The auto industry needs bailout as a matter of general economic necessity. Simultaneously, we must address the problem of foreign oil dependency, to address global warming, redress the balance of trade, and avert global conflict over resources.
These two imperatives are seen as counterpoised. Yet there is a stunningly simple way to address both imperatives simultaneously. In fact, the need for an immediate bailout gives the government a tool it would not otherwise have to force greater auto fuel efficiency.
The solution is this: Do not give any general assistance to the auto makers. Instead, give targeted government funds to support the research, manufacture, and sale only of car and truck models that meet rigid fuel efficiency standards. Fund the companies only to retain and improve certain model lines; penalize the companies if they retain older less fuel-efficient models. Give them an incentive to shut those production lines down.
More below the fold.
While we're at it, utilize the present crisis to eliminate, not reform, the CAFE system. CAFE -- Corporate Average Fuel Economy -- was a scam from the start. It encouraged the companies to retain a large number of production models and to segregate their model lines into gas guzzler profit centers, and fuel efficient loss leaders, since the companies only had to show good "corporate averages." This is precisely the dynamic that led to the current Detroit decline, a dynamic in which Washington certainly shares responsibility.
Simultaneously, the CAFE standard system made it virtually impossible to start up a new car company, since any viable start-up would have to enter the field with a full-range line of models. This is totally contrary to sound energy policy. We ought to do everything possible to encourage new auto makers who make innovative fuel-efficient models.
CAFE was nothing but a giveaway to Detroit, and it has failed. Get rid of it. Completely.
Replace it with tough new minimum fuel economy standards based on model type -- not fleet averages. If you produce a two-seater "sports" car, it should get a minimum of 80 miles per gallon. 4-5 seat passenger cars should get a minimum of 60 mpg. 6-8 seaters should get 40 mpg. Etceteras. If you can't meet those standards, you can't make or sell the car in the USA. Period. Special standards can apply to hybrids, electric, and alternate-fuel vehicles.
Meanwhile, the government should do all it can to spur and assist the production and sale of models that do meet those standards. Starting with the current bailout package. Don't let the frickin' car companies devise the plan. Have the Obama Energy and Environment Transition Team structure the plan.
If one or more of the Big Three can't cut it, tough luck. It doesn't mean the end of the auto industry, any more than Citibank's failure would mean the end of the banking industry. It would mean that new car makers would be given more of a niche.
And that's a good thing. For American workers, taxpayers, green jobs, and economic revitalization.