Ailing autos may be Obama's vehicle

From Times staff writer Edward Silver:

The president-in-waiting doesn’t want to let the American auto sector fail, and not only because that would set off a shock wave in manufacturing and destroy millions of jobs. He and his advisors see the industry as a vehicle for solving America’s energy crisis and steering the economy down the path of green growth.

It’s hard to deny that much of the blame for our energy problem can be laid at Detroit’s doorstep. The carmakers have a history of resisting the kind of change that would ease our dependence on a finite fuel source, one that fortifies unfriendly petro-states and worsens global warming.

Obama clearly seeks to make that dream deferred a reality. His renewables and efficiency agenda would hit a wall if the American automobile industry was put up on blocks. Furthermore, bankruptcies could rob the nation of the chance to build export industries with markets wherever wheels are found.

The president-elect’s agenda was designed to unfold over several years, driven by a mix of policy fiat and cash incentives. Congress already has approved $25 billion to help automakers stay afloat and retool plants. Obama also backs fresh funds for fuel research and generous subsidies for consumers who switch to electric or flex-fuel vehicles.

But plans to prod the marketplace to assemble a solution are colliding with a harsh reality. General Motors, Ford Motor and Chrysler, onetime emblems of American industrial strength, are veering dangerously close to insolvency.

In GM’s case, the money may run out in a matter of months. And the car crash is happening too fast to hope for a transition that doesn’t involve rushed decisions and high costs.

Life support, not evolution, is the task at hand. So Obama has dropped his reticence about taking policy stands before taking office and urged a $50-billion transfusion into the automakers’ dwindling accounts.

On the plus side, the companies now aren’t likely to fight a reinvention program, as they had for so long. When you’re gasping for breath, resistance is futile. . . .

Perhaps the most elusive piece of Obama’s program is the energy component itself. Backers of alternatives to oil started agitating long before the Illinois senator appeared on the scene, and their ideas are still in competition. This year, with crude hitting $147 a barrel before the price plunged, many checks have been written and prototypes unveiled in the search for breakthroughs. Any true solution, of course, must be able to cost-effectively scale up to feed America's teeming fleet of cars and trucks.

Corn ethanol is widely considered a failure, in part because it literally takes food off our plates. Cellulosic ethanol, made from plant waste, faces the challenges of getting the chemistry right and harvesting and transporting the raw material.

Electrification? GM has staked much on the Volt, scheduled for introduction in 2010. If it survives its parent’s financial malady, it could bring great benefits in energy efficiency and lower emissions. But with a $40,000 price tag, the Volt may not go far. Meanwhile, a mass transition to plug-ins is waiting on better batteries and upgrades to the electric grid. That option may also require burning more coal, the bane of the environment.

T. Boone Pickens proposes running our vehicles on natural gas. That idea would detour much of the No. 2 electricity fuel away from the power market, and require the retooling of both vehicles and fueling systems. Oil is also a richer source of energy, but because natgas burns cleaner than oil and is extracted domestically, it may have an inside track in Washington.

Ready to pick, Mr. President?

What’s clear is that, just as the impact of the automakers’ collapse would radiate outward, so would the effects of their renewal.

If Obama is willing to act with audacity, his efforts may amount to experimentation in an emergency. Nevertheless, the rules of the road -- the shape of the vehicle and fuel industries -- may be set for decades as a result.

If he gets somewhere, much of the world may follow.

Photo: Then-candidate Barack Obama with leaders of the Teamsters, United Auto Workers and AFL-CIO at a Labor Day rally in Detroit. Credit: Bill Pugliano / Getty Images

Comments

[Paul]

American will choose all of the above. Sustainable ethanol, natural gas, green electricity, bio-diesel and petroleum. A diverse energy infrastructure will work to keep competition between all the forms of energy and in turn the costs down.

[mr.bilko]

Alternative energy for vehicles is still 3 to 8 years away from being a workable solution. Had Detroit focused on long term (alternative fuel sources) back in 2000, instead of short term profits (trucks/SUVs, rolling back EPA rules), they they would not be in a jam today. Congressman Dingell and Senator Levin helped create the problems for Detroit by shielding the Big 3 when they should have been pushing them.

During the boom years, Detroit focused on building gas guzzling, but highly profitable SUVs and trucks. One-half of the vehicles they sold fit into this category. Detroit has no vehicles for the lean years while Toyota and Honda do. Didn't the Big 3 learn anything from the 1970s and 1980s?

The Big 3 also need to get their labor contracts redone. They are paying auto workers to do nothing.

