President Elect Obama and the American Auto Industry
November 6, 2008 by admin
These words were a common refrain during Obama’s campaigning:
“I’ll help our auto companies retool, so that the fuel-efficient cars of the future are built right here in America. And I’ll make it easier for the American people to afford these new cars.”
Can President Obama can deliver on these promises?
Do the key points in his plan go far enough to achieve the ambitious triple goals of revitalizing domestic auto manufacturing, freeing the US of dependence on foreign oil, and reducing greenhouse gas emissions from our cars and trucks?
The following proposals are part of President-elect Obama’s 10-year, $150 billion energy package:
- $4 billion in tax credits to American automakers to retool plants to meet higher fuel efficiency standards.
Caveat: President Bush already signed a $25 billion loan package for Detroit to retool.
- A $7,000 tax credit for consumers who buy early model plug-in vehicles.
Caveat: A $7,500 tax credit for plug-in vehicles is already included in the $700 billion bailout package for the financial sector.
- A goal of putting 1 million plug-in hybrids on American roads by 2015.
Caveat: The first plug-in hybrids will not be launched until late 2010, so meeting these goals will be extremely challenging.
- A requirement that all new vehicles made in the US would be flex-fuel capable by the end of his first term in office.
Caveat: Unfortunately, very few of today’s flex-fuel cars actually run on ethanol, because the economics and environmental consequences of corn ethanol are prohibitive, and the technology for producing cellulosic ethanol is still in development.
- Despite the caveats, these goals represent an unprecedented level of aspiration for greener transportation. In fact, Obama has been considering how to combine efforts to save Detroit and reduce fuel consumption for at least two years. His 2006 bill, “The Healthcare for Hybrids Act,” had the federal government covering 10 percent of the retiree health care costs for a qualifying auto manufacturer—that is, if the carmaker invests at least 50 percent of the those savings into hybrid and alternative fuel vehicles, including the retooling of assembly lines and the retraining of workers.
Things become far worse for the auto industry since that time, so Obama may need to go beyond specific technology goals to more fundamental shift in strategy. He could start with one or both of these steps:
Allow California to Regulate Greenhouse Gas Emissions from Vehicles
The Obama administration should accept California’s application for a waiver allowing the state to regulate greenhouse gas emissions from vehicles. Bush’s Energy Bill mandates an average fuel efficiency of 35 miles per gallon by 2020, with a phased-in approach beginning in 2011. The California standards would force automakers to cut greenhouse gas emissions by 30 percent—roughly equivalent to 43 miles per gallon—by 2016, with cutbacks to begin in 2009. The decision affects 16 states other than California—thus impacting about half the new car market in the United States.
This single act of accepting the California waiver, would encourage global automakers to accelerate efforts to build more efficient vehicles using all kinds of fuel-saving strategies, from downsizing, increased aerodynamics, hybridization, and plug-in technology.
Establish a Gas Price Floor
All of Obama’s efforts to have Detroit produce hybrid and plug-in vehicles will be undermined—if not entirely swept away—by low gas prices. The Obama Administration should ensure a price floor—say $2.50 or $3.00—for a gallon of gas. And raise that floor steadily over time. High gas prices earlier in 2008 produced a real shift in sentiment—among automakers and consumers—toward higher mpg vehicles. Ensuring a minimum level of prices at the pumps would make sure that this momentum is not lost.
Obama has inspired the vision for a Detroit renaissance built on a new generation of American hybrids of all kinds. It’s easy to like that idea. But it’s another matter to ask Americans to make sacrifices—like paying more at the pump—or to force car companies to accept the will of states that want more aggressive emission standards. For Obama to achieve his critical goals regarding energy and the environment, he’ll need to rise beyond hope to a new level of pragmatic leadership. He’s Americas best chance in a long time.
sounds good, but most of these proposals have either already been put in place, or are pipe dreams. I’d like to see the good, but lets be realistic.
I hope he can actually do something
A gas price floor is hard to implement without the oil companies simply raising their price to whatever the floor is. Increasing gas tax slowly over time will accomplish more, along with a gas tax rebate that rewards those who use less. Those using less gas will be subsidized by those with higher consumption lifestyles.