How Green Is the Auto Bailout?

Auto executives before a Senate Banking Committee hearing on the auto industry bailout. From left, General Motors Chief Executive Officer Richard Wagoner, UAW President Ron Gettelfinger, Ford Chief Executive Officer Alan Mulally, and Chrysler Chief Executive Officer Robert Nardelli.

Photo: AP Photo / Gerald Herbert

related articles

President Bush, Congress and president-elect Obama seem to be coming to agreement on a $15 billion loan bailout to the U.S. auto industry that will shake up management, appoint a "car czar" to oversee the industry and ... (drum roll please) improve their fuel economy.

Of course, Congress already mandated fuel economy improvements last year and had allotted $25 billion to help the industry retool its factories to meet that mandate. According to some reports, the bailout loan will come out of that pot of money, leaving less -- presumably -- for the original goal of improving fuel efficiency.

That said, here's a look at what the Big Three plan, according to a Department of Energy summary:

Ford would roll out an all-electric commercial van by 2010, a battery-powered sedan in 2011 and a suite of hybrids, plug-in hybrids and battery electric vehicles in 2012. Overall, Ford plans to spend $2 billion annually to improve fuel economy 36% by 2015. Of course, Ford has said it doesn't need a federal loan this year to stay afloat.

General Motors, besides developing the Chevrolet Volt, which runs on gas only after exhausting its battery after about 40 miles (an average roundtrip commute for about 80% of Americans), plans to spend $2.9 billion to produce 15 hybrid models by 2012. GM needs $12 billion to survive through the first quarter of 2009.

Meanwhile, Chrysler, which is not a publicly traded company and which is owned by a viable corporate parent, Cerberus Capital Management, plans to roll out three electric-drive vehicles by 2013 and, like GM, ensure that about half its fleet can run on ethanol blends of fuel. It wants $7 billion in federal money to get through the first quarter of 2009.

The Natural Resources Defense Council points out that the Chrysler plan is short on specifics, but that both the GM and Ford plans would enable their fleets to meet California's greenhouse gas emissions law -- which has yet to be enacted because the Environmental Protection Agency has refused to grant it a waiver that would permit it's setting of an air quality law more stringent than federal law demands. The Supreme Court endorsed California's law, about a dozen other states would enact it ... and yet it's been held up by not only the Bush Administration but also (you guessed it) Detroit's automakers. The Center for Biological Diversity suggested that Congress should require Detroit to drop legal opposition to those clean air laws, and set even more strict fuel-economy standards as a condition of the loans.

Some have said that the domestic auto industry's focus on gas-guzzling (but high-demand and high-profit margin) vehicles like pick-up trucks and SUVs helped to dig itself into this financial hole, though there's no question the companies produced those vehicles precisely because they were so profitable. Toyota, the poster child for fuel efficiency because of its hybrid Prius, was no different, making wads of cash on big cars during the same time period.

Times have changed, and if there's a silver lining to this massively expensive bailout, it's that Detroit will be compelled to improve the energy efficiency of the vehicles it sells to the American public, and that in turn will take a bite out of the nation's carbon dioxide emissions. Whether it will be as effective as the original fuel economy upgrade passed by Congress, and whether American consumers continue to demand fuel-efficient vehicles even as gas prices drop, remains to be seen.

Also in question is how well Obama's proposed economic stimulus plan will spend on transportation projects. There's a growing chorus of voices calling on Obama to ensure that the money be spent on smart growth strategies, like supporting public transportation, regional town centers in suburbia and refurbishing aging water and sewer systems necessary for urban revitalization. New York Times columnist David Brooks went so far as to call the incipient plan as traditional -- and therefore wrong -- as an episode of This Old House.

COMMENTS ()