Energy Independence Implications Of Auto Bailout

Dec 9: Chairman Edward Markey (D-MA) and the Select Committee on Energy Independence and Global Warming held a hearing entitled, Auto Bailout Hearing to Explore Energy Independence Implications. According to an announcement from the Committee, "As Congress considers a multi-billion dollar program of loans to America’s auto industry, many measures of success or failure exist for the industry and the government’s attempts to help the automakers. Chief among those measures of success is how effectively America’s auto industry, and the industry as a whole, is transformed to build cars for the future that reduce our dependence on oil. Will the auto industry meet the fuel economy rules passed by Congress and signed into law nearly a year ago, which could revitalize the industry? Should American taxpayers expect even higher fuel economy performance in return for their investment of additional billions in loans? Do the auto companies’ plans impair their ability to meet the current fuel economy regime?"

Witnesses testifying at the hearing included representatives of: Public Citizen; Bright Automotive; Robert H. Smith School of Business, University of Maryland; Art Center College of Design; and MAG Industrial Automation Systems. In opening comments, Chairman Markey said, "This week Congress will vote on whether to extend a lifeline to a broken domestic industry teetering on the brink of bankruptcy. The same companies that fought seat belt requirements in the 1960s, air bags in the 80’s, and fuel economy for more than three decades, have returned, hat in hand, unable to survive the month without a taxpayer intervention. Once untouchable symbols of American industrial might and ingenuity, it has become clear the Detroit Three have ceded leadership to the innovators and are now running in fear. . .

". . . the fundamental reason the Big Three need life support today is their inability to move from Car 1.0 to Car 2.0 over the past half century. A business model premised on bigger cars, wider highways, and more oil is a failed equation. Any recovery of these companies will require more than just fresh cash. It will require a change of culture. I have reviewed the pending draft legislation that would make available $15 billion in emergency loans and require the Big Three to withdraw pending lawsuits against the states that support adopting California’s greenhouse gas emission standards. I commend that provision and strongly believe that Congress must go one step further and require that these companies meet the California targets on a nationwide basis. . ."

House Speaker Nancy Pelosi (D-CA) and Chairman Barney Frank (D-MA) of the House Financial Services Committee held a press conference late the afternoon of December 8 on the draft aid package to the auto industry. The two outlined the Democrats plan to use $15 billion from the Advanced Technology Vehicles Manufacturing Incentive Program authorized by section 136 of the Energy Independence and Security Act of 2007 (EISA) [See WIMS 11/5/08]. Previously, Democratic leaders including Speaker Nancy Pelosi (D-CA) and Senator Majority Leader Harry Reid (D-NV) had strongly opposed using the "section 136 funds." They agreed, however, to use the funds because the Bush Administration refused to give in on its opposition to use the Troubled Assets Relief Program (TARP) funds of the Emergency Economic Stabilization Act (EESA) of 2008.

Speaker Pelosi said, “It is important to note that unless the restructuring that is called for in this legislation and the goal of viability is achieved by March 31, [2009] there is no justification for spending any more taxpayer dollars. Now it has been said this is a loan of $15 billion because it’s for a different purpose than under Section 136; 136 is for innovation. . . I am very encouraged by the conversations so far. We are on the path. I will only support using Section 136 with the assurance that we will get it back in a number of weeks. And in fact, in a number of weeks, if the Big Three are not on the path to viability, we may want our money back sooner than March 31 instead of over the longer term that would be built into the bill should they again be a thriving, competitive, innovative auto industry for the future.” The Bush Administration is still reviewing the draft legislation and reportedly wants additional stipulations on the auto companies. A deal was expected later today or tomorrow; however, it is still unknown if the compromise will pass the Senate.

In a related matter, the Natural Resources Defense Council (NRDC) released new data indicating that General Motors and Ford are "now positioned to comply with California's landmark global warming standards if they are applied nationwide." NRDC said the new findings are critical as Congress considers a major bailout of the auto industry. NRDC said, "Despite the capacity to meet these standards, however, GM and Ford remain embroiled in efforts to block the California standards through lawsuits and lobbying."

Roland Hwang, vehicles policy director for NRDC said, “Producing modern and efficient vehicles will expand America’s workforce, make GM and Ford globally competitive, and save drivers billions at the pump. In a future of insecure oil markets and intensifying global warming, American auto companies will only be competitive by making cleaner, more fuel-efficient cars.” The NRDC study is based on the fuel economy levels in the plans submitted by GM and Ford to Congress on December 2, 2008.

Access the hearing website and links to all testimony and Chairman Markey's opening comments (click here). Access a release from Speaker Pelosi (click here). Access a release from NRDC and link to the analysis (click here). [*Energy, *Air, *Climate]