Just hours after his auto task force announced that it had rejected General Motors and Chrysler’s turnaround plans, President Barack Obama stepped up to the White House podium to explain the task force decision, reassure the communities hardest hit by auto industry layoffs, and set the course for the future of U.S. automaking.
If Obama has his way with GM and Chrysler — and his administration is withholding billions of dollars in government aid in order to help ensure that he gets it — then fuel efficiency and clean technology will define the companies’ future lineups. (Chrysler, most likely, in an alliance with Fiat — the administration concluded the automaker does not stand a chance at viability on its own.) Obama said this morning that despite the short-term pain of a shakeup, he’s confident that massive restructuring “will mark not an end but a new beginning for a great American industry.” One that will produce “the fuel-efficient cars and trucks that will carry us to an energy independent future.”
Obama said that the U.S. “will lead the world in building the next generation of clean cars.” But as the auto task force made clear in its report, there’s a long, long way to go. As we’ve noted before, GM’s best shot at a game-changing vehicle, the extended-range electric Chevy Volt, remains too costly at this point to vault GM into viability — let alone ahead of hybrid leader Toyota and its top challenger, Honda. From the report’s section on product mix and CAFE (corporate average fuel economy) standard compliance (emphasis added):
- GM earns a disproportionate share of its profits from high-margin trucks and SUVs and is thus vulnerable to energy cost-driven shifts in consumer demand. For example, of its top 20 profit contributors in 2008, only nine were cars.
- GM is at least one generation behind Toyota on advanced, “green” powertrain development. In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable
- Absent the successful introduction of a number of new-generation nameplates, as described in the Company’s plan, GM’s product portfolio is more vulnerable to CAFE standard increases than the portfolios of many of its competitors (although GM is in compliance today with current standards). Many of its products fail to meet the minimum threshold on fuel economy and rank in the bottom quartile of fuel economy achievement.
So leading the world might be a stretch — keeping up with the world might be a more realistic target, though also questionable. Obama emphasized that GM and Chrysler are not “moving in the right direction fast enough to succeed” — a conclusion the task force reached in part by analyzing the automakers’ tenuous ability to keep up with rising CAFE standards and appeal to car buyers with a shrinking appetite for gas guzzlers. To keep that appetite down, however, the administration may have to take a closer look at gas taxes.