Detroit Needs Drilling, Not Bailouts

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Looking for the root of the impending car industry debacle? Look no further than the failure of the Big Three and the United Auto Workers to challenge the Green attack on cheap gasoline.

Since the 1980s, the golden goose of the U.S. auto industry has been SUV and light truck sales. Those vehicles were so popular and so profitable that the Big Three could afford to meet UAW demands for high wages and generous benefits. The golden goose even enabled the Big Three to afford the infamous UAW Jobs Bank where thousands of laid-off auto workers were kept on the payroll for years, costing the automakers billions of dollars.

But for decades, the Big Three and the UAW overlooked the linchpin of all these “good times”—the cheap gasoline that fueled SUV sales. For some strange reason, neither the companies nor the UAW had the foresight or courage to challenge the Green chokehold on our gasoline supply.

While the Greens blocked oil drilling offshore and on public lands, like the Arctic National Wildlife Refuge, the Big Three and the UAW looked the other way. When the Greens worked to block the expansion of gasoline refineries through both direct opposition to plant expansion and through stringent EPA regulation that made refinery expansion expensive and unprofitable, the car industry snoozed. Only Ford CEO Wiliam Clay Ford Jr. was active on the Green issue—but not in a helpful way. He advocated higher gas taxes to incentivize the public away from buying SUVs.

It wasn’t until September 2008 that the CEO of General Motors finally got around to calling for increased offshore oil drilling—almost 20 years after the offshore drilling moratorium began. The UAW has yet to make the connection between cheap gas and its members’ jobs.

But let’s not give GM too much credit yet. In a full-page advertisement in the New York Times this week, entitled “There’s a belief that GM is not doing enough,” GM boasts that, “We have aggressively addressed our North American manufacturing footprint, shifting our production from trucks and SUVs to smaller cars and crossover vehicles.” What?

Amazingly, as gas prices plummet to levels not seen since early 2005 and SUV and light truck sales start to rebound, GM is “aggressively” shifting out of the hugely profitable vehicles that the public loves into less-profitable eco-boxes that are loved only by the Greens. Moreover, foreign carmakers can make better ecoboxes and sell them for less money, since they aren’t burdened by the UAW legacy costs that add about $2,000 to the cost of a car. Smaller cars were losers for Detroit in the 1970s and 1980s, and little has changed.

GM has also let the Greens goad it into betting much on the production of the electric car known as the Chevy Volt. “The future is electrifying,” is GM’s marketing pitch for the Volt. Touting the car as an “Extended-Range Electric Vehicle that is redefining the automotive world,” GM says that the Volt “is designed to move more than 75 percent of America’s daily commuters without a single drop of gas.

That means for someone who drives less than 40 miles a day, Chevy Volt will use zero gasoline and produce zero emissions.” Should you decide to drive more than 40 miles, then the Volt has a “gasoline-powered, range-extending engine that drives a generator to provide electric power when you drive beyond the 40-mile battery range.”

But as Wall Street Journal columnist Holman Jenkins pointed out last week, “We’re talking about a headache of a car that will have to be recharged for six hours to give 40 miles of gasoline-free driving.” If you use the car as intended, that is, never going beyond 40 miles between charges and so never using the gasoline engine. Even then, you’ll have to periodically drain the tank, since gasoline goes bad after a couple of months. And then you’ll have to make a special effort to dispose of the old fuel in an environmentally safe manner, just as for used motor oil.

The alleged advantage of the Volt is that, while it’s running on its battery, it produces no emissions. But it can hardly be assumed that consumers will flock to the Volt for that dubious reason.

Detracting from this alleged benefit is the fact that India’s Tata Motors is preparing to sell its $2,500 Nano car as low-cost transportation in developing nations. The millions of carbon dioxide-emitting Nanos to be sold in the developing world will more than offset whatever emissions are avoided by the many fewer Volts sold in the U.S. Moreover, there is the overriding reality that both China and India, the fastest growing emitters of carbon dioxide, have vowed not to cut their emissions. So the Volt’s alleged emissions benefit is quite illusory in the context of global warming.

Although the Big Three and the UAW didn’t set out to kill their golden goose, they didn’t do anything to protect it, either. It’s not too late for them to figure out that cheap gasoline is their friend and the Greens are the enemy. The future may be electrifying one day, but for today, the Big Three and UAW need, “Drill, baby, drill” and the equally important “Refine, baby, refine.”

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