Honda exec red-flags Detroit 3 aid

WASHINGTON — A proposal that would give tax credits to the Detroit 3 for researching fuel-saving technology — even if they don't have taxable income — is “covert protectionism,” a top Honda executive says.

“It creates a very unlevel playing field” for import-brand automakers, said John Mendel, executive vice president of American Honda Motor Co.

Contrary to common assumptions, Mendel said, the Japanese government does not subsidize Honda research. U.S. incentives for energy-saving technology should be available to all automakers, “not just a few,” he told Automotive News.

Industry help?

The tax credit proposal is part of legislation introduced last month by U.S. Rep. Joe Knollenberg, R-Mich. The eight-term congressman, who faces a serious re-election test this year in his suburban Detroit district, says his bill would stimulate Michigan's economy and help the auto industry meet tougher federal fuel economy standards.

The bill estimates that the Detroit 3 will increase r&d spending by $7 billion a year to meet the new standards. The federal r&d tax credit is 20 percent of new spending, Knollenberg spokesman Nate Bailey says. Normally, money-losing companies can't collect the credit.

The bill's chances appear slim. Democrats who control Congress likely would not be eager to advance the proposal, even if Knollenberg had proposed a way to pay for it.

But the issue could move to the front burner next year. Both of the leading Democratic presidential contenders, Sens. Barack Obama of Illinois and Hillary Clinton of New York, have offered campaign proposals that would provide special financial aid for what they call “domestic” carmakers.

Clinton's energy plan includes $20 billion in “green vehicle bonds.” They would help companies retool to build more fuel-efficient cars and trucks and provide a tax credit for employee health and pension costs.

Obama advocates “retooling tax credits and loan guarantees for domestic auto plants and parts manufacturers.”

Tough challenge

Both candidates favor fuel economy standards that are even higher than those enacted by Congress last year. The new law requires cars and trucks to average 35 mpg by 2020, about 40 percent higher than today.

Honda's Mendel said all automakers will be challenged to meet the higher standards.

He warned against the increased risk of “covert protectionism” during a May 1 session of the International Auto Industry Summit, organized in Washington by the American International Automobile Dealers Association. Said Mendel: “We've got to keep our eyes open.” 

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