Euthanizing the U.S. Auto Industry

Charles Krauthammer sums up nicely some major problems with this unnecessary government interference in the market place.

If you want to reduce our dependence on foreign oil, do it by reducing our dependence on foreign oil. Let us drill in ANWAR and on the continental shelf (before Cuba does it for us). Use more nuclear energy or coal to generate power.

I have no sympathy for Detroit, but a government mandate is not going to change anything Detroit does. They produce bigger vehicles instead of more fuel-efficient cars because (a) there is a demand for trucks and SUVs; (b) they are good at it and have higher profit margins when the sell them; and (c) they are not good at making fuel-efficient cars. They also show every sign of being too bureaucratic to respond to market forces efficiently. This mandate will change none of that and just eliminate their profitable markets.

Fuel efficiency went down and oil consumption went up 10 years ago because of government mandated safety regulations like airbags that increased the weight of vehicles. Detroit just can’t flip a switch to make things more efficient. They will now need to invest a ton of money in R & D to comply with all of these new regulations in addition to the current regulations.

The upshot will be that the new regulations will get passed and in a year or two there will be a giant taxpayer funded bailout of the auto giants because they are too far behind Japan and Germany to catch up with the requisite technology to comply with all of these mandates. In 20 years our cars will be so heavily regulated and unprofitable that we will all be stuck driving cars that resemble Soviet-style Lada Samaras produced by a federal department of motor vehicles.

Platts and that crowd loves to talk about a big auto and big oil conspiracy against us simple folks, but the reality is that this is one of the most competitive businesses in the world. People are already voting for more fuel efficiency with their wallets, which is why Toyota is now #1. Detroit will either respond or get buried. Platts has decided the best course of action is to require them to dig their own graves now.