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Thursday, January 1, 2009

What a Concept: Let Detroit Build 'Profitable' Cars and Trucks!

Some heretical thoughts being bandied about at The Wall Street Journal where today's edition features an editorial that pushes the idea of liberating Detroit to build and sell cars and trucks that actually make money, instead of having to offer vehicles that first satisfy bureaucratic edicts from Washington bureaucrats.

I know, I know, leave GM, Ford and Chrysler to their own devices and they'll probably build millions of full-size trucks - Ford F-150s, Chevy Silverados and Dodge Rams - that get lousy gas mileage and pollute the environment, compared to the economy weezer modules Washington's all-wise bureaucrats seek to force everybody else to drive, like it or not, because it's "good for us and the environment."

Along the way, the WSJ analysis focuses on the crucial role of the government's Corporate Average Fuel Economy (CAFE) rules in the undoing of the Big Three:

"The fuel-economy rules apply equally to foreign brands, of course, some of which also specialize in big, powerful vehicles. But they afford themselves an out. BMW paid $230 million in CAFE fines from 1983 to 2007 to avoid building small cars at a loss to please Washington. Volvo paid $56 million. Daimler paid $55 million.

"Why don't the Big Three take this out? Explains the Government Accountability Office, because they fear the political repercussions of being tagged with "unlawful conduct."

"They must be laughing up their sleeves in Stuttgart, having unloaded Chrysler in the nick of time. Democrats had just taken over Congress the previous November, vowing tough new mileage standards. One week before the Chrysler sale, candidate Barack Obama gave an environmental speech harshly critical of the Detroit auto makers. Three weeks after, the Big Three ran up the white flag and agreed not to oppose new fuel economy rules.

"This year, Daimler paid one of the biggest CAFE fines ever, $30 million -- or $118 per car, a pittance to Mercedes buyers. By dumping Chrysler, meanwhile, it avoided its share of an estimated $100 billion in unremunerative investments the Big Three will have to make to meet the new fuel-mileage rules."

Read the whole thing. Then write your congressman and ask him why he wants to kill America's greatest industry.

9 comments:

  1. Mark,

    CAFE is here to stay, sadly. The only way we could get rid of it is to replace it with something else, and the something elses I can think of are all politically very unpopular, such as fuel taxes.

    TAP

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  2. LOL, CAFE is beans compared to the diesel particulate filter that is crushing the diesel truck market.

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  3. Perhaps bankruptcy and another Depression is what the country really needs from the Big Three. Perhaps then we could have CEO's discsuss profit motive and not be deemed criminals by bureaucrats and Capitol Hill lawmakers.

    We fought a Cold War to keep the world free from Communism, and we ended up becoming our own worst enemy. Central planning and a command economy are our future, bailouts for every industry that comes begging, in return for which Washington DC will own everything.

    I think bankruptcy is looking better all the time.

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  4. The US fought a cold war to keep the world free from Communism, and since the end of the Soviet Union, we have become our own worst enemy.
    Since the Auto Bailouts will be followed by the airline bailouts, steel bailouts, shipbuilding, etc, and Washington DC will end up owning all the major US industries, we will become a Communist country, complete with a command economy and centralized planning.

    Better bankruptcy and Depression than that.

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  5. "CAFE is here to stay, sadly."

    Why? Carved on Mount Rushmore?

    "The only way we could get rid of it is to replace it with something else"

    What was Prohibition replaced with?

    The way to get rid of CAFE is for legislators to grow a spine and stand up to environmental blowhards, whose volume far outweighs their numbers. Just stand up and say, "CAFE is killing our industries. I will not stand for that. Please join me in killing CAFE."

    Easy-peasey.

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  6. As long as the schools are training children to harass their parents to be more "green" and the entire media is pushing this load of "watermelon" (green outside, red inside) garbage we will never see any real change for the better coming from DC.

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  7. Sadly another ill-informed post trying to tie CAFE standards with the big three bankruptcy. It takes little research (a Google search or two) to find that the big three make money off of mid-size and compact car sales, but lose money - even after subsidizing them - on their trucks, SUV's, etc., Reason? No one wants to pay what these vehicles actually cost to make so the companies have to essentially give them away.

    This whole debate is non-sense. If it was as easy as allowing American's to buy the cars they prefer then we would have very few trucks whatsoever. Other than the Ford F150 (always in the top 5 in sales for the last 27 years), most of the best selling vehicles are mid-size or compacts. e.g. the Toyota Camry's, Corolla's, Honda Civic's, Chevy Caprice and Cobalt, etc.

    So, I agree. Let's give American's the cars they really want and slap a new CAFE standard of 60 mpg on new vehicles. Perhaps that will stop the insane business model of subsidizing money losing Hummers.

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  8. @ Dave. S :
    "What was Prohibition replaced with?"

    http://en.wikipedia.org/wiki/War_on_drugs

    Perhaps not the best example..

    =darwin

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  9. Just me, the SUVs and trucks are profitable. Everyone accuses Detroit of not innovating at the expense of their high margin SUVs and trucks. You are the only person I have ever seen claim this. I haven't seen any salespeople forcing people to buy trucks over a midsize.

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