Washington’s draconian CAFE mandates to fight global “warming” are being felt in perverse ways. Making the rounds before the Detroit media last week, Chrysler executives rallied around higher gas prices – criticizing the Clinton/McCain tax-holiday plan and applauding the trendtoward $4 a gallon gas.
“While (CEO Bob Nardelli) empathized with the pain higher gas prices causes for consumers,” reported the Detroit Free Press, “he said the nation must have an energy policy that is aligned with the country’s larger goals.”
Why is the head of a company that is hemorrhaging profit — because higher gas prices are driving consumers from high-profit SUVs into lower-profit sedans — stumping for high gas prices?
Because the federal government has mandated an “energy policy” that, by 2020, tells automakers they have to sell (not just manufacture) a product line that averages 35 mpg – or 40 percent higher than today (keep in mind, product averages haven’t changed in the last two decades). That will cost the automakers billions in product redevelopment – billions that will be wasted unless consumers have a market incentive to buy more fuel-efficient cars. And that incentive is higher gas prices.
Automakers, in other words, can’t gain from Washington’s edict without consumer pain.
“You have to have alignment,” says Jim Press, Chrysler president and vice chairman, between the market and government mandates. Autonation CEO Mike Jackson, the country’s largest auto dealer, was more blunt, telling the Free Press that the senators’ gas-tax holiday demonstrated “zero intellectual honesty.”
Ford CEO Alan Mulally goes even further than his Chrysler peers, encouraging much higher federal gas taxes in order to insulate the industry from gas price swings (as Europe has done) and permanently incentivizing consumers to buy the higher-mileage cars that Washington is mandating.
Reading Nardelli’s comments, attentive consumers might start to catch on to the CAFE con. But that’s the beauty of backdoor GW mandates – they are intentionally opaque to shield pols from their true economic costs and real-world consequences.