[Sherry]

We must not as a nation forget the role the high cost of our dependence on foreign fuel played in the demise of our automakers. The exorbitant cost of gas the past year has done serious damage to our economy and society. We need to take lessons from our mistakes.WE also need to get out from under the grip our dependence on fore gin oil has on us. Why not take some of these billions and invest in America becoming energy independent. Driving an electric car would cost the equivalent of 60 cents a gallon. The electricity could be generated by solar or wind power. Green technology would create millions of badly needed new jobs. What America needs is a green revolution. It is time for us to move forward with alternative energy. I just read Jeff Wilson's new book The Manhattan Project of 2009. I highly recommend this book to anyone who is concerned about the downward spiral of our economy and it's effect on our society and would like to see our country become energy independent!

[Bush]

What about the Banks?/

[anonymous]

Let the big three fail. Why take money from tax payers who earned it and give it to corporations too stupid to make a competitive product? Let Toyota and Hyundai take up the slack in different cities that aren't paralyzed by unions. If the auto workers want to stay in the industry, they can move. Who wants to live in Detroit anyway?

[Tim]

It's quite funny that people continue to bash these companies for producing large, inefficient vehicles. These companies were producing vehicles that made bunches of money and were bought in droves by the US consumers. As a business person, I think it could be quite easy to fall in the trap that Ford, GM, and Chrysler found themselves in. Yes, they deserve lots of blame too but not enough that would force them out of business. People say let them go out of business and let Toyota and Honda buy those plants and hire some of their workers. Wake up, we're in the middle of a huge financial crisis. Toyota and Honda aren't going to get into more debt by buying these facilities. Once one of the big three go bankrupt, it will lose sales so much they will just have to fold and call it a day. Once this happens, suppliers will go bankrupt. These suppliers don't just supply the big three so then Toyota and Honda will hurt even more than they are now, so prices will go up because of reduced supplies. People will increasingly stop buying vehicles so the remaining big three will fold. When these fold, so will much more suppliers as well as those who cannot afford the existing suppliers. More people without jobs who can't afford cars. Do we all presume that these big 3 workers are only driving big 3 vehicles? Now we have a huge loss of sales that will affect Toyota and Honda. They will be hugely impacted even though they produce many of the sacred vehicles that the big 3 doesn't. Finally, once at 3 million + jobs have been lost, where will we be? GREAT DEPRESSION 2.0!!!!

[Don's Truck]

Yep, I drive a big Dodge diesel pickup truck. I need it. I use it. A small car would be of use to me (loads of hay, hauling a horse trailer, etc.) I blame alot of the problem with the big 3 on the union (UAW). Greedy, unskilled labor for the most part. When an assembly line worker makes more than a teacher or a police officer, that is wrong. The UAW needs to take a beating. I read where GM even paid workers for not working, when they closed a factory. Who else gets paid for not working? (don't get me started on welfare and food stamps). Get a grip, Ford, GM and Chyrsler.

[bob]

"Who else gets paid for not working?"

Farmers get paid for not tilling fields. Homeowners, who live on big lots, get paid for not farming their 'yard'. All you need to do is lobby a few politicians, and you, too, can get paid for not doing anything. ;)

[PacificGatePost]

Forget Chapter 11, however, WHAT you implement and HOW you do it is critical.

Here is a plan worth a look by Congress...
----
http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html
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Trying something outside the box like this, is the only way to save the U.S. Auto Industry.

... it deserves saving.

[kim]

The auto companies did nothing for years. I remember the big deal about CAFE standards. They said there was no way for them to meet them. Well it now seems they are falling head over heels to produce cars that will far exceed the mandated standards.

Bankruptcy for the big three does not mean the companies will go out of businsess and stop making cars. It means that some contracts for labor and banks and suppliers will be open to rennegotiation.

The stockholders will lose and the creditors will take over.

Those stockholders who allowed management to create lousy cars and follow lousy policy will lose. Lesson learned. Ten years ago the industry should have got its act together and built cars that made sense.

[Ken]

With the Big Three auto makers now in a plainly visible death spiral, the automotive bailout debate is kicking into overdrive. The disagreement hinges on whether a bailout is necessary to support an important industry or whether the unprofitable dinosaurs of the past should be allowed to fail as America focuses on an information-age, service sector, and alternative energy future.

As usual, both sides have it wrong. The government should let the Big Three fail not because we no longer need an auto industry, but because we desperately do. What we do not need is the bloated, inefficient auto industry that we have today. By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford. Such auto makers could conceivably be profitable and could become the cornerstone of a manufacturing renaissance in the United States. In contrast, Ford (F), Chrysler and GM (GM) are never ending money pits that threaten to swallow a good deal of our economy.

[notsoandso]

American car companies still don't get it. Almost nightly you see the mis-directed advertising aimed at a very narrow market.
NFL Football repeated ads Sunday by Dodge featuring a beastly gas guzzling Pickup driving over terrain that looks like the "Goat" trail in the Baja 1000. Ford's Pickup ad was for the ability to tow a sailboat. Then there was a Honda ad for a car getting 33 mpg. How many people watching the NFL need to tow sailboats in November or will ever drive over anything close to Baja 1000 type terrain? In this economy how many want 33 plus mpg????? Darwinism works even for companies.