Government loans have strings attached...may be more like rope or cable

For sure, the Detroit 3 and their suppliers could use some cheap cash. Their cost of capital is through the roof, and they face massive investment in new fuel-efficient technologies and vehicles or the world will leave them behind. So $25 billion or $50 billion of federal loans at 5 percent COULD be a savior and a great investment.

Could be.

The problem with the plan included in the energy bill: the string attached. Actually, it's more of a rope. A cable even.

In Washington, where they can mandate things, it seems so simple. The taxpayers will subsidize automotive investment FOR CARS THAT BEAT THEIR COMPETITORS BY 25 PERCENT IN FUEL ECONOMY! And the subsidized loan can cover a third of the investment. In Congress, that's a good day's work. Let's go home now.

But imagine you're the automaker. What one vehicle can do this? Maybe your first plug-in hybrid qualifies. Or maybe not. But you've got a whole suite of technologies -- injection systems, diesels, transmissions, a range of hybridization, light-weight materials -- that can improve fuel economy by 2 percent 5 percent or even 10 percent each. You can use them judiciously across a range of vehicles and reduce fuel consumption a bunch.

Sorry, Rick, Bob and Alan: Those don't qualify.

The regulation of this program alone would be a nightmare. Who decides? The number of regulators needed -- particularly the number of regulators who have a clue -- is mind-boggling.

Remember the Clinton administration's Partnership for a New Generation of Vehicles? The government helped the Detroit 3 (they were still the Big 3 then) cobble together various fuel-economy technologies into display cars that could in theory get 40 miles per gallon. Did it actually speed up the commercialization of any of those technologies? Unclear.

The string attached to the government loans needs to be performance-based, not hope-based. Actions that will quickly improve fuel economy -- and thus the competitiveness of the automaker -- deserve taxpayer support. They would be an investment that will pay off many times over. But a standard that will subsidize only moonshots will do about as much good as PNGV.

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.