Blaming GM to fit Washington’s skewed view

Blaming GM to fit Washington’s skewed view
 



Edward Lapham

Automotive News | March 3, 2009 – 11:17 am EST

 

It isn’t obvious yet whether the Obama administration’s auto industry task force will save the world.

But one thing is clear: White House chief of Staff Rahm Emanuel ought to do his homework before he spouts off in politicalspeak about the auto industry.

You would think the president’s No. 1 gunslinger would be better informed than the senators and congressmen who displayed their ignorance and inbred biases during the congressional auto hearings late last year.

Apparently not.

Over the weekend Emanuel took a poke at General Motors on the CBS program “Face the Nation.” He portrayed GM’s current financial crisis as the poster child for a couple of hot items on the Obama administration’s political agenda: national health care and increasing energy independence.

In short, Emanuel said that for up to 30 years GM had a flawed strategy because it didn’t invest in alternative-energy cars, was dependent on gas guzzlers and had an outdated health care cost structure.

There is no denying that since 1980 GM has made plenty of mistakes.

But Emanuel’s energy thing was the same-old/same-old rhetoric about GM relying on gas guzzlers and not developing alternative-energy vehicles.

Some White House staffer with real-world business experience — or at least a recent M.B.A. in marketing — should explain to Emanuel that this is a market economy. So when the country’s energy policy for decades was to keep gasoline as cheap as possible, consumers wanted gas guzzlers; companies needed to build and sell them if they wanted to stay in business.

Could GM have done more to invest in alterative vehicles — even though there wasn’t a sound business case to do so?

You bet. Even Bob Lutz says that if GM could take a mulligan, it would do more, and sooner, with gasoline-electric hybrids because of the image value. Surely someone in the White House must remember that GM developed the EV1 electric vehicle and began leasing it in 1996 — before the first Toyota Prius went on sale in Japan.

Emanuel’s reference to health care also was uninformed.

For the last half century, auto workers have had one of the best health care systems in the country, with tremendous negotiated benefits.

Since at least 1983, the Detroit 3 have been vocal about their cost disadvantage to competitors from countries with national health care. They tried to reduce some of the cost disadvantage at the bargaining table, but that was difficult to do because defined health care benefits remained a priority for the UAW.

And in 1993 when the fledgling Clinton administration launched an initiative to reform the U.S. health care system, the Detroit 3 and the UAW were cheerleaders because the Clinton plan would have reduced costs and made the Detroit 3 more competitive.

Then, as now, only the union has supported the notion of a single-payer system — but with the expectation that the automakers would make up any shortfall if socialized federal health care didn’t measure up to their negotiated benefits.

Finally, in 2007, the UAW and the Detroit 3 found a way to reduce some of the health care benefits and costs.

But in Washington, reality is shaped by ideology and the politics of the moment.

The situation is scarier than I thought.

It was bad enough when some in Congress didn’t understand the auto industry, its challenges or how it has changed. If the White House doesn’t get it either, the industry is in for a rough ride.

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