MSDI 2008 CAFÉ - Econ

Auto Industry DA (CAFÉ)

Auto Industry DA (CAFÉ)................................................................................................................................1

Shell..................................................................................................................................................................2
Link extensions.................................................................................................................................................3
Affirmative answer...........................................................................................................................................4

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MSDI 2008 CAFÉ - Econ

Shell
A. Uniqueness. The auto industry is on the brink of collapse but it will make it
through. Failure could mean the collapse of the US economy.
The New York Times, "Auto Industry Feels the Pain of Tight Credit " May 27, 2008
Those forces, on top of the softening economy, are putting enormous pressure on the American auto industry as it faces what may be its worst year in
more than a decade. About 15 million vehicles are expected to be sold in 2008, down from 16.2 million last year, as sales reach the lowest levels since
The impact on the broader American economy could be
1995, according to the marketing firm J. D. Power & Associates.
profound. Not only is the car a consumer's biggest purchase after the home, but the auto industry remains
one of nation's most important economic engines. With less money available to bolster the industry's
growth, the businesses that support it are also facing the prospect of a sharp slowdown. ''It is a bleak
picture, and it all hinges on the availability of financing,'' said William Ryan, a financial analyst at Portales Partners who has
followed the auto business for years. ''The whole universe related to the auto industry is touched in some way -- parts
suppliers, manufacturers, salespeople, trucking people, the paint and metals industries. Even semiconductors.'' Within the auto sector, problems
stemming from the continuing tightening of credit have already started to spread. Auto lenders like Chase, Capital One and GMAC are finding it harder
and more expensive to obtain money for loans. Profits also look dimmer as the lenders absorb losses from defaults and pull back from making new
loans. Car dealers and manufacturers will probably face months of weaker profits as they offer more incentives to sell new vehicles. Luxury car sales,
which provide outsize profits for auto companies, are off 13 percent from last year, according to the Autodata research firm. And consumers, facing
potentially higher mortgage payments and $4-a-gallon gas, are delaying purchases of midmarket cars. ''The housing crisis, defined with the credit
crisis, has really knocked consumers back on their heels,'' said Michael J. Jackson, the chairman of AutoNation, the largest automobile retailer. But the
auto industry may not suffer the same severe downturn as the housing sector. One reason is that auto lenders have long issued loans expecting that
vehicles, as collateral for the loans, start to lose value as soon as they are driven off the lot. In contrast, mortgage lenders during the housing boom
believed that home prices would keep rising. Still, the parallels are striking. Easy money and lax underwriting helped extend a boom for automakers
from 2005 to early 2007. With Detroit pumping out new cars, consumers were encouraged to buy even though they might not have needed a new
vehicle. Now, just as in the housing sector, the auto industry is suffering, too. Borrowers are falling behind on their car payments at a rate faster than in
other recent downturns. And losses are considerably worse. Auto lenders sustained losses on about 3.4 percent of their loans in the first quarter, a rate
about 30 percent higher than in 2002, according to data from Moody'sEconomy.com. Even some of the most creditworthy borrowers are stressed.
Recently there have been a few small signs of improvement. But auto lenders have struggled to find investors willing to buy
packages of new loans. Just as in the mortgage markets, a sterling credit rating -- the bond insurer's seal of approval -- is no longer trusted. ''It's a
challenge, but it's not a crisis,'' said William F. Muir, president of GMAC, the financing arm of General Motors
that is now operated as a joint venture.

B. Link. Stringent fuel efficiency standards would hurt the auto industry.
The Washington Post, Automakers Tell House to Lay Off On Fuel Economy, March 15, 2007
The auto industry is prepared to fight over fuel-economy regulation. Its lobbyists include veterans of past fuel-economy fights. The industry also has
thousands of dealers around the country who can be called upon to contact members of Congress or visit Capitol Hill. The UAW can unleash its
stringent increases in fuel-economy standards could lead to a
members to press the industry's case. Gettelfinger said
"calamitous result" of factory closings, tens of thousands of layoffs and the loss of retiree health care,
already a primary target of industry cost-cutters. Improving vehicle gas mileage could cost as much as
$44 billion at GM alone, Wagoner said.

C. Impact. Collapse of the global economy would trigger the release of every weapon
on the planet and extinction.
Thomas E. Bearden, Lt. Col, PhD, MS in nuclear engineering, BS in mathematics – minor in electronic
engineering, December 29, 2000
Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable that some
of the weapons of mass destruction will be used by one or more nations on others. An interesting result then—as all the old strategic studies used to
show—is that everyone will fire everything as fast as possible against their perceived enemies. The reason is simple: When the
mass destruction weapons are unleashed at all, the only chance a nation has to survive is to desperately try to destroy its perceived enemies before they
destroy it. So there will erupt a spasmodic unleashing of the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they
The ensuing holocaust is certain to immediately draw in
feel the economic collapse, poverty, death, misery, etc. a bit earlier.
the major nations also, and literally a hell on earth will result. In short, we will get the great Armageddon we
have been fearing since the advent of the nuclear genie. Right now, my personal estimate is that we have about a 99%
chance of that scenario or some modified version of it, resulting.

