The "Big Three" are under bankruptcy watch and begging for more bailout money. President Barack Obama thinks this is a good time to appease his environmental base by weighing Detroit down with a new round of environmental regulations. This is horrible timing and it will severely damage the ability of the "Big Three" to return to profitability. The first increase in CAFE will take place by the 2011 model year. Detroit is now preparing to launch the 2010 model year in July. That is when they change their factories over and begin production of the next years model. They will have only a little over a year to prepare for this change. How will they do it? The easiest solution to raise the fleet millage averages would be if people bought more small and compact cars. That is unlikely unless gas returns to $4 per gallon. They will be forced to cut prices on compact cars to induce more of the public to buy them. The problem is they are already losing money on these cars and can not change that unless the UAW agrees to severe concessions. The UAW (see a UAW contract here) is resisting that solution. The other method is to increase the mileage on the same size car. That takes time and money. It takes expensive new technologies to improve engine mileage without sacrificing power. The "Big Three" are working on this, but no major breakthrough will occur in the next year. The other method is to make vehicles lighter. This requires higher tensile steels and stronger alloys. These materials cost more money and may require different manufacturing processes. All these things will make automobiles more expensive for consumers. Consumers are currently not buying cars and trucks. This isn't because they don't want them or need them. They simply can not afford them in today's economy. If they can not buy them now, they will not buy them when the price is increased by a few thousand per vehicle. The decision to let California decree the emission standards will have a similar effect of raising vehicle prices. Barack Obama may have good knowledge of politics, but he is ignorant of the realities of the automotive industry. The bailout of the "Big Three" will fail. We should stop calling it a bailout. Let's be honest. We will have to "subsidize" the "Big Three" for years under an Obama Administration.
Obama May Let States Set Emissions Standards
Monday, January 26, 2009
President Obama is continuing his reversal of Bush-era policies, issuing two memoranda on Monday that promote his clean-energy policy while having a far-reaching impact on the ailing U.S. auto industry.
The first memorandum will order the Transportation Department to work out rules for automakers to improve fuel economy. It will call for the department to notify automakers by March 2009 to increase their fuel efficiency for 2011 model year cars and trucks.
The second memorandum will order the Environmental Protection Agency to reconsider California's request for a waiver from the Clean Air Act -- a move that would allow California, the nation's most populous state, to set tougher tailpipe emission standards than apply nationally. Excerpted from FoxNews.com