Will the Auto Bailout Need Jumper Cables?
There's good news on the U.S. domestic auto front, including that the Obama Administration has put real teeth into Congress's 2007 one-third increase in new-vehicle fuel economy, and that Detroit marques, especially Buick, steadily improve in the all-important J.D. Power manufacturing-quality rankings. If General Motors and Chrysler had addressed their MPG and manufacturing-quality problems a decade ago, they wouldn't have ended up as bankrupt wards of the state. At least they finally are addressing those problems now. Another bit of good news is that the government's long-fictional MPG ratings of cars, which showed them as getting much better mileage than they actually do -- in order to allow Detroit to evade the old iteration of mileage regulation -- finally have become realistic, so that buyers know what they are purchasing. Beginning with the 2009 model year, realistic numbers are used. For earlier models, you can compare old phony government mileage claims with the realistic MPG numbers here.
[photo caption of a Roadster: It's an ultrafast plaything designed to allow rich drivers to cut everyone else off -- why are federal taxpayers giving the company's wealthy investors a subsidized loan?]
But there's still plenty to fret about on the auto front. One problem is continuing love of horsepower, which wastes petroleum and increases greenhouse emissions. Ford now has a Taurus -- a family sedan! -- with a 365-horsepower engine, more horses than muscle cars of the 1960s. Why is this even legal? (Don't reply that "no one can tell me what I can drive" -- this is a fallacy, as detailed here.) Companies that taxpayers have no business supporting, such as Nissan and Tesla Motors, a startup building $102,000 socially irresponsible super-fast electric sports cars to allow the rich to terrorize other drivers, are applying for an available $25 billion in government auto research loans that are unlikely ever to be repaid. So far, a total of about $70 billion in public funds has been invested in saving General Motors and Chrysler (Ford took no public money). If the subsidized auto firms sell 10 million vehicles over the next three years, that's a $7,000 taxpayer subsidy per sale. The subsidy is coming in large part from deficit spending -- that is, being borrowed from the young. General Motors' market capitalization must rise to about $60 billion for taxpayers to get their investment back. Considering the General Motors market-cap peak was $56 billion in 2000, for taxpayers to be repaid, the company must become more valuable as a reduced entity than when it dominated U.S. auto sales. And that's assuming General Motors and/or the UAW don't demand additional subsidies in the future!