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Link extensions
Businesses oppose the plan – they fear it will cut into profits.
The Washington Post, January 25, 2007
In the Bush plan, Peters said, regulators would require that automakers improve fuel economy by 4
percent a year starting in 2010 for passenger cars and 4 percent a year for trucks and SUVs beginning in
2012. The plan would also give automakers the ability to buy and sell fuel-efficiency credits among
themselves, though the details have not been worked out. Sharp changes in fuel standards have
encountered stiff opposition from the auto industry, which fears that they would cut into profits. The
companies have outlined approaches similar to the Bush plan, which Peters called "the most friendly to
Detroit."

Business confidence key to the economy.

John Braithwaite (fellow at the Australian Research Council Federation) 2004 Annals of the American
Academy of political and social science http://72.14.203.104/search?q=cache:Ct-
LT6hnUnkJ:regnet.anu.edu.au/network/ragenda/hope/link_documents/Hope.JB.pdf+recession+%22busines
s+confidence%22+braithwaite&hl=en
The challenge of designing institutions that simultaneously engender emancipation and hope is addressed within the assumption of
economic institutions that are fundamentally capitalist. This contemporary global context gives more force to the hope nexus
because we know capitalism thrives on hope. When business confidence collapses, capitalist economies head for
recession. This dependence on hope is of quite general import; business leaders must have hope for the future
before they will build new factories; consumers need confidence before they will buy what the factories
make; investors need confidence before they will buy shares in the company that builds the factory and bankers need
it to lend money to build it; scientists need confidence to innovate with new technologies in the hope that a capitalist
will come along and market their invention. Keynes’ (1936) General Theory of Employment, Interest and Money lamented the
theoretical neglect of “animal spirits” of hope (“spontaneous optimism rather than … mathematical expectation” (Keynes 1936,
161)) in the discipline of economics, a neglect that continues to this day (see also Barbalet, 1993).

The plan would be detrimental to the auto industry.

Inside Energy with Federal Lands, November 5, 2007
Staff talks on major provisions of the House and Senate energy bills were set to finish late last week,
according to a Democratic aide familiar with the process, but opponents of the most stringent fuel
efficiency mandate being discussed had still not approached leadership with any alternatives. Their
inaction will likely mean that the final bill contains the Senate's tough standard, the source said. House
Speaker Nancy Pelosi Enhanced Coverage Linking Nancy Pelosi -Search using: * Biographies Plus News
* News, Most Recent 60 Days said Thursday she plans to introduce a final energy bill in the next two
weeks, for House and Senate consideration. The staff meetings are being conducted as part of an informal
conference controlled by the House and Senate Democratic leadership. Both Pelosi and Senate Majority
Leader Harry Reid of Nevada have consistently supported increasing the Corporate Average Fuel
Efficiency Standard to 35 miles per gallon by 2020 fleet-wide, as called for in the Senate bill. But this
provision is unpopular with a considerable segment of their own caucus, and with most Republicans.
Over 170 members of the House have signed on to a less stringent CAFE proposal backed by the auto
industry, that would maintain the distinction between standards for cars and light trucks while increasing
the average to 32 to 35 mpg by 2022. This approach, introduced as a bill (H.R. 2927) in the House by
Representatives Baron Hill, Democrat-Indiana, and Lee Terry, Republican-Nebraska, is supported by at
least seven Senators including Michigan Democrats Carl Levin and Debbie Stabenow and Ohio
Republican George Voinovich. They told House and Senate leadership in a letter last month that "we
would strongly object to a conference report that adopted [the Senate bill's] provisions because they
would have a needlessly detrimental effect on the auto industry."

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MSDI 2008 CAFÉ - Econ

Affirmative answer
No link. The auto-industry will accept CAFE standards now fearing high standards
would come after the election.
The Washington Post, April 24, 2007
The automakers prefer to leave any adjustment in mileage standards in the hands of the National
Highway Traffic Safety Administration rather than Congress. The industry says NHTSA would be ruled
by science rather than politics. Utilities, coal producers and large business groups such as the National
Association of Manufacturers and the U.S. Chamber of Commerce have also argued against Congress
mandating a specific change in CAFE standards. But with the prospect that Congress, especially the
Senate, could become even more heavily Democratic after the 2008 election, the auto companies are
showing signs that they might accept tighter requirements to avoid more onerous limitations from the
next Congress.