Auto Pilot Programs

I wondered if the federal government was planning to cajole both the buyers and sellers of the US auto industry to move to a more fuel-efficient future. It appears that Congress has found money for some R&D carrots even as the US automakers are being shown the stick.

Speaker Nancy Pelosi and Financial Services Chairman Barney Frank sent a letter on Friday to Robert L. Nardelli, Chairman and CEO of Chrysler, and Rick Wagoner Jr., Chairman and CEO of General Motors, regarding their company restructuring plans, due Tuesday. The lawmakers provide a list of 6 items that "must" be a part of their submitted plans; the last is:

A demonstration of your ability to achieve or exceed the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007, and the emissions standards adopted by California and other states, if they receive Federal approval, and become a long-term global leader in the production of fuel-efficient and advanced technology vehicles.

They conclude (h/t Earth2Tech):

We trust that your restructuring plan will demonstrate to the world that you are willing to make the tough decisions that modernize your operations, restructure your debt, enhance your competitive status in the global marketplace, and protect American jobs for the future.

Meanwhile, the $789B stimulus bill passed Congress, containing $3.3B to provide incentives for vehicle-related clean technology research and development:

• $2B for loans and grants for advanced battery research
• $300M for the GSA to replace older vehicles with hybrids or other vehicles with lower emissions
• $400M for "electrical infrastructure projects" to encourage plug-in hybrid electric vehicles (PHEVs)
• $300M for a pilot grant program for alternative fuel vehicles
• $300M for loans and grants to reduce diesel emissions

Not included were any significant incentives for buying alternative vehicles such as plug-in electric vehicles (e.g. in the form of a tax credit) beyond what current law already provides. The Senate version of the stimulus bill had more generous provisions that were mostly excised in conference committee negotiations. What's left isn't perfect. Some provisions phase out or end, starting this year, reducing the certainty auto makers have long argued they need to undertake the capital investment to develop such vehicles. The best surviving provision changes the total number of PHEVs eligible for a tax credit from a total of 250,000 to a maximum of 200,000 per manufacturer.

Automakers have clamored for a clear policy; the Obama administration has been very clear, and now there are buyer incentives to help build the market. The automakers need to get beyond timid short-term thinking and boldly build the next generation of classic American cars.