New Regulations On The Bankrupt Auto Industry

"This moment of peril must be turned to one of progress," President Barack Obama said yesterday, as he signed his first two Presidential Memoranda, both aimed at getting the United States on the path to energy independence.

The president directed the Department of Transportation to establish higher fuel efficiency standards for carmakers' 2011 model year. The standard, known as Corporate Average Fuel Economy, or CAFE, standard, was established in 1975 in the wake of the Arab oil embargo.

In model year 1990, the passenger car standard was amended to 27.5 miles per gallon, and it has remained at this level. In 2007, new light truck standards of 22.2 mpg were issued. The new efficiency standards called for raising the average fuel economy to 35 miles a gallon for both cars and trucks by 2020.

The second memo paves the way for California and 18 other states to raise tailpipe emissions standards for the greenhouse gas carbon dioxide above and beyond the national standard.

It all really means more regulation and efficiency demands by politicians on the nearly bankrupt auto industry. Consider that there are already three voices on fuel economy and carbon dioxide emissions in the United States. The National Highway Transportation Safety Administration, the EPA and States like California each have different standards, different structures and different timelines.

The car makers now have less than three months to prove to Washington that they can survive after recieving government bailout money last month. Its clear that the Obama administration wants Detroit to make smaller, more fuel-efficient vehicles. However, if we keep seeing cheaper energy, people won’t buy these fuel-efficient vehicles. People will return to light trucks and vehicles with utility and size instead.

So, there may be an eventual conflict between what the government wants the carmakers to do (build smaller cars to adhere to aggressive environmental regulation) and what the automakers need to do in order to get the consumer to purchase cars and trucks. After all, political sound bites and new auto regulations do nothing to help the bankrupt auto industry turn a profit.

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The Way To Help The Big 3 Automakers

All three CEO's of the nations major automakers, Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler just flew into the nations capital in their luxury corporate jets to speak to Congress about getting a 25 billion dollar slice of the taxpayer bailout pie.

The automakers arrived in Washington after spending millions on a coast to coast advertising campaign that warned of the impending disaster to the economy if the Congress did not come through and help them with a loan.

The truth is that if the Congress does grant the automakers any type of bailout, they will not have not helped their dire situation in the long run.

Instead, Congress and the taxpayer will have become a a short term enabler to the three largest car makers in the domestic automobile industry. There is a distinction here that is crucial.

Helping is doing something for someone that they are not capable of doing themselves. Enabling is doing for someone things that they could, and should be doing themselves.

Detroit created its own problems by relying too much on trucks and SUVs. They have not built the fuel efficient cars that Americans need and want. Meanwhile, the unit cost structure of the Big 3 automakers remains far to high and it is simply not competitive in the global marketplace.

The United Auto Workers (UAW) have to accept cuts in pay and benefits. Then, the automakers need to make the fuel efficient cars at a competitive price that the country wants. Their current business model does not work, so all current management needs to be fired by their boards.

Taxpayer dollars invested in this industry in its current form is a bad investment. Congressional enabling of the automobile industry with a loan or bailout will not solve their problem but only postpone their day of reckoning while costing the taxpayer billions in the process.

Congress can help the automobile industry by sending a clear message of no taxpayer bailout. Those begging CEO's should head back to Detroit and begin to do their jobs.

Getting rid of the luxury airplanes and the rest of their executive perks would be a very good place to start.

For More Read: The Long Road Of Bankruptcy For General Motors on eworldvu.com