What the Car Companies Want From Obama

Car buffs and political junkies are two separate breeds, with little overlap between the two. But Detroit has never seemed closer to Washington than at this year’s North American International Auto Show.

Most of the reasons are obvious: The federal government now owns a portion of GM and Chrysler, thanks to $14 billion in emergency loans to help them avert bankruptcy. A federal “car czar” will soon be appointed to oversee those loans and the two companies’ turnaround plans.

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Beyond that, the manic rise and fall of gas prices has left car buyers feeling whipsawed, and carmakers wondering if the government shouldn’t do something to make pump prices more stable. Perhaps most of all, auto executives sense that the incoming Barack Obama administration represents a chance to help retool energy and environmental policies in ways that might help their companies gain an edge – and reassert American leadership in the auto industry.

If you’re doing a doubletake – yes, this is unusual. Like most of their corporate brethren, auto executives typically dread federal scrutiny, and want government out of their business. But with a devastating recession and the near-collapse of the Detroit automakers, the times, they are a-changin’. Here are some of the surprising things Big Auto is hoping for from the Obama administration:

An increase in the gas tax. You heard this right. Energy experts have long insisted that it’s virtually impossible to develop alternatives to petroleum as long as gas is less than $2 per gallon. Raising the 18.4-cent federal tax on gas, they say, is one way to encourage conservation and make gasoline alternatives more appealing. And now that the automakers are sinking big bucks into new technology like electric propulsion systems and hydrogen fuel cells, their CEOs tend to agree.

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Bill Ford, executive chairman of Ford Motor Co., points out that ordinary R&D won’t be enough to gain widespread acceptance from consumers. “We’re going to need some help in the marketplace to generate demand for these new types of vehicles,” he says. GM CEO Rick Wagoner won’t come right out and endorse a gas tax, but he’s clear about the need for new ways to interest consumers in the electric-vehicle technology GM is pursuing. “The gas tax is highly political,” he says. “But almost every other country in the world has a fleet with higher fuel economy than in the United States, and almost none have done it with [gas-mileage] regulations. We really want to drive this technology, whether through a gas tax or other incentives.”

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Executives from Europe, where fuel taxes are much higher and pump prices are three to four times the levels here, are less shy about stating the virtues they see in higher gas taxes. “I would prefer if the government would offer support for environmentally friendly cars,” says Stefan Jacoby, CEO of Volkswagen of America. “The best way you can do that is a tax on fuel. When gas prices went down, all these sales of hybrids went down. I would encourage a tax credit [for hybrids] but also put a tax on fuel.”

A sympathetic car czar. One unstated fear of GM and Chrysler executives is that the soon-to-be-announced car czar will meddle deeply in their businesses and impose unrealistic demands. Which could happen. But a car czar could also be a boon for these troubled companies, especially if he or she helps build shared priorities between Detroit and Washington.

While GM Vice Chairman Bob Lutz was walking the floor at the Detroit auto show, he ran into a Ford Motor Co. executive who asked him sardonically if he was looking forward to dealing with the car czar. “Actually, I am,” Lutz answered. “We might actually have somebody in Washington we can talk to. We go to NHTSA* and they say, ‘we only write the rules.’ Then you go to this agency and that agency and then you go home and it’s like a Chinese dinner: You’re still hungry. Maybe the car czar will be a disaster. But if their job is really to make our industry sustainable, it could work to our advantage.”

What Lutz didn’t say is that for decades, the Detroit automakers have had a tight relationship with the Michigan Congressional delegation, which has long tailored fuel-economy standards and other regulations to their advantage. But that influence is waning, one reason a sympathetic car czar could end up being a friend to Detroit.

(*NHTSA is the National Highway Traffic Safety Administration, which oversees safety and fuel-economy standards.)

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A coherent energy policy. Up till now, there’s been nothing out of Washington that even vaguely resembles a national energy plan – and that was just fine with the automakers when they were minting money on big cars and SUVs. But many industry experts now believe that gas prices will rise again, perhaps well above $4 per gallon, and stay there – especially once the global economy rebounds.

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That’s why the race is on to develop new gasoline alternatives that will be affordable - when gasoline isn’t. But nobody knows what those new technologies will be, and for now, efforts are spread among electric powertrains, diesel, hydrogen, and various kinds of hybrids. Some kind of government policy could help consolidate research and build infrastructure for the most promising technology – as other countries, like Japan, have already done. “Other nations have played their hands differently, whether it’s industrial policy or the things that set the stage in Japan for hybrids,” says Larry Burns, GM’s technology chief. “Now, with the spotlight on the auto industry, people are listening a little bit differently.” If that's true, the next step would be for them to act a bit differently.