Tweak CAFE and help Detroit

Yes, Detroit Can Be Fixed

Excerpt:

... simply have to allow auto makers to meet the fuel economy standards with any mix of autos made in domestic or overseas factories.

Under the nonsensical "two fleet" rule that now applies, manufacturers meet the standards separately with their "domestically" and "nondomestically" produced fleets. What does this have to do with making sure U.S. consumers get good mileage? Nothing. It's a naked handout to the UAW at the expense of the companies and their customers.

How dumb is the two-fleet rule? Nissan, in a petition for its removal, points out foreign brands may actually minimize the domestic content in their U.S. cars so they can continue to count as "nondomestic."

How dumb is the rule? Chrysler might not be unraveling today if not for the two-fleet rule, the real genesis of the Hail Marys it's been throwing in all directions to find an electric car or a small-car partner or to merge with GM. Chrysler has a perfectly salvageable business making trucks, minivans, muscle cars and Jeeps -- doomed only by the lack of enough small, fuel-efficient cars to roll out of a UAW factory with a Chrysler emblem slapped on.

For 30 years, to make and sell the large vehicles that earn their profits, the Detroit Three have been effectively required to build small cars in high-wage, UAW factories, though it means losing money on every car. (That -- not some perverse desire to make bad cars -- is why they skimped for decades on styling, engineering and materials in their family sedans.)

Sure, this bullet would be far from silver and would still cause pain. The UAW might declare war to stop production from being shifted offshore. The Big Three might have to pay billions in job buyouts to use their new freedom. Since 2005, they've had some leeway under Nafta to shift "domestic" production to Mexico and haven't done much about it.

But here's the key: Detroit would finally get what every foreign competitor and just about every other business has -- normal leverage over labor costs. Auto jobs wouldn't automatically flee offshore. The Big Three would rather hire high-quality U.S. workers -- but on the same terms that Toyota or Nissan or BMW do.

Let's not kid ourselves that a taxpayer rescue would be anything but a down payment on a never-ending bailout. The bailout already is never-ending: Chrysler was already rescued once. Forgotten are the Reagan-era import quotas that inflated the price of every car sold in America to help prop up the Big Three. If hooked up to Washington life supports today, Detroit's first assignment would be to "protect jobs" -- job protection guarantees being one of the Big Three's fatal errors in the first place.

Comment: I was watching CNBC tonight and the commentator opined that a Detroit bailout would in essence make GM (and Ford and Chrysler) like Airbus. I understand the the Saturn Astra is a fine small car, but GM cannot make money on it because it is too expensive to be built in the US.