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Enough with the Handouts
Rather than giving the auto industry handouts or loans, how about contracting them to rebuild America's infrastructure. Starting with replacing every vehicle in the government's fleet with electric or hybrid vehicles.
The result: The industry makes money producing the new vehicles. Jobs are created. Carbon emissions go down. Gas prices plummet. The new market gives the industry a greater incentive to invest in R&D for electric vehicles. American car companies start building electric cars that people want to buy. Sales increase. More jobs are created. Gas prices plummet further. Ad infinitum.
The economy is restored. Problem solved.
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A government contract to the American automakers to produce and provide electric and hydrid cars for the government fleet will kill any innovation or incentive for the automakers to improve their vehicles. What you'll get is the automotive equivalent of the post-Katrina formaldyhyde trailers: fields of crappy autos unfit for use but bought and paid for by the US Govt. The automakers will produce the lowest cost, least innovative car to satisfy the contract and grab the cash. As the cars won't be individually owned, no one will complain enought to return them.
Keep in mind that congress has already passed legislation curbing innovation. My understanding is that the tax credit bill for purchasing hybrid or electric cars included a sop for the American auto industry. After a period of time, the best selling hybrids had their tax credits reduced or phased out. This effectively penalized the most innovative produces making the most popular hybrid cars while benefiting those producers (American) who lagged behind in innovation and commitment to hybrids.
I certainly am no strictly free market guy. Rather than simply have the government purchase a bunch of crap from Detroit, I'd rather have the government request in-depth, exhaustive plans from the auto industry regarding hybrid products, production plans, and manufacturing plant requirements. When these plans are deemed feasible, the government can provide a loan and oversight for the automakers to pursue these plans.
November 22, 2008 10:34 AM | Reply | Permalink
Well, someone certainly hates the American auto industry. Which is fine, I guess, except that it and its subsidiaries do employ about 5% of the American workforce.
Assuming you don't want to throw 'em all out of work, my idea is to give the companies a reason to produce rather than just giving the companies cash to pay their bills.
If you want the automakers to innovate and produce quality vehicles, just give them guidelines in the contracts. All the vehicles purchased have to be electric or hybrid, with mpg set at a minimum floor and gradually rising over the course of the contract. Ideally, this would be coupled with gradually rising industry-wide CAFE standards and an industry-wide phaseout of new non-hybrid vehicles. This isn't rocket science. If the companies want the contracts, they'll innovate to make them happen.
Oh, and you can put in the contracts that all the vehicles need to be produced in the US.
The result: better hybrid and electric vehicles made in the US that people want to buy, and ultimately a wholesale conversion of the US auto market to hybrids and electrics.
To the extent that regulations have rewarded the auto makers for producing crap, obviously they need to be undone. To the extent that there are small domestic auto producers that are producing quality vehicles and innovating, they need to be supported as much or more than the big three. We should be focusing investment on what works, and rewarding innovation as it arises. None of this is incompatible with our goal.
The point here is that there is an existing industrial base in this country (what's left of it anyway). We need to use government investment to spur the base to produce. This is a win-win (win-win-win). I can think of no better way to start.
November 22, 2008 11:37 AM | Reply | Permalink