I held back submitting this monthly column until the end of March to see what latest theatrics would wash over the auto industry. I wasn’t disappointed. The Obama administration looked over the homework submitted by GM and Chrysler – homework designed to demonstrate how they were going to get out of their collective messes – and sent them back to detention to do it over again.
On top of it all, long-time CEO at GM Rick Wagoner was summarily dismissed, as if one lone auto executive had been responsible for creating an unworkable fiscal structure and a corporate culture developed over decades of booms and busts in the auto business. And just for good measure, the government is insisting that Chrysler and Fiat hook up – something they were bound to do anyway – making this requirement the equivalent of forcing children to eat dessert.
Those inside the industry recognized the Obama administration’s reply for what it is – political theatre. Only 16% of Americans polled believe the auto industry should get additional loans, making any decision to give GM and Chrysler more money…toxic. Obama had to scold the two companies, and chastise them for not being aggressive enough in their restructuring plan to show that the money he is bound to give them came after careful review and critique. And Wagoner? Bob Lutz, GM’s vice-chairman, called it throwing the virgin into the volcano to appease the gods a few months ago. I’m having trouble picturing Mr. Wagoner in a hula skirt, but the analogy fits.
Despite all of the pronouncements and lecture, something major is missing from the activity. It is an opportunity not just to save GM and Chrysler, but also to change the fundamental landscape of the auto industry and our energy consumption patterns across America. Sound too far-fetched, too grandiose? Well so does universal health care and rebuilding our education system, but I expect the Obama administration to handle these problems too.
Government’s job is not to try and decide how many employees GM should have, or whether or not a tie in with Fiat is a good idea. Government’s job should be to instigate fundamental change. As part of the loan package, the Obama administration could require GM and Chrysler to roll out their production-ready electric vehicles in 2010, offering the first real step towards a fundamental shift in how Americans get around and what they consume in order to do it.
Are these cars ready? GM and Chrysler both have pre-production models that have been driven by hundreds of people, including the hypercritical automotive press. The general consensus is that they are as good as any pre-production model can be. GM and Chrysler are not exactly bullish on how profitable the vehicles will be once they are in showrooms, but it seems pretty clear that they’re not making money on their gas-powered cars and trucks anyway, so why not at least lose money on something that shifts the environmental burden and the energy focus to the electricity industry.
If this kind of authoritarian mandate sounds too socialist, you’re close, because the Chinese are doing exactly this. The New York Times reports that Chinese leaders are planning to pour vast government resources into the development of electric vehicle technology and EV production. This comes from the very top down, meaning they have the means and the political will to actually pull off this grandiose plan.
Make no mistake; the Chinese aren’t doing it to save the planet from global warming or pollution (much of the new electricity demand in China will likely come from coal or nuclear power plants). Instead, they are eliminating a massive liability – their dependence on foreign oil. Most of China’s oil comes in from the Middle East, and must take a long sea route to show up in Chinese ports. The U.S. has a pretty big navy. Actually, it is considered the best and the biggest in the world. So the math isn’t hard. Either the Chinese government builds a massive navy that can go head to head with the U.S. to guarantee its energy security, or it reduces oil imports to negligible volumes by developing technology solutions that also could also be exported around the world, making the Chinese government even more money.
Meanwhile, back in Washington D.C. and Detroit, government is fretting over details about projected U.S. vehicle market volume (not even Nostradamus knows where that is going) and standalone viability casting a wafer-thin veneer over the obvious political subterfuge. I’m not advocating communism by any stretch, but if the executive branch is going to make a decision about the car companies unilaterally anyway, why not step up and make a decision to promote real and resounding change that will live on for generations.
Call it a silver lining, lemonade out of lemons, making the best of a bad situation. Whatever the label, the ideal confluence of events is upon us: needy car companies, a president who has made energy efficiency a keystone of his administration and a genuine shift in consumption patterns made by the American public that are more sensitive to the environment.
Change. Hopefully it won’t just be a tidy campaign slogan. If it is, you can bet the Republican Party – the authors of this miserable state of affairs – will be using exactly the same theme to rebuke the incumbent in 2012, blaming him for the failure of our manufacturing base, and the lack of progress in reducing our dependence on foreign oil. My hope is that President Obama realizes the opportunity in front of him and acts in a way that realizes those lofty goals he now is obliged to execute.