Bob Lutz the operating head of General Motors says if Congress requires the car companies to build small ultra fuel efficient vehicles they will have to be sold at a loss. Now that is a truly brilliant way to help car companies that are losing money.
Leave it to Bob Lutz, GM's voluble vice chairman, to puncture the unreality of the auto bailout he himself has been championing. In an email to Ward's Auto World, he notes an obvious flaw in Congress's rescue plan now taking shape: The fuel-efficient "green" cars GM, Ford and Chrysler profess to be thrilled to be developing at Congress's behest will be unsellable unless gas prices are much higher than today's.So will Congress raise gasoline taxes enough to price gasoline at $4 a gallon. In the middle of a recession? Are you nuts? Will they stiff arm the eco-nuts and lower CAFE requirements? Are you nuts? Will they allow the car companies to import high mileage vehicles from Europe and PO the American unions? Are you nuts?
"Very few people will want to change what has been their 'nationality-given' right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50," Mr. Lutz explained. "Those prices will put the CAFE-mandated manufacturers at war with their customers -- and no one will win in that battle."
Translation: To become "viable," as Congress chooses crazily to understand the term, the Big Three are setting out to squander billions on products that will have to be dumped on consumers at a loss.
None of this was mentioned at four days of congressional bailout hearings, because Detroit knows better than to suggest Congress has a role in the industry's problem. Yet its own recently updated Corporate Average Fuel Economy regime, or CAFE, makes a mockery of the idea that government money will render the companies profitable, even as the same bailout bill demands that the Big Three drop their legal challenge to a California mileage mandate even more unsustainable than the federal government's.
It looks to me like Congress has just bought some car companies.
Cross Posted at Classical Values