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Outside the Box
By Gideon Weissman
Published: May 11, 2020 8:22 AM ET
Any bailout for America’s Big Three automakers must also protect consumers and the environment.
The coronavirus pandemic has greatly affected automakers. With the closing of US car dealers. USA And with consumers clinging to their savings, car sales have plummeted.
So, as with many other struggling industries, businesses and lawmakers are talking about a bailout for the Big Three US automakers. USA Anyone can guess what form that rescue might take, or when it might come. But it’s not too early to see what happened the last time the United States rescued Detroit. It worked very well for the auto industry, but not so well for the public or the environment, so we must take stock of the lessons learned.
At the time of the 2008 financial crisis, America’s top three automakers: General Motors
GM+ 6.64%
Ford Motor
F+ 7.6%
and Chrysler
FCAU+ 3.66%
– They were already slumping, victims of their own myopic business decisions, including selling gasoline-powered trucks and SUVs that nobody wanted when gas prices rose in the mid-2000s. Then, when the recession hit, consumers Not only did they cut spending, but even those who wanted a car were unable to get a loan, thanks to the collapse of many auto finance companies.
When Detroit asked for help from the US government. USA In the financial crisis, automakers obtained massive infusions of cash and special programs, such as the $ 3 billion “junk cash” fund, to lure American consumers to showrooms. When the bailout officially ended, even after the automakers paid off the loans and the government sold its shares, the cost totaled more than $ 9 billion.
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Public investment came with warnings, demanding that automakers commit to modernizing the industry and producing cleaner vehicles. In 2011, with the full backing of the grateful and indebted Big Three, the Obama administration dramatically strengthened national vehicle emissions standards, requiring an average national fleet-wide fuel economy equivalent to 55 miles per gallon by 2025. It was estimated that the new emission standards would save 12 billion barrels of oil and remove 6 billion metric tons of CO2 over the life of the program, more than the total annual emissions of the United States economy.
After the bailout, many analysts and policymakers painted it as a success. Auto manufacturers became profitable again and fuel economy increased.
Among the 17 pure electric vehicles for sale in the US USA In 2020, only one, the Chevy Bolt, is from a Big Three automaker.
Today, with the auto industry at stake again, the deal doesn’t look as good. In 2015, gasoline prices fell and automakers shifted back to SUVs again, undermining their recent efficiency gains. In 2019, the Big Three ranked last among the top manufacturers of fuel economy and CO2 emissions. US automakers USA They have overcome the electric vehicle revolution. Among the 17 pure electric vehicles for sale in the US USA In 2020, only one, the Chevrolet Bolt, is from a Big Three automaker.
With the election of President Donald Trump, automakers also reversed their support for environmental improvements. GM and Chrysler joined the Trump administration’s effort to reverse auto emission standards, a rollback that, if successful, would undermine one of the nation’s biggest steps thus far to reduce pollution that contributes to global warming. .
Keeping automakers in your lane
Even the apparent successes of the industry in the past five years look worse in the rearview mirror. Recent record-breaking auto sales have been built on an unstable base of unprecedented consumer debt, which now totals more than $ 1.3 trillion, almost double the amount auto buyers had in 2010.
For years, automakers used low interest rates and long-term loans to increase demand and get people to buy “more cars” than they needed, raising the average sale price of a new car to more. of $ 36,000. Now, with the United States in another economic crisis, automakers are stuck trying to sell high-priced SUVs to people who are still paying for their old cars and worried about losing their job. For car buyers with bad credit, including those exploited for unreliable high-risk market practices, buying a new vehicle is a risky or unachievable possibility.
The latest federal bailout could have generated big short-term gains for automakers, but it may not be enough to keep them from knocking on Congress again, asking for more taxpayer support. Any package of assistance to the automotive industry has to do three things well:
1. Ironclad environmental commitments: Auto manufacturers must stay away, for good, from selling polluting cars that run on fossil fuels. Scientists say we need to dramatically reduce carbon pollution by the middle of the century to avoid a climate catastrophe. That will require fully electrified new car fleets by 2035 at the latest. Large automakers should have to use stimulus funds to make that transition happen and invest in complementary infrastructure, including electric vehicle charging stations.
2. Consumer protection: Car manufacturers cannot be allowed to go their way, harming consumers, who are very vulnerable at this time of job loss and economic instability. That will require national policies against charging excessive loan rates; better enforcement of fraud protections; end discriminatory margins of discrimination and require lenders to determine borrowers’ ability to repay their loans.
3. Investing in a car-free future: Support for the auto industry must be combined with an even greater set of investments and actions to end our national dependence on automobiles. For a century, the United States has pursued transportation policies that prioritize automobiles, from the interstate highway system to low gasoline taxes. The results have been polluted air, clogged roads, a devastated climate, and homes struggling with auto debt. Duplicating that system makes no sense.
Congress can protect public transportation systems from wilting and dying as a result of the coronavirus crisis and avoid building a new set of costly and polluting highway projects that will increase emissions and absorb transportation funds in the name of the “stimulus ” Then federal, state and local governments can begin to plan and build a transportation system that provides access for everyone, including those who choose not to own cars.
The past decade has shown that automakers cannot be trusted to pay taxpayer generosity with a greater sense of responsibility for the environment or the financial interests of car buyers. The lesson of the latest auto bailout is that any new help for the auto industry will need to be accompanied by chains that are long and strong enough to attract Detroit automakers into the 21st century.
Gideon Weissman covers consumer and environmental issues as a policy analyst with Frontier Group, a group of experts in the public interest. You can follow him on Twitter at @gweissman.
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