Editorial: Auto policies out of sync with market
President Barack Obama is scheduled to be in Metro Detroit Wednesday to take one more victory bow for the recovery of the domestic automobile industry. And while the boasting is becoming a bit overdone, it never hurts to remind Americans that this crucial segment of the economy is thriving again, particularly since taxpayers recently learned the official tab for the bailout was $9 billion.
It's a worthwhile investment, and one worth protecting. So while visiting the region, the president should take a close look at the vehicles that are driving the resurgent sales and profits, and weigh the impact that his administration's environmental and energy policies will have on their future.
Automakers sold roughly 1 million more vehicles in 2014 than they did in 2013, for a 6 percent increase. Topping the sales charts were pickups and sport utility vehicles, with Ford Motor Co.'s F-150 finishing as that company's overall sales leader for the 33rd year in a row.
Sales of Ram pickups were up nearly 25 percent, and helped drive Fiat Chrysler's overall 16 percent hike in yearly sales. And General Motors' large trucks posted a 30 percent gain in December alone.
These are not the vehicles Obama designed the bailout to favor. When the rescue was proposed in late 2008, many in Washington resisted helping Detroit because it blamed automakers for not retooling to produce the small, energy-efficient automobiles policymakers believed consumers demanded.
Fiat had to agree to make a 40-miles-per-gallon car for the U.S. market as a condition of taking over Chrysler. Chevrolet had to move production of the Sonic subcompact to Lake Orion. And the Energy Department provided loans to the domestic automakers — including Ford, which didn't take bailout money — to make more fuel-efficient cars.
Right in the middle of the rescue, Washington raised CAFE standards, mandating a preposterous 54.5-mpg fleet average by 2025. The automakers, of course, were in no position to fight the sales-busting requirement because they were by then wards of the federal government.
The higher standards are why Ford took the risk of switching the bread-and-butter F-150 to an all-aluminum body, at a cost of roughly $1,000 per vehicle.
While using CAFE standards to manipulate product selection, the government has done very little to influence consumer demand.
Rapidly falling fuel prices have sparked a surge in demand for larger, less efficient vehicles.
Even with a $7,500 subsidy, electric vehicles are still not taking hold. Given the high sticker price of most EVs, the subsidy amounts to a taxpayer giveaway to the wealthiest consumers. Electric cars and hybrids captured less than 3 percent of vehicle sales in 2014, falling well short of Obama's 1 million vehicle goal.
The auto industry is running at a healthy clip today. But looming in the near future are government regulations that have no connection to marketplace reality, and are not in tune with the changing landscape of energy production and prices.
If these issues are not addressed, the government could well be responsible for sinking the industry it once bailed out.