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The Big-Three Bailout’s Green Strings



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Jack Nerad, Executive Editorial Director for Kelley Blue Book has a great oped here that’s worth a read. Here’s his conclusion:

So what are the implications of this history lesson? The first takeaway is that a portion of the woes the domestic Big Three are suffering today are the result of current and past federal government policies, so it seems fair that they be accorded government assistance now in time of dire need.

But equally important, while the Big Three automakers might well be accused of not correctly gauging the needs and desires of the American buying public, one group that is demonstrably much worse in that endeavor is Congress. If the U.S. government were a car company, it would not only be deep in the red, but also have miserable customer satisfaction scores.

So a second takeaway is that doing the wrong thing — and by the wrong thing we mean attaching assistance to a web of politically motivated strings to federal loans — will only lead to a bigger catastrophe down the road.

If Congress acts to aid the ailing Big Three car manufacturers — and I strongly suggest it should — then it is equally important that the domestic carmakers be allowed the latitude to conduct their business based on the dictates of the American consumer, not the politicians.

Here’s what Congress doesn’t get. A base briced Toyota Camry ($19,000) costs $7000 less than the hybrid model ($26,000). The hybrid gets 33 m.p.g. in the city, 34 m.p.g. on the highway, the base model gets 21 and 31 respectiveley. You can do all the calculations you want to see how many years the payback period is, or you can do what most people in America actually did if they were worried about gas mileage: they bought the 26 m.p.g. city/35 m.p.g. highway Toyota Corolla for $15,000.

With the gas mileage of the Corolla nearly identical to that of the hybrid Camry, there’s really no reasonable way to make up the $11,000 difference. 

What’s becoming increasingly terrifying for the U.S. economy is to hear the Big Three CEO talk about how disastrous the failure of their three companies would be, and then hearing them talk about how the future of their companies rests on a) technologies that don’t exist and b) consumer demand that isn’t proven.



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