp up battery production capacity. Doing it later would be stupid, because people won’t want to buy our gasmobiles in 5 years when compared with our electric vehicles or other automakers’ electric vehicles.

Unfortunately, this means that our engine factories (which we put $17 billion into) are soon going to be useless. Well, the land and building shells will still be useful, but nothing we currently have or do inside will be. These factories will have to be completely revamped to produce batteries and electric motors. In order to do that, we will need to invest another $17 billion. Actually, we will need to invest $33 billion on top of that $17 billion for additional battery factories in order to keep producing the same number of vehicles we sold in 2017. This is a good thing, because we will have a competitive advantage in the industry from our $50 billion worth of battery factories. Don’t worry about us choosing the right batteries and manufacturing machines, though — we’ve got this.

Our other factories will need to be reworked to support the many new models we are introducing based on new electric powertrains. That’s another $50 billion.

We have a cash balance of $50 billion. Quite a lot, eh? Unfortunately, that’s clearly not enough to cover this quick transition. (If we could somehow spread the transition outby 2–3 decades, that would be much easier, but we don’t see that as sensible.) So, we will need to borrow a lot of money, and we are going to cut off dividend payments for several years. No worries — we’ve got you covered in 2025 or 2030, and we know you are long-term investors who also care about humanity and want to see a quick transition to clean technology that helps to stop costly and horrendous global warming, so we’re sure you won’t bail on us.

To be honest, though, we don’t know a lot about batteries and don’t have experience making compelling electric cars, so we hope we don’t screw up too much while pouring $150 billion into this. (Oh, did I mention that we need to do some massive staff re-training, R&D, set up new supply chain partnerships, license new tech, and acquire a bunch of patents?) By the way, yeah, um, our thousands of engine-related patents are basically useless now, so we’re just going to toss them in the trash.

I know you’d rather get a few more dividend payments before we jump in, but frankly, everyone in the industry sees the light and is now going to do this, so we have to get moving fast.

Back to Reality

Yeeeeah. … Most shareholders of GM, Fiat Chrysler Automobiles, Ford, BMW, Nissan, Daimler, Toyota, Hyundai, and Honda wouldn’t be thrilled to hear such plans, and many would try to stop the move. (Volkswagen is getting away with something slightly approaching this thanks to the pickle it landed in by being a massive cheater and liar. Lucky VW!)

Overall, the question is: If you’re in the shoes of these large automakers, how do you dump your huge investments (sunk costs) and competitive advantages (which are centered around the internal combustion engine) in order to jump head first into a new technology? How do you tell shareholders that you’re going to go from making billions of dollars a year in profits to borrowing money for several years? How do top executives who built their careers on engine expertise suck it up and say that it’s time to retire the old dirty beast under the hood? Tough questions.

I know I demonize automakers a lot for doing a horrible job on their EV efforts and promotion, but it’s not really about demonizing them — the goal is to push them into a better approach, and to help inspire other consumers to do the same. But when you look at the challenges they face, this simplistic idea becomes less potent. That leads into a topic for a coming article — how I think these companies can and should proceed. First, though, I never got to the main question in the title: “What goes on in the minds of auto execs?”

Who the hell knows? These people vary in personality, career focus, and culture quite a bit. How much they understand that electric cars are the future, how much they understand the existential threat electric cars present to their businesses, how much they consciously think through the finances or run spreadsheets on the matter, how much they care about global warming and air pollution, and how much they genuinely try to delay an electric car revolution probably vary a great deal.

If you find any more interesting tidbits on how any of their minds work and what they are thinking, drop us a note. In the meantime, fanboy/fangirl or not, I think you have to give some thanks to Tesla. If Tesla wasn’t around, the transition would be going much more slowly, the plans of automakers would be even much worse, and there’d be a lot less inspiration in this market and in the world in general. more