A great, great writeup in the Wall Street Journal, today, by Holman Jenkins.
Like all regulatory schemes, Congress’s hallowed Corporate Average Fuel Economy rules froze in place a conception of the auto industry as it appeared to the simple minds of Congress in the early 1970s, when three manufacturers dominated the U.S. market, making full lines of vehicles. Today, more than 25 companies sell vehicles here, and the corollary of such diversity, normally, is specialization.
The Big Three, left to their own devices, would surely specialize in those vehicles on which they make money — i.e., those with hefty price tags and markups relative to their man-hour content. Even at the peak of gas prices, half the vehicles sold in the U.S. were light trucks. In November, amid a collapsed home construction industry and with $4 gasoline fresh in mind, what were the two top sellers? Pickups by Ford and Chevy — and the Dodge Ram was No. 7.
Shouldn’t this be telling us something about how to make the Big Three “viable”?
Indeed, Clearly, Americans don’t want the tin thimbles the Congress wants us to buy, and automakers to make.
And before you start about how that applies to the foreign cars, too…
The fuel-economy rules apply equally to foreign brands, of course, some of which also specialize in big, powerful vehicles. But they afford themselves an out. BMW paid $230 million in CAFE fines from 1983 to 2007 to avoid building small cars at a loss to please Washington. Volvo paid $56 million. Daimler paid $55 million.
Why don’t the Big Three take this out? Explains the Government Accountability Office, because they fear the political repercussions of being tagged with “unlawful conduct.”
….
This year, Daimler paid one of the biggest CAFE fines ever, $30 million — or $118 per car, a pittance to Mercedes buyers. By dumping Chrysler, meanwhile, it avoided its share of an estimated $100 billion in unremunerative investments the Big Three will have to make to meet the new fuel-mileage rules.
It doesn’t take a great deal to see the locus of the problem for domestic automakers is government. It’s time to get the government out of the business of cars. They could make it without the bailouts, if the congressional micromanagement of cars would disappear. A good place to start would be the CAFE nonsense. corps, given that there is a Democrat in the White House and Democrats are in control of both houses of Congress we have a snowball’s chance of seeing that happen. The obvious solution is letting Detroit build vehicles it can sell. The left and it’s solution demands government regulation , ignoring of course, the fact that it’s been the cause of the problems, all along.
So, bye bye big three.
Tags: business, domestic automakers, foreign cars, fuel mileage, government accountability office, home construction industry, light trucks, political repercussions, regulatory schemes, small cars, wall street journal, washington volvo
