Last week Senator and presidential hopeful Barak Obama gave a major policy speech to the Detroit Economic Club and two thousand of Detroit’s business, government, and civic leaders. Obama’s hard-hitting speech laid down the stakes: oil dependency puts our nation at risk, politically, militarily, economically and environmentally. He told Motown moguls that at the very least we should be producing vehicles that improve fuel economy by 1 mile per gallon a year. He also called for a significant increase in low carbon fuels by fuel refiners, and promised expanded consumer incentives for buying fuel-efficient vehicles.
Needless to say, the standing ovation Obama received upon arrival was not repeated at the end. Even with his proposed package to help automakers cover the costs of transforming their industry—a 10-year federal subsidy to pay 10% of retiree healthcare pumping $6 to $8 billion into Detroit automakers coffers, lunch goers were unimpressed. Our automakers dismiss this amount as piddling. But is it?
The National Highway Traffic Safety Administration’s preliminary analysis of industry estimates puts the automakers investment to make 4% per year improvements in fuel economy at $85 billion over 10 years. Obama’s proposed federal assistance would thus cover 7% to 9% of the total investment needed. (While Obama’s proposal only requires automakers to invest 50 percent of the federal subsidy in fuel saving technologies, they would still receive a total of $6 – 8 billion. If they choose not to spend the other 50 percent on fuel saving technologies, that is their decision.) If 7% is too little, then how much is enough? Let the negotiation begin.
This week, Detroit did not want to accept Obama’s message just as Detroit did not want to accept the message we gave them in 2005, before Katrina, that fuel prices over $3.37 would make them hemorrhage red ink, or in 2006 when we concluded the best way to ensure higher and less volatile profits would be to proactively increase their fuel economy.
Just like they did not want to accept CAFE in 1975.
Detroit can’t keep saying “can’t”, they need new “can do” ideas that help America reduce oil dependency and slow or reverse global warming. Let’s hope that Ford’s appointment of a sustainability czarina and GM’s announcement that it is joining the U.S. Climate Action Partnership will translate into new ideas and new actions.