Seeking More Federal Money, GM and Chrysler Promise Greener Vehicles
February 18, 2009 - 8:21 PMBoth General Motors and Chrysler made green vehicles a key part of their respective restructuring plan presented to federal officials this week, as the struggling U.S. car makers again asked for billions more in taxpayer funding.
Chrysler, which is requesting another $5 billion on top of the $4 billion it received in late 2008, plans to merge with Fiat. Chrysler says these steps will “leverage the advanced powertrain and small car technology that has made Fiat number one in Europe in ‘low’ CO2 [Carbon Dioxide] emissions.” (See Chrysler Restructuring Plan)
In addition to the $5 billion from the Treasury Department, the Chrysler plan further says it will need $6 billion from a Department of Energy program to help car companies make more fuel-efficient vehicles.
“To be viable on a long-term basis, we believe it is critical that Chrysler continues to pursue strategic partnerships/consolidation to be both operationally viable, i.e. meet energy and environmental regulation, and financially viable, i.e., create an acceptable ROI [return on investment] to shareholders,” the plan reads.
The GM proposal talks about the firm’s “commitment to high-quality, fuel-efficient vehicles and advanced propulsion technologies.” (See GM Restructuring Plan)
General Motors already received $13.4 billion in federal loans and is asking for an additional $16.6 billion from the Department of Treasury. It is also seeking $7.7 billion in loans from the Department of Energy for fuel-efficient vehicles.
“The company is investing significantly in alternative fuel and advanced propulsion technologies in 2009-2012 timeframe, supporting the expansion of GM’s hybrid offerings and development of the Chevrolet Volt’s extended-range electric vehicle technology,” the GM plan states.
The Volt is a lithium-ion battery car, explains the GM plan, which will be an advanced hybrid vehicle.
“GM has also committed to increasing its number of hybrid models to 14 by 2012, and to making more than 60 percent of its fleet alternative-fuel capable,” the plan says.
Ford has said it does not need federal money at this time but is leaving the option open for the future.
Chrysler and GM delivered the restructuring plans to the Department of Treasury on Tuesday. A task force headed by Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers, a former Treasury secretary, will review the proposals and determine how much – if any – additional tax dollars the car companies will receive, as well as what strings will be attached – if any.
“I have received restructuring reports from both General Motors and Chrysler, and they have been posted on the Treasury website. NEC Director Summers and I will be convening the President's Task Force on Autos later this week to analyze the companies’ plans and to solicit the full range of input from across the Administration on the restructuring necessary for these companies to achieve viability,” Geithner said in a statement.
The Obama administration and the Democratic majority in Congress have called for more environmentally friendly vehicles. Already, President Obama signed an executive order to make it easier for states – such as California and others that have expressed a desire to do so – to set more restrictive fuel-efficiency standards than the federal Corporate Average Fuel Economy (CAFE) rules.
The CAFE standards are a big part of the problem regarding why the American auto industry has fallen on hard times, said Sam Kazman, general counsel for the Competitive Enterprise Institute, a free market group. He said the government’s professed goal of saving the auto industry could ruin it.
“Detroit is being forced to reinvent itself to produce more environmentally friendly cars,” Kazman told CNSNews.com. “Toyota and Honda are best at the fuel-efficient cars. This deprives American companies of what they’re best at, which is trucks and SUVs.”
As long as these two companies are eager to get federal money, they will likely have to abide by Democrats in Congress demanding more green cars, Kazman said. He also expects the companies to get a second phase of federal money because Congress will not want to admit its mistake in allocating the first phase of funding.
“Politicians should never design or engineer cars,” Kazman said. “I would rather they try to do brain surgery. At least then we’ll know whether they were successful or a failure right away and they probably wouldn’t try it again. They will keep trying to engineer cars.”
Thus far, both the Treasury and the White House are reserving any substantial comment on the auto plans.
“We appreciate the effort that these companies and their stakeholders have made, and the President's team will be reviewing these reports closely in the days ahead,” White House Press Secretary Robert Gibbs said Tuesday. “It is clear that, going forward, more will be required from everyone involved – creditors, suppliers, dealers, labor and auto executives themselves – to ensure the viability of these companies going forward.”
In other parts of the plan, GM said it will sell or phase-out the large Hummer vehicles by March 31 and either close Saturn or allow it to spin off into a separate corporation by 2011. The GM plan also left open the possibility of bankruptcy, a notion it rejected last year.
The Chrysler plan seemed to rely on the Fiat merger and the federal bailout money for survival and issued a warning.
“If Chrysler is unable to restructure its liabilities and if further government funding is not forthcoming, the ‘Orderly Wind Down’ alternative would be pursued,” the plan said. “However, it may have severe social and economic consequences for both Chrysler and the broader U.S. economy.”