As 2010 dwindles it’s time to reflect on the significant automotive stories of the year from a perspective that attempts to ignore the daily hysteria of the “gotcha” playing media. The longer term effects and significance of the following stories will be in force during the new year and perhaps much longer.
- U.S. Unemployment Rises to 9.8% in November
- U.S.Taxpayers Get $13.5 Billion from GM IPO. Still Own 33%
- Fuel Economy Regulations Risk Huge Job Losses, Increasing Environmental Damage
- EPA to Stigmatize Gas Guzzlers with a D Grade?
- Toyota and NHTSA Safety Debacle
U.S. Unemployment Rises to 9.8% in November – It’s all about the economy, and while American wealth creation is now slowly recovering from the Global Great Recession, millions of people who want to work remain idle, a human tragedy and an ongoing crisis that our taxpayer financed leaders seem unable to resolve.
Employment in most major industries – or what’s left of them – changed little in November, according to the Bureau of Labor Statistics. Unemployment was 9.6% in each of the prior 3 months.
Critics point to a lack of an industrial policy that protects and promotes jobs in the U.S., which is the only major economy without one. Wealth creation isn’t that hard – you grow it, mine it or build it, the “it” being something you can sell domestically and export.
Critics also contend, correctly, that the official jobless data drastically understate how many people are unemployed or under-employed in the United States.
In spite of attempts by the Administration to spin ongoing bad news, the latest data continue to show just how deeply ingrained the Great Recession is in the economy, with employers reluctant to add jobs, even though Gross Domestic Product is growing again, albeit slowly.
The latest data is grim for the country and for auto executives and U.S. workers who are looking at years of only gradually improving sales, which at the retail level are running about 10 million units annually, down from 15 to 17 million vehicles during much of the last decade.
This needs fixing now.
U.S. Taxpayers Get $13.5 Billion from GM IPO. Still Own 33% – At the end of 2008 the lame-duck Republican Bush Administration used taxpayer money to prop up General Motors and Chrysler, which were on the verge of bankruptcy because of the sudden collapse of the global financial markets created by the reckless, unregulated practices of Wall Street. The Republican Administration didn’t deal with the core issues though – they just kicked it down the road to the incoming Democrats.
It took the U.S. Treasury Department under the new Obama Administration to sort this mess out by forcing drastic bankruptcy restructurings, as well as CEO and Board firings at General Motors and Chrysler. The choice was clear – restructure with U.S. taxpayer money or liquidate.
Ideologues will be debating this call for decades, but Steven Rattner, acting through the then new Treasury Secretary Timothy Geithner of the incoming Administration ultimately saved millions of U.S. auto jobs, including those at what were still solvent but vulnerable companies, including Ford Motor as well as the transplanted Japanese and German auto factories in the U.S. and associated suppliers.
Yes, taxpayers saved GM and Chrysler as part of the more than $80 billion bailout process. However, it now looks like taxpayers will get most – if not all – of their money back from this controversial decision. And while you can’t prove a negative, further economic harm was obviously avoided.
Fuel Economy Regulations Risk Huge Job Losses, While Increasing Environmental Damage, CAR Study Predicts – While we are on the subject of ideologues, it is time – actually it’s long overdue – for a serious debate about environmental assumptions and their effect on the economy.
Government fuel economy regulations under development at the National Highway Traffic Safety Administration, the Environmental Protection Agency and the California Air Resources Board could severely hurt the U.S. economy by causing the loss of another 1.3 million manufacturing jobs, as well as hurt the environment.
As a result, the auto market may never recover its production and employment levels that helped create the now shrinking U.S. middle class. These are the grim conclusions presented earlier this month by the respected Center for Automotive Research. The controversial greenhouse gas regulations being proposed by the Democrats may require a fuel economy average as high as 62 mpg by 2025. Combined with the impending safety regulations already in place and anticipated new ones as regulatory reach continually expands, consumers are looking at potential price increases of roughly $6,000 to $8,000 per vehicle, after alleged fuel cost savings are accounted for.
EPA to Stigmatize Gas Guzzlers with a D Grade? – The U.S. Department of Transportation (DOT) and the U.S. Environmental Protection Agency (EPA) are jointly proposing the most radical changes to the fuel economy labels on the window of every new vehicle in dealer showrooms since the regulation began more than 30 years ago.
The new label requirements might result in sticker shock for automakers whose most popular offerings would be labeled as class Dunces. Many of these are light trucks that are used for wealth creation. Not surprisingly automakers and suppliers are now lobbying the regulatory bodies for ameliorating changes.
The stated goal of the new fuel economy labels is to provide consumers with “simple, straightforward energy and environmental comparisons “across all types of vehicles, including electric vehicles (EV), plug-in hybrid electric vehicles (PHEV), and conventional gasoline-powered vehicles.
If only it were that simple. As always in Washington you have to look at the underlying assumptions.
One label design prominently features a letter grade, A+ to D, to communicate the vehicle’s overall fuel economy and greenhouse gas emissions performance. The new design will also provide consumers with an estimate of the expected fuel cost savings over five years compared to an average gasoline-powered vehicle of the same model year.
The regulations appear to favor plug-in hybrids as the A+ leaders, in keeping with politicians’ current favored technology. Critics say that the government should not be promoting design standards, relying instead on performance standards, while letting technologies fight it out in the marketplace and giving consumers a choice. (See Chevy Volt has MPGe Rating of 93, 37 MPG Combined or EPA Says Nissan Leaf Gets 106 MPGe)
The second proposed label retains the current label’s focus on miles per gallon (MPG), a demonstrable bad way of measuring fuel consumption when compared to gallons per mile.
More maneuvering on this issue will come in 2011 as EPA attempts to institute greenhouse gas (GHG) pollution standards for refineries and power plants in yet another impending regulatory battle.
The Obama Administration wants to move forward next year on global warming in the face of fierce Republican party opposition.
Several states, local governments and environmental organizations sued EPA over the agency’s failure to update the pollution standards for fossil fuel power plants and petroleum refineries, two of the largest source categories of GHG pollution in the United States. The lawsuits claimed EPA was not doing its job under the 40-year-old Clean Air Act and it needed to move forward with sweeping regulations. (See EPA Moves Ahead on Greenhouse Gas Standards)
Toyota and NHTSA Safety Debacle – Motor vehicles are responsible for 95% of the nation’s transportation deaths but only 1% of the $79 billion Department of Transportation’s budget. Worse, the National Highway Traffic Safety Administration, which is responsible for auto safety, has only 125 engineers working on auto safety. Five are electrical engineers, and one – yes, just one, is a software engineer. This sorry state of regulatory affairs was revealed during embarrassing Congressional hearings over Toyota pedal entrapments and unintended acceleration deaths last winter.
This is clearly indefensible. An embarrassed NHTSA is now trying to regain citizen confidence after the Toyota debacle revealed how easy it is for automakers to manipulate an understaffed NHTSA on recalls and service actions to protect profitability.
In NHTSA’s latest move, Toyota Motor will pay $32.425 million in civil penalties as the result of two safety defect investigations prompted by the hearings. The additional penalties are on top of a previous fine of more than $16 million for how Toyota handled safety recalls after initially denying safety defects existed.
All of the fines levied are the maximum amount permitted under law, and other auto makers are showing a new found interest in promptly recalling safety related defects instead of stonewalling them or using the myriad regulatory quirks that critics exposed at the hearings. The upshot will be more recalls than ever.
