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Summary:

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 […]

obama-auto-industry1Just 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.

  1. kerry bradshaw Monday, March 30, 2009

    Obama’s quite a jerk if he thinks the US automakers are going to make any money building small cars that nobody wants, even during these days of higher gas prices. Its the labors costs, stupid! They prevent any US automaker from matching even half the vehicle development costs spent by Toyota and Honda. Reducing the number of vehicles sold (which seems to be the bizarre logic of Obama and his fellow dolts) is no solution to the autmaker’s problems. And green anything doesn’t make money – in case you haven’t noticed those higher electric rates, they always lose money. Just ask Spain, where a university recently discovered that the country loses two job for each new job in the “high tech” (but obsolete) windmill business. Remember the Obama nonsense (a few days ago) that these new green jobs will bring prosperity. Another in a long string of Obama lies (“balanced budget” , withdrawal from Iraq, quick victory in Afghanistan, etc, etc).

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  2. The hidden costs (direct user, geopolitical fallout, environmental, etc.) of petroleum based internal combustion engine type vehicles do not compare well with EV based vehicles. Compare total life of vehicle price per mile driven (total cost of transportation using a particular vehicle), for example electricity costs per mile vs gasoline (and internal combustion engine wear) per mile. If other features are satisfactory or comparable, keeping these other costs in mind justifies a much higher sticker price for an EV or even a step towards it such as what the Volt promises. On top of that, I personally would happily pay 10% (perhaps more, depending on specifics) more for a car that had proof that the vast majority of labor costs used to manufacture it were from domestic labor. Who’s with me on this?

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  3. 1st response takes me back to the days of similar nonsense when Volkswagen, Toyota and more were first landing on these shores.

    Ignorance may be bliss; but, it doesn’t make for market share.

    BTW, a couple hours after Obama’s statement, Fiat announced the takeover of Chrysler is a done deal.

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  4. [...] bankruptcy court. “We get it,” he said, referring to the Obama administration’s assessment (and rejection) of GM’s turnaround plan. “We need to do more, and we need to do it [...]

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  5. [...] bankruptcy court. “We get it,” he said, referring to the Obama administration’s assessment (and rejection) of GM’s turnaround plan. “We need to do more, and we need to do it [...]

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  8. [...] the automaker has taken criticism in recent months from the Obama administration’s auto task force and others for lagging on [...]

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