Commentary Magazine


Car Companies in the Obama Era

The Obama administration announced plans to require that fuel economy of cars sold in the U.S. be increased to 35.5 miles per gallon by 2016, four years earlier than scheduled under present law. In so doing, the administration has highlighted the inherent contradiction in its new role as uber-car czar. The Wall Street Journal explains:

The technology required to make the cars and trucks able to meet the proposed standard could add $1,300 to the average cost of making a vehicle — a significant share of the money Detroit’s auto makers are trying to save by slashing their union retiree health care costs.

[. . .]

“If gasoline is cheap, there’s going to be a huge disconnect” between the vehicles available and what consumers will want, argues AutoNation Inc. Chief Executive Mike Jackson. He has long advocated a higher federal gasoline tax to ensure that gas prices stay above $4 a gallon, the level that drove demand for small cars last summer.

So taxpayers are giving away or lending billions to the car manufacturers in the hope that they will survive while the government is loading enormous costs onto the companies to produce cars Americans may not want to buy. This will necessitate more subsidies to get Americans to buy the cars government has forced the companies to make. Got it? The extent of the expenses imposed on the car companies is staggering and the impact, inescapable:

The costs of meeting the new standard would be high. The Transportation Department last year estimated that requiring auto makers to achieve 31.6 mpg by 2015 would cost the industry $46.7 billion, among the most expensive rule makings in U.S. history.

The car companies are mute, in part because they would rather deal with a uniform federal standard than the maze of regulations from California and other states. And of course they are now wards of the federal government, so it wouldn’t do to complain about the new mandates imposed. And besides, they’re too big to fail and the government can always subsidize their sales if Americans don’t want itty-bitty expensive cars, right?

Welcome to the car industry in the era of post-capitalism.