Tuesday, May 19, 2009

Say anything about 2016 that you need to survive

Promise them anything, Detroit.
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It hardly matters whether the world's auto companies stand a snowball's chance in Las Vegas of meeting the ambitious new targets for fuel economy and emissions by 2016 that President Barack Obama will announce today.

What matters is that insolvent General Motors Corp. and Chrysler LLC are under almost total federal control now and must do whatever Uncle Sam says.

And as long as U.S. taxpayers are keeping GM and Chrysler on federal life support -- and it's looking more and more like we're far too committed to pull the plug now -- the folks in Washington, D.C., will be calling the tune on what kinds of cars and trucks get built and sold here.

The Obama plan calls for overall fuel economy of vehicles sold in the United States to reach 35.5 miles per gallon by 2016. That's an increase of 5% a year from today's 25-m.p.g. average. Greenhouse gas emissions must be slashed 30% by the same date.

Those are challenging targets from cost and technology perspectives, and it's almost ludicrous to expect consumers to choose so many higher-mileage vehicles if gasoline is still selling for $2 or $2.50 a gallon.

But the big benefit is that the proposal puts fuel economy standards largely under the federal umbrella, eliminating -- or at least postponing for seven years -- the potential nightmare of automakers having to conform to a patchwork mess of different and stricter standards from California and other states. California has agreed to defer to the federal standards from now until at least 2016, according to the deal struck with Obama.

And the auto companies have promised to go along. As if they had any choice.

A senior Obama administration official said the new standards will add $700 more to the cost of a car by 2016 -- on top of the $600 cost of the existing fuel economy regulations.

Who knows how much more in incentives it might cost taxpayers to get us to buy more fuel-efficient vehicles? The government's plan anticipates a gas price of $3.50 a gallon by 2016.

Whether or not consumers will play ball and whether or not GM, Chrysler and other automakers can actually meet the 2016 targets hardly seem critical points right now. In the case of the Detroit Two on the government dole, all they can think about now is whether they're still going to be alive in 2010.

They'll promise anything by 2016.

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