Automakers want incentives, not more climate regulations

For U.S. auto companies, 2007 was mostly a year to forget.

Toyota passed General Motors to become the world’s biggest seller of cars, and supplanted Ford as the second-biggest  U.S. seller. Ford last week reported fourth-quarter losses totaling $2.8 billion and announced it would undergo another round of buyouts and early retirements. Chrysler, for its part, saw its German owner give up and sell the third-largest U.S. carmaker to a private equity company in 2007.

{mosads}Things weren’t much better in Washington, where Congress approved an energy bill imposing higher fuel efficiency standards on vehicles for the first time in 30 years   even as tax incentives that might have helped carmakers defray costs to consumers were dropped from the package. Those higher standards impose another burden on the U.S. industry, which has relied on gas-guzzling sport utility vehicles to retain market share.   

While U.S. auto companies grudgingly accepted last year’s energy bill, this year they are hoping to block any new regulations and improve their chances of getting tax breaks. They argue they made major concessions last year that will cost them billions and shouldn’t be punished again by new bills targeting global warming. Instead, they said, other industries should be the focus of climate change measures.

“We do believe we gave at the office,” one auto lobbyist said.

Greg Martin, a Washington spokesman for General Motors, charged that transportation industries are responsible for one-third of the nation’s carbon footprint, with carmakers responsible for 60 percent of that total. “Yet 100 percent of the solution is being borne on this industry’s shoulders,” Martin said.

“The industry that creates one out of 10 jobs in America has signed up for a 30 percent reduction [in greenhouse gases],” said Dave McCurdy, president of the Alliance for Automobile Manufacturers, which represents U.S. and foreign producers.

He and other industry representatives are also targeting legislation promised by Sen. Barbara Boxer (D-Calif.) that would overturn an Environmental Protection Agency (EPA) decision preventing Boxer’s state from imposing tougher vehicle emissions standards. The bill could have a greater impact on reducing greenhouse gases than last year’s energy bill, but McCurdy argues it would lead to a patchwork quilt of state regulations devastating to an industry already trying to do the right thing. {mospagebreak} 

Sen. Debbie Stabenow (D-Mich.), a champion of the U.S. industry, echoes that point. Now that fuel efficiency standards have been set for the auto industry, she said, attention should be turned to other industries that contribute to global warming.

“If we want to have an American auto industry, then we should have one set of regulations,” Stabenow said. She also notes that U.S. automakers already have the burden of meeting the new fuel efficiency standards, which she said would cost those companies $80 billion to meet.

{mosads}However, a Washington representative for the Sierra Club, Ann Mesnikoff, noted that if California’s vehicle emissions standards were imposed, it would result in almost twice the greenhouse reductions that could come as a result of the energy bill. While last year’s energy bill was a major victory, she notes that it is the first time new standards have been approved in decades, suggesting more could be done.

Stabenow, backed by the auto industry, is pressing for various tax provisions, some of which could find themselves in the economic stimulus bill now being debated, that would help the U.S. industry modernize its manufacturing plants. As policymakers worry about the threat of a recession, they argue that industries already experiencing the downturn deserve help.

“When there’s any kind of bump in the economy, the auto industry and heavy manufacturing often feel it first, longest and hardest,” said Ziad O’Jakli, group vice president for government and community relations for Ford.

Stabenow will soon unveil a “green-collar jobs” initiative intended to jump-start the production of battery technologies for plug-in hybrid and long-range electric vehicles, and to provide funds for research into the next generation of battery technology. She’s calling for Congress to approve a $500 million investment in battery technology, which she told reporters last week could be included in a second economic stimulus bill later this year.

Martin, the General Motors spokesman, said such technology investments would “benefit the U.S. industry and the economy as a whole.”

Mesnikoff said investments in such technologies are reasonable since they could help the auto industry re-tool itself. The question for lawmakers, she said, is what taxpayers actually get for that hefty investment.

Overall, Stabenow is hoping to secure $6 billion to $7 billion for her initiative, which would also provide $5 billion to modernize old plants and hundreds of millions to re-train Michigan workers.

The stimulus bill House leaders agreed to last week could also benefit U.S. carmakers, since consumers could use tax rebates as down payments on new cars. But automakers also want additional incentives that could provide more direct help.

One industry source suggested companies could be granted the ability to use research and development tax credits that are unusable today because the Big Three automakers have losses and are not paying taxes. Just as workers who don’t earn enough to pay income taxes are getting rebate checks, manufacturers who are not paying taxes could get the ability to use tax credits, with the requirement that they be targeted for research and development and not executive salaries.

Stabenow voted against last year’s energy bill after tax incentives for the auto industry, which could be resurrected this year, were dropped from it. “What I saw was no help, but massive regulation,” said Stabenow, who characterized her stand against a measure supported by Democratic leaders as a protest vote.