President Barack Obama made his first series of important moves on energy policy yesterday. He directed regulators to quickly determine whether California and 18 other states can impose stricter car emissions and fuel efficiency than the EPA mandates nationally. He also ordered the Transportation Department to enact short-term rules on how automakers can improve fuel efficiency of their new models based on a 2007 law. The law requires that by 2020, new cars and trucks meet a standard of 35 miles per gallon, a 40 percent increase over the previous standard.
The auto companies have nashed their teeth very forcefully throughout the 2007 law passage and now its enactment. They have done so while driving themselves into near-obsoletion. Their sales have plummeted in the past couple of years, but especially in 2008. Why? Because they bet the market would do one thing and it did the other. What has their main complaint been with these potential regulations? That they would force the corporations to sell one kind of car in California and another in the rest of the country. How ridiculous is this claim? Very, when you realize that these same corporations are already selling vehicles that produce fewer emissions and get much better gas mileage in other countries.
GM, until last month, had been the world’s number one autoseller for decades. Were all those cars sold exclusively in America? Of course not. They sold cars in Europe and Asia; in countries who have mandated much higher fuel efficiency standards than did the U.S. GM and Ford built plants overseas that manufactured cars that met those standards. They did so and they remained profitable. What has destroyed their bottom line was spending millions of dollars to lobby the U.S. government to not impose those same standards here. So the car corporations forced themselves to make one kind of car to sell in the U.S. and another in the rest of the world. That led to their current financial struggles.
Cons and pro-corproate Democrats often cite the virtues of the mythological “free-market”. Here is an opportunity for them to do so again. If GM, Ford and Chrysler can’t read the market’s signals, don’t they deserve to go under? Won’t some other entrepreneurial entity come forward to fill the needs of the market? Darn right, it will. So what President Obama is doing is allowing our government to help out our mature industries. GM, Ford and Chrysler are on the brink of collapse. Obama is extending a helping hand to them, allowing them to continue their existence when they did everything in their power to end it by their own hands.
As usual, corporate media types misread the middle America realities before their eyes. A “senior editor” (isn’t that impressive?) at CNN writes that
There is an idea afoot in the land that automakers are holding back on small cars because they would rather sell high-margin pickups and SUVs.
It isn’t true. They hold back on small cars because nobody wants to buy them. And since they are hard to sell, automakers can’t make any money on them. If there was steady, predictable demand, you would see waves of good, small cars.
The history of auto sales in 2008 provides a case in point. When gas prices spiked, sales of small and hybrid cars shot through the roof. After prices came back down, dealers couldn’t give them away.
How badly can one person misread the market? Auto corporations definitely held back on small cars in their pursuit of the more profitable SUBs and pickups. How many small car advertisements do you see? Now think of how many truck & SUV ads you see. Millions of dollars of marketing spent every year by every automaker is the cost of all that advertising. Small car profits can’t justify themselves in the face of large vehicle profits. It is a pretty simple business decision. The problem is not every potential cost is adequately accounted for by the auto corporations. Well over 1 million Toyota Priuses have been sold in America. The technology in the Prius? GM and Ford said Americans wouldn’t want it. Why then do people remain on waiting lists for the car? The manufacturing hasn’t caught up to the demand, just the opposite of what the CNN editor wrote.
The last sentence I quoted? An even worse misread of the economy, if that’s possible. When did gas prices start coming down in 2008? In September, when the economy started to collapse. Dealers can’t give any vehicle away right now. There are thousands upon thousands of vehicles sitting around in port cities like Los Angeles. That has never happened until last year. American’s credit has been cut, and that was the only thing that allowed for our recent economic activity to occur. Without that credit, people are starting to realize their post-inflation wages haven’t increased in years. They have no money to buy cars. Or appliances. Or houses. That’s why 500,000 people are losing their jobs every month. It’s not because gas prices are $1.75 instead of $4.25, despite what the CNN editor wants you to believe.
I haven’t even touched on the environmental benefit of regulating emissions standards. That has to be done, and done today. Our climate forcing is making itself felt in an increasing number of ways. We have the opportunity to try to alleviate the worst of climate change. The American people spoke in November: they want to make the best of that opportunity. Dinosaurs like the CNN editor just haven’t caught up to that reality yet.