Obama Car Policy Raises Doubts

The Obama administration is wasting no time altering the way both GM and Chrysler does business, even down to determining what kinds of cars they will manufacture. The moves have at least one lawmaker wondering where they have the legal authority.

House Majority Leader Steny Hoyer is openly wondering if the Obama administration has the legal authority to, in effect, run two major automobile companies, using bailout money as incentive. Senator Chris Dodd also expressed doubts that what the Obama administration is doing is strictly speaking legal. Both lawmakers, though, suggest that the Congress is willing to grant the Obama administration authority to do what it wishes.

The Obama administration is using the bailout money to dictate changes to GM and Chrysler. GM has been ordered to produce "more fuel efficient cars" while Chrysler has been ordered to, in effect, sell itself to the Italian car maker Fiat. Neither Ford, which has not taken bailout money, nor the various foreign companies such as BMW and Toyota, which has car plants in the United States are affected by the Obama policy.

The Obama administration, according to the Wall Street Journal, is engaged in two conflicting policy initiatives concerning GM and Chrysler. President Obama wants the two auto companies to build more fuel efficient cars and at the same time become profitable. There is a problem:

"Yet the Treasury's own 'viability summary,' released yesterday, points out that 'GM's product portfolio is more vulnerable to CAFE [fuel-economy] standard increases than the portfolios of many of its competitors.' Only nine of GM's 'top 20 profit contributors in 2008' were cars; the rest were SUVs and trucks, which are politically incorrect on Capitol Hill and with the green lobbies. Chrysler has a similar problem. Even GM's much-vaunted electric Volt car is 'too expensive to be commercially successful,' according to Treasury."

The American people prefer big, roomy vehicles that are not as fuel efficient as those the Obama administration prefer that they drive. In order to force the American people to drive smaller, more fuel efficient vehicles, the Obama administration will provide billions in tax incentives, paid for by the American people, to subsidize the purchase of more fuel efficient cars.

Unsaid is the possibility that Obama administration energy policies, such as cap and trade and restraints on domestic oil exploration, will artificially drive up the price of gasoline, further making large SUVs uneconomical and forcing car buyers to look at the smaller, more fuel efficient automobiles.

There is a big problem with this policy, aside from the usual problems that occur due to government industrial policy. If people want SUVs and trucks that Obama does not want them to have, they can buy them from Ford or one of the foreign companies. By forcing GM and Chrysler to build fuel efficient cars regardless of what the market indicates, Obama may have actually doomed both companies at best to bankruptcy, at worse to the ash heap of history.

Sources: Hoyer: 'I Don't Know' Where Obama Got Legal Authority for Auto Plan, Fred Lucas, CNS News, April 1, 2009

The Obama Autoworks, Wall Street Journal, March 31st, 2009