How Green Can The New GM Really Be?

(AP)
President Obama announced today that his Auto Task Force helped General Motors produce a plan for the company to "move toward profitability" and "start building a larger share of its cars here at home, including fuel-efficient cars."

To many observing the government's control over the auto maker, however, those goals do not necessarily align.

"GM wants to make money, but making green vehicles is a totally different object," said Dan Ikenson, associate director of the Center for Trade Policy Studies at the Cato Institute, a free market think tank. "The government has to decide -- do we want it to be a profit maximizing business, or a tool of policy?"

President Obama has made the promotion of a "green" economy one of his top policy priorities, and Congress is facilitating his agenda with a plan to put a price on carbon. The government's majority share in GM presents an opportunity, some say, for the administration to help an ailing industry while pushing green initiatives. For others, however, the government's obligation to see major car manufacturers through this economic storm means taking a more measured approach to "greening" the auto industry.

"There's two elements to rescuing the American auto industry," said Daniel J. Weiss, director of climate strategy at the liberal Center for American Progress. "There's the short term effort to keep them from drowning, then there's the long term effort of building a boat to get them to where they want to go."

The car industry is "already committed to doing what they can to be part of the green energy economy," said Charles Territo, senior director of communications for Alliance of Automobile Manufacturers.

However, he added, "It is important that the goals of energy security and reducing emissions not fall solely on the back of manufacturers. Alternative fuel infrastructure and consumer acceptance of new technologies are also part of the equation. An auto maker can have the most fuel efficient fleet in the industry, but if those aren't the types of vehicles consumers demand, they will struggle."

There are some ways the government should interfere in GM's business, Weiss said, such as insisting on the continued development of the Chevy Volt, the company's much-anticipated plug-in hybrid vehicle. GM has said the car remains on track for a 2010 launch, according to Reuters. One of President Obama's priorities is to get one million hybrids on the road by 2015.

"It's important the federal government as the new overseers (of GM) keep that car on track," Weiss said. U.S. auto companies "have to be able to compete with China, Japan, Korea, and Germany, who are building the super-efficient cars of the future."

Territo said it was clear two weeks ago, when the White House introduced new national fuel economy standards, that the industry had set its sights on increasing fuel efficiency. Ten auto executives stood by the president's side as he announced the new standard. But it will still be difficult for American companies to meet the new standards, he said.

"Currently we have a policy that promotes cheap gasoline, but that also requires manufacturers build fuel efficient autos," Territo said. "If gasoline prices remain relatively low, it's going to be very challenging for manufacturers to offer the types of vehicles consumers demand and still meet the aggressive fuel economy and greenhouse gas standards set by the federal government."

Sales for the first third of this year of fuel-efficient hybrid vehicles are down roughly 40 percent from last year, Territo said, slightly higher than the 37 percent decline in sales overall.

The sales of individual models are down significantly, he said, with sales of the Prius down 50 percent in the calendar year so far.

Weiss said it is "extremely short-sighted" to point to low oil prices as a challenge facing fuel-efficient cars.

"No one believes oil prices will stay at this level," he said. "They're not whistling past the graveyard -- they are singing past the graveyard if they think oil prices are going to remain this low after the recovery."

Furthermore, said Daniel Becker, director of the Safe Climate Campaign, consumers will welcome more fuel-efficient cars.

"Making gas-guzzlers that pollute the atmosphere, cost us too much at the gas pump, and don't sell very well really isn't very good for the United States," he said. "Toyota and Honda lost money (in the recession), but they're still healthy companies because they're making efficient vehicles Americans want to buy. They weren't as wedded to the gas-guzzling economy as the U.S. three were."

The fact that the Obama administration was able to institute higher fuel economy standards may indicate the government may be able and willing to exert its newfound influence over car makers.

"Would he have been able to do it if the auto industry had both hands free instead of one shaking a tin cup? Maybe not," said Becker. "There are a lot of factors that went into it."

Still, Weiss said, the industry got its biggest request from the government: a uniform, national standard for fuel efficiency.

"The policy the Big Three were seeking was delivered to them by the Obama administration," he said.

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