Planet Gore

Obama’s Washington Is the Enemy of Auto-Industry Reform

Detroit, Mich. — If Washington and Detroit were really interested in returning GM and Chrysler to profitability, a restructuring might look like this:

  1. Congress would eliminate fuel-mileage regulations (so-called CAFE laws) costing an estimated $85 billion over the next decade. These arbitrary standards force automakers to make vehicles customers don’t want, impose nonsensical regulations on how many cars a manufacturer can import from outside the Americas — and what’s more, is encouraging GM to spend $200-a-vehicle to make its fleet ethanol-capable (which a CAFE loophole rewards).
  2. Concentrate on core products like sedans and light trucks instead of pouring millions into electric cars and other “alternate” fuel vehicles. Companies like Hyundai and Kia produce not a single hybrid yet are gaining U.S. market share by making cheap, profitable automobiles that customers want.
  3. Reduce manufacturing wages and benefits to industry-leading rates, immediately saving billions and setting a baseline on which to build worker incentives as the companies become profitable again. Not “competitive” rates of $29 an hour versus $26 an hour at U.S. Toyota plants. Not “competitive” beginning wages of $25 an hour, but a beginning wage of $15 an hour (the average U.S. manufacturing wage) with a raise to $21 an hour over two years — which is what Hyundai pays its American workers in its new Alabama plant.
  4. Slash dealership overhead. At 20 percent, GM and Toyota have roughly the same market share. Yet GM is burdened with a staggering 7,000 dealerships versus Toyota’s 1,500. Fewer and larger dealers would be better able to market, stock, and service the cars they sell and it would also make it easier for GM to slash its eight brands (Toyota has only three).

But Detroit has instead fallen down a rabbit hole into Obama’s Washington Wonderland. And as Obama made clear in his election campaign, he thinks Washington is an expert on the auto industry.
So instead of appointing a car czar to ride herd on the “emergency” Detroit Two car loans — or just getting out of the way — Obama has assembled an unwieldy bureaucratic monster called the “Presidential Task Force on Autos” which will, reports the Detroit News, “be drawn from a number of cabinet departments, including Treasury, Labor, Transportation, Commerce, and Energy, the National Economic Council, the White House Office of Energy and Environment, the Council of Economic Advisers and the EPA.”
As a result, there will be no elimination of costly CAFE laws. It is shocking, in fact, that Washington Democrats are unwilling to even consider this fundamental, multi-billion-dollar reform.
The Energy Department will feed more billions on top of the billions GM has spent making unprofitable electric cars that have yet to establish a consumer market.
And the UAW, secure in the knowledge that there will always be more money from Uncle Sugar, will continue to play chicken over wage-and-benefits reform.
And those dealerships? Well, they are protected by state franchise laws and outside the purview of Detroit and Washington.
Which is why the U.S. created a very efficient, sensible tool called Chapter 11. In Obama’s Wonderland, however, efficient and sensible don’t seem to be in the lexicon.


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