Wednesday, June 03, 2009

Will Obama be able to pound a square peg into a round hole?

Or rather, a burly blue-collar factory worker into a pencil-necked green shirt?

Okay, enough of being oblique. Foreign auto makers are good at making small, efficient cars because their home markets demanded this. There were lots of factors: They had (and have) much higher fuel prices, smaller roads, less parking and were in general, not as rich as Americans.

Here in the U.S. with our vast distances, wealth and cheap fuel, our auto companies were very good at making big powerful vehicles.

CAFE and unions

Our powerful unions have been able to extract very nice salary and benefits from U.S automakers, but the only way to support that is for the companies to have profitable product lines. Government regulations force automakers to meet an average fuel economy for their fleet. As a result, they make big profitable cars and little cars that loose money.

This little car gets good mileage and currently sells for $700 under the invoice price.

Now the government essentially owns GM and wants to run it in a way that makes Democratic interest groups happy: Environmentalists want high fuel efficiency. Unions want cushy jobs--the more the better. You can't have both.

In a rational world, we would notice that there are plenty of economical cars available, so those who want them are able to get them.

This Camaro goes for $4,500 over invoice ($3,500 over list) and has 426 hp.

There is no need to meddle in the decisions of companies; they will make whatever consumers demand.

If the government wants less fuel used, they can cause its price to rise through taxes (I don't think this is a good idea, but that is a subject for another post).

Update: Telling my wife about CAFE standards, she asked if it was a nice place to get coffee and tasty pastries. Me: No. It is a place to bankrupt major American industrial companies.

No comments: