Government Shows Automakers How To Manage

SEARCH BLOG: AUTOMOBILES

"Off with its head!" So declared President Obama. And off came the head of General Motors. It was, by all measures, a quote from the French Revolution, but why quibble?

General Motors was out of money; it was out of options. Management showed that it couldn't control its spending: the CEO took a private jet. Management showed that it couldn't plan ahead: it didn't forecast the end of the credit market. Management showed that they were not people people: they couldn't get rid of people fast enough. Management showed that they didn't care about product: they only had 18 models getting more than 30 mpg.

The government has the money; it has all of the options. Government showed that it could control its spending: the bank bailout was less than $2 trillion. Government showed that it could plan ahead: it is forecasting a recovery as soon as the downturn is over. Government showed that it cared about people: its policies "encouraged" lending institutions to give mortgages for those needing "social justice." Government showed that it cares about product: it will "encourage" people to buy what they didn't know they wanted.

As an indication of how badly General Motors was run and how simple it is to fix all of the problems, Government established new regulations:

New fuel rules to cost autos $1.5 B

Higher mileage standards for ailing automakers will increase new vehicle price tags $64 to $126. By David Shepardson The Detroit News WASHINGTON — Stricter fuel economy standards outlined Friday by the federal government for the 2011 model year will cost struggling auto companies nearly $1.5 billion and boost the cost of passenger vehicles an average of $64 for cars and $126 for light trucks. The National Highway Traffic Safety Administration said the ad­ditional vehicle cost will be re­couped by buyers of pickups, SUVs and minivans, through fuel savings, in an average of 7.7 years. Passenger car buyers will recover that cost in an average of 4.4 years. “These standards are impor­tant steps in the nation’s quest to achieve energy independence and bring more fuel efficient vehicles to American families,” said Trans­portation Secretary Ray La Hood. The Corporate Average Fuel Economy rules set by the Obama administration pegged the 2011 passenger car standard at 30.2 miles per gallon and the light truck standard at 24.1 mpg. Overall vehicle efficiency climbs to 27.3 mpg in the 2011 model year, up 8 percent over the 2010 model year. It is the first increase in fuel ef­ficiency requirements for passen­ger cars since the 1985 model year. The regulations will save an esti­mated 887 million gallons of fuel and reduce tailpipe emissions by 8.3 million metric tons over the lifetime of the vehicles. “There is clearly demand for automobiles that can achieve President Obama’s new standard and the Big Three have cars com­ing to showrooms that can meet this ambitious goal,” said the au­tomakers’ longtime champion, Rep. John Dingell, D-Dearborn. NHTSA said that the higher prices likely will lead to a small re­duction in auto sales, and estimat­ed that as many as 1,024 auto in­dustry jobs could be lost as a re­sult of the regulation. The new CAFE standards were generally praised by members of Congress and the automakers. “With gas prices once again on the rise, I am pleased to see the Obama administration tak­ing this historic first step to­wards reducing our depend­ence on foreign oil and helping revitalize the domestic auto in­dustry,” said Rep. Ed Markey, D­Mass, chairman of the House Select Committee on Global Warming and Energy Inde­pendence. Michael Stanton, president and CEO of Association of Inter­national Automobile Manufac­turers, said the industry is pleased to have a final standard to meet for 2011. “We encourage NHTSA and the (Environmental Protection Agency) to work closely togeth­er to harmonize and finalize standards through the 2016 model year,” Stanton said, not­ing that the companies “have pledged to meet or exceed these new standards.” The new rules subject nearly all vehicles of 10,000 pounds or less to fuel efficiency require­ments. Under prior rules, vehi­cles more than 8,500 pounds were exempt from fuel efficien­cy regulations. The new rules are the first step in meeting a 2007 energy law that will require car makers to achieve an industry fleet av­erage of least 35 mpg by 2020, a 40 percent increase over today’s standard of about 25 mpg. Federal law carves out a sep­arate category of work trucks between 8,500 and 10,000 pounds. NHTSA will spend at least two years studying the is­sue of whether to impose new fuel efficiency regulations for medium- and heavy-duty trucks. But they wouldn’t take effect until 2015, at the earliest. You can reach David Shepard­son at (202) 662-8735 or dshe­pardson@detnews.com. • SATURDAY, MARCH 28, 2009 PAGE 12A SECTION A Latest business news, stocks at detnews.com/business

And that's why its head had to come off.

Oh, those cost estimates... $64 to $126 per vehicle? Hey, you believed the rest of it, too.

Not counting the Lexus models, hybrid cars cost roughly $1,700 to $11,200 more than comparably equipped gasoline vehicles.

But don't worry. Government money will help you pay for that... and help you forget the cost estimate was off by one or two decimal places.

"Close enough for Government work."

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