Government Killing GM
by Alan Caruba
Issue 136 - July 22, 2009

Growing up as a teenager in the 1950s, I could not wait to get my license to drive and I liked the sporty look of the British MG. These days I drive a Volkswagen. In that short tale can be found the seeds of the end of the American auto industry.

Here’s some history. In 1952, the merger of several British auto companies resulted in the British Motor Corporation. It was the largest of its day with 39% of British output. Despite established dealerships for the various models, a series of poor management decisions resulted in the loss of market share.

By 1968, British Leyland was formed out of British Motor Corporation and became British Leyland Motor Corporation Ltd. The 1970s were difficult economic times for the United Kingdom and its Labor government (1974-1979). In 1975, it was partially nationalized and the government became a holding company with the government as the major shareholder. At that point British Leyland employed 159,000 people in its many divisions that included a bus and truck operation.

UK market share barely changed and despite brands such as Jaguar, Rover and Land Rover, the government motor company continued its decline.

In 1984, Jaguar Cars became independent once more through a public sale of its shares, but the Leyland truck and bus operation was sold to Volvo in 1988. The Rover Group was sold by the government to British Aerospace that in turn sold it to BMW. By 2005, the MG Rover Group went bankrupt, bringing to an end the production by British owned companies. The MG became part of Chinese Nanjing Automobile. Today, the British auto industry is now largely owned by companies in other nations or operating as a mere shadow of its former self. The government could not save a failing industry.

Anyone who thinks that the American Government will do any better with General Motors is very wrong. At a minimum, as Larry Kudlow, the radio-TV business maven, put it, “Taxpayers won’t get their money back.” That figure already stands at $50 billion.

Both GM and Chrysler should have been allowed to go into bankruptcy months ago, but the U.S. Government in its infinite wisdom has thrown our money down a rat hole created by bad management and excessive labor union demands over the past four decades. Meanwhile, as was the case in the UK, Chrysler is now owned by an Italian auto manufacturer.

The U.S. government now owns GM, AIG an insurance company, and billions in housing mortgages through the government entities of Freddie Mac and Fanny Mae. Kudlow emphasized this is hundreds of billions more “of taxpayer dollars that will never be repaid.”

That news is bad enough, but consider now that the U.S. government has just increased the standards of how much mileage must be achieved from a gallon of gasoline at the very same time it demands that more of that gasoline be mixed with ethanol. Ethanol reduces mileage. President Obama has already made clear that he wants GM to manufacture “green” automobiles. No one will buy them.

The Telegraph, a British newspaper, recently did the math on the price of “green” cars, noting that the present UK models cost $5,000 more than a regular auto. “To benefit from the difference in fuel efficiency, you would have to drive 198,000 miles, the equivalent of driving around the world eight times.” The same will apply to comparable American-made “green” cars.

Here in America, the biofuels industry receives a 45 cent tax credit for every gallon of ethanol or biodiesel it produces or about $3 billion a year. The US government requires that 10% of all gasoline be blended with these biofuels whether consumers want it or not. This mandate is scheduled to double by 2015.

Not only will the automobiles cost more and get less mileage per gallon, but the Congressional Budget Office last month reported that “the increased use of ethanol accounted for about 10% to 15% of the rise in food prices.” That’s because the main ingredient of ethanol is corn. That is insane.

At the same time, the government refuses to permit exploration and extraction of known oil reserves in the nation’s interior and off its continental coastal shelf despite estimates of literally billions of barrels of untapped oil.

There is one, single reason why we can’t get at those oil and natural gas reserves, as well as being denied access to the massive amounts of U.S. coal reserves. It is the environmental organizations that maintain a campaign against energy use in the nation. The government is to blame, of course, but you can thank Greenpeace USA, Friends of the Earth, the Sierra Club, the Environmental Defense Fund, and the United Nations Environmental Program, among countless others that have fought against any and all development, any and all economic expansion and growth.

This campaign is coming to a head with a “Cap-and-Trade” bill making its way through Congress that would impose a huge tax on “greenhouse gas emissions” by every industry and business that produces or uses energy. It has no scientific justification. Even the Environmental Protection Agency’s Office of Transportation and Air Quality has released a study demonstrating that the reduction of CO2 emissions would be minimal at best, but such reductions are absurd because there is no global warming.

Reducing greenhouse gas emissions in the midst of a historic economic crisis, at a time when such emissions will continue in other nations around the world, and when such emissions are known to have no effect whatever on a totally bogus “global warming” or “climate change” is a program for national suicide.

Government control of the auto industry is now merely a prelude to its eventual end. Jobs will disappear forever. “Green jobs” are a myth. The economy will suffer a grievous loss. And, if you draw the lessons from the British experiment, you can accurately predict the future of our auto industry.

Alan Caruba writes a daily blog at http://factsnotfantasy.blogspot.com.