I don’t sit down in front of the TV all that often, but it seems like every other commercial, I hear Tim “The Toolman” Taylor [Tim Allen] hocking the Volt. The advertising campaign is not not doing all that well, unless people are going into the showroom to check out the Volt and buying another GM product … like a Chevy Silverado or somthin’
It is now official. Per our friends at the EPA, by the 2025 model year, a car manufacturer’s fleet (i.e., cars and light trucks) must average 54.5 miles per gallon. This is known as the CAFE standard…Corporate Average Fuel Economy. We’ll ignore for the moment that this standard is double our current standard, and focus on the facts.
Traditionally, the CAFE standard has been set by Congress. But, for President Obama’s EPA, this is not good enough. Because cars emit the dreaded carbon dioxide, which all plants need to live, the EPA has seized control. You may have heard that all manufacturers agreed to this 54.5 mpg standard earlier this year, but understand, they had little choice. States, particularly California, were set to impose their own rules, and rules from state to state would cripple the industry. So, when the feds said, agree to 54.5 and we’ll hold the states at bay, well, that was an offer they couldn’t refuse.
I’m going to use today’s numbers because, unlike the EPA, I cannot predict the future, nor, can I force the future to be what I demand. And, to simplify “the math”, I will assume that GM only makes the Chevy Volt and the Chevy Tahoe. The Chevy Volt is rated at 93 mpg which includes the first 35 or so miles that it runs on pure electricity. The Chevy Tahoe is rated at 17 mpg. If all Chevy did was manufacture 2 vehicles, one Volt and one Tahoe, they would be good to go as this results in a “fleet” average of 55 mpg.
But, what if 2 purchasers are “soccer Moms” and a Volt doesn’t get the job done? Simple…GM manufactures another Volt. Now, GM has 2 Volts that no one wants, but has sold 2 Tahoes. Of course, GM doesn’t manufacture cars that way. To meet the CAFE standard, GM needs to decide first, how many Volts it will manufacture, and how many Tahoes it will manufacture. But, that decision is no no longer based upon what consumers want, it’s based upon what the EPA dictates.
The only way Detroit can hit these averages will be by turning at least 25% of its fleet into hybrids. But hybrid sales peaked in the U.S. two years ago at 3% of the market and are declining. The EPA’s $157 billion price tag includes only the estimate of what manufacturers will have to invest in new technology, not the billions more that will hemorrhage when nobody buys their EPA-approved products.
Do I see another GM “bailout” in our future?
In late July, with much fanfare, the administration, through the National Highway Transportation Safety Administration announced new standards for motor vehicle “fuel efficiency”. Currently, a manufacturer’s vehicle fleet must average 27.5 miles per gallon, and this has been the standard since 1990. However, by 2025, the fleet average must be 54.5 miles per gallon. Read more
Admittedly, I’ve given away the answer because of the image to the left of this post, but, let me explain their rationale. Read more
Bob King, President of the United Auto Workers, has announced a new strategy to increase members. On the “foreign” side he has decided that it is neigh onto time that Americans in this country making Nissans, or Hondas or Mercedes join the union. Never mind that all attempts to unionize these workers in the past have failed (mostly because pay at these plants is on par with those of unionized plants), to Mr. King it will now be full steam ahead.
Early this year he sent a set of “rules” to each foreign manufacturer, and, if the company didn’t agree,
[t]he UAW, he said, would hold demonstrations at the corporate headquarters of these companies outside the U.S. as well as at their U.S. plants. In addition, it would picket their dealerships in the U.S. and abroad, and sports events globally that are sponsored by the car companies.
When that demand basically fell on deaf ears, Mr. King is now huddling with the UAW leadership to decide which foreign manufacturer should be the “target” of his protests. And, yes, it’s ok for the UAW to use that word because, well, they are a union.
So, it matters not to Mr. King that your spouse (who wouldn’t be unionized in any event), but happens to sell cars, for example, at your local Honda dealership will lose much needed income during these protests. It’s all about the union.
UAW President Bob King said he thought a target would have already emerged by now…
We’ll keep you posted on that emerging target.
Moving on to the domestic front, it seems that US auto manufacturers have actually turned a profit this past fiscal year. And, the big three’s union contracts expire this year. To that, Mr King says,
Where we’ve given concessions, we’re going to try to get as many of those back as we possibly can.
Here’s an idea, Mr. King…any profits made by GM and Chrysler must first be used to pay back the American taxpayer in full. Then you can claw back whatever concessions you want.
Today, in a surprise announcement, we learned that General Motors CEO, Edward Whitacre will be leaving that office effective September 1, and resigning as Chairman of the Board effective December 31. While everyone knew that he had no intention of remaining with GM for any extended period of time, most expected that he would at least stay until GM had gone through the initial public offering of “new” GM stock. Read more
Two other articles caught my attention this week, neither of which warranted an entire post, but, both of which need your attention.
GM is now seeking new help from more financial institutions to assist GM in obtaining loans for GM customers who want to purchase cars. About 3 years ago, GM sold control of GMAC, it’s “in house” car loan business. Now, GM has a problem. About 40% of Americans are “subprime” borrowers, and if few banks will give car loans to those people, GM sells fewer cars. Government Motors’ solution…find institutions that will give a car loan to “subprime” borrowers, i.e., people who probably can’t afford a car loan. Haven’t we already been there and done that…with not the best of results?
Remember the President’s promise…if you are making less than $200,000 per year you will not see your taxes increase? Well, not exactly.
Of course, Social Security taxes and Medicare taxes (for everyone, regardless of income) have already increased, but, what about “income taxes”. Apparently, they are not safe either. On Tuesday, House Majority Leader Steny Hoyer (D. Md.) “suggested” that the deficit was so high that, maybe, the middle class would have to pay higher income taxes.
Gee, Mr. Hoyer, didn’t you think of that when you voted for TARP, Stimulus Part I, Stimulus part II, and, all of the things in the 2009 budget that Bush vetoed while he was in office? Who the heck did you think would pay for all of that government spending?