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The Government Can't Sell Cars

Posted By Rory Cooper On March 17, 2009 @ 5:22 pm In Economics | Comments Disabled

From left to right, Richard Wagoner Jr., Chairman and CEO of General Motors, Roger Nardelli, Chairman and CEO of Chrysler and Alan Mulally, President and CEO of Ford Motor Company

As President Obama and Congress are starting to learn, it isn’t easy running American businesses from Washington. This week AIG threw bonuses [1] in the faces of their new CEO’s on Capitol Hill, after Senator Chris Dodd [2] (D-CT) specifically legislated [3] that they could do just that. Senator Dodd is apparently wishing he hadn’t [4] made that decision now.

Now we learn that the auto companies that American taxpayers are bailing out an alarming rate are being forced into more bad decisions by lawmakers [5]. Their new “bosses” on Capitol Hill are forcing them to “green” the cars they build at a rate faster than consumers demand, or that prices will allow. While the intentions of clean automobiles are admirable, it is a hard sell to a struggling economy to demand that the companies that we are bailing out because they can’t sell enough cars should be forced into making cars people don’t want to buy. Logical right?

When gas prices were at $4 a gallon, Toyota couldn’t keep an expensive Prius on the lot for two days. But now that gas prices are at a more reasonable level and the economy is limping, consumers are choosing value over gas mileage. Now, most lots are carrying an 80 day supply [5] of the expensive Priuses. The marketplace tends to work in this fashion, which is why it is never a good idea for politicians to get this deep into the everyday workings of American business.

Rebecca Lindland, an auto analyst for IHS Global Insight told the LA Times [5]; “The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars, but shouldn’t it be more about satisfying the needs of the American consumer?”

Ironically, even when gas prices were high, expensive hybrid automobiles weren’t making much money. Toyota finally turned a profit on the Prius in 2008, and those were extreme circumstances. Honda spokesman Chris Martin admitted [5]; “If we were making money on the Civic hybrid, we weren’t making a lot.”

Given Toyota and Honda’s history, and their status as the leading hybrid automakers, it would make perfect sense for GM, Chrysler and Ford to take a reasoned approach to the rollout of new hybrids. Unfortunately, President Obama and Congress won’t let them take any reasoned approaches that don’t give them the opportunity to push an entirely different social agenda that has nothing to do with saving taxpayers money.

President Obama and Congress are off to a rocky start running America’s largest corporations. It makes you wonder how they’ll manage 4 million small businesses in America [6], as they hope to do under the Employee “No” Choice Act [7]. Maybe it’s time Americans demanded that the bailouts stopped, and government return to doing what it is designed to do. The government is not designed to run your health care; it isn’t designed to negotiate every union contract in America; it isn’t designed to sell insurance; it isn’t designed to refinance mortgages; and it certainly shouldn’t be selling cars.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/03/17/the-government-cant-sell-cars/

URLs in this post:

[1] AIG threw bonuses: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031702046.html

[2] Senator Chris Dodd: http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig---time/

[3] specifically legislated: http://corner.nationalreview.com/post/?q=YzNjNGQ0Y2FmYjRlNDI2ZTIzMzkwMzI3MmRlN2M1ZjA=

[4] wishing he hadn’t: http://money.cnn.com/news/newsfeeds/articles/djf500/200903171227DOWJONESDJONLINE000505_FORTUNE5.htm

[5] more bad decisions by lawmakers: http://www.latimes.com/business/la-fi-hybrid17-2009mar17,0,6682265.story?page=2

[6] 4 million small businesses in America: http://www.heritage.org/Research/Labor/wm2341.cfm

[7] Employee “No” Choice Act: http://www.foundry.org/2009/03/10/employee-no-choice-act-increasing-the-feds-role-again/

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