Downturn Will Test Obama’s Vision for an Energy-Efficient Auto Industry

President-elect Barack Obama leveled a stern warning at General Motors and Chrysler last week after the federal government promised them billions to help them survive: “The auto companies must not squander this chance to reform bad management practices.”

Once he takes office, the bailout will give him a tool to prod the industry to change, but it will also test his resolve as he pushes it in new directions.
Mr. Obama, after all, has been thinking out loud about the future of the American automobile industry for years, well before his presidential campaign began. He co-sponsored two bills in 2006, during his second year as a United States senator — one to raise fuel economy standards, and the other to encourage the use of alternative fuels.

His writings and speeches on the auto industry suggest a keen interest in finding ways, including new technology, to improve the fuel efficiency of the cars and trucks that Americans drive.
But with Detroit in a fragile financial state, it is unclear how many compromises he will have to make in pursuing his agenda for the auto industry, as he juggles other priorities like providing a stimulus program for the broader economy. The United Automobile Workers union, which backed Mr. Obama, will want a say in the changes he envisions for the automakers.
And the car companies, which have long lead times to develop products, will need sales of big trucks and sport utility vehicles, which may pick up again as gas prices fall, to bring in much-needed revenue.

By all accounts, Mr. Obama’s personal interest in the industry stems from his interest in environmental issues, and he has a ready resource about how the industry operates in Martin Nesbitt, a close friend who worked in financial planning at G.M.
Mr. Obama delivered his clearest prescription to the automobile industry in May 2007, when he appeared at Cobo Convention Center in downtown Detroit before an audience of 2,000 auto industry executives.
In a speech to the Economic Club of Detroit, Mr. Obama said the Big Three had done little to lessen the nation’s dependence on foreign oil and needed to improve their vehicles’ fuel efficiency.
“The auto industry’s refusal to act for so long has left it mired in a predicament for which there is no easy way out,” Mr. Obama said.

He added, “For years, while foreign competitors were investing in more fuel-efficient technology for their vehicles, American automakers were spending their time investing in bigger, faster cars. And whenever an attempt was made to raise our fuel efficiency standards, the auto companies would lobby furiously against it.”

He suggested initiatives similar to the legislation he had introduced in Congress, and which he emphasized in his campaign. They included a 4 percent annual increase in the Corporate Average Fuel Economy standards, equal to about one mile per gallon a year, and incentives for the companies to develop more fuel-efficient cars.

Mr. Obama said he would provide up to $3 billion to Detroit auto companies and their suppliers to retool their factories in order to produce smaller, more fuel-efficient vehicles. Still, with gasoline prices falling again, it is unclear whether consumer demand will shift so dramatically to small cars.
Congress later included up to $25 billion for the companies for the retooling. General Motors and Chrysler initially tried to tap that money for their depleted cash reserves, before receiving assistance from the Bush administration.

Environmentalists say the speech in Detroit was a sign of commitment to prodding the auto companies to build more fuel-efficient vehicles.

“I think he gets it,” said Daniel Becker, director of the Safe Climate Campaign for the Center for Auto Safety, a Washington consumer advocacy group. “The speech at Econ Club was a brave one, but a thoughtful one.”

Mr. Obama, who received standing ovations at the beginning and conclusion of his speech, said he wanted to be blunt with the Detroit companies on their home turf.
“I’m making this proposal here today because I don’t believe in making proposals in California and giving a different speech in Michigan,” he said. His goal was “not to destroy the industry, but to help bring it into the 21st century,” he said.

A year earlier, in his 2006 book, “The Audacity of Hope,” Mr. Obama wrote that “fuel-efficient cars and alternative fuels like E85, a fuel formulated with 85% ethanol, represent the future of the auto industry. It is a future American car companies can attain if we start making some tough choices now.”

He also did not spare the U.A.W. from criticism.
“For years,” Mr. Obama wrote, “U.S. automakers and the U.A.W. have resisted higher fuel-efficiency standards because retooling costs money, and Detroit is already struggling under huge retiree health-care costs and stiff competition.”
With Detroit in crisis, there is little room for hesitation after Mr. Obama reaches office.

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