Why the Automakers Won't Make Fuel-Efficient Cars, Even as the Price of Being Bailed Out

by Robert Reich

Telling automakers to make more fuel-efficient cars as a condition of being bailed out is like telling Citigroup or any other big bank to issue more affordable loans to Main Street as a condition of being bailed out. It won't happen. Conditions like these make the public feel better about using their tax dollars to bail out private firms, but they're useless. Automakers, like the big banks, will do the minimum required, and you can bet their lawyers and lobbyists will find ever more clever ways of avoiding even that minimum. Without lots of buyers who want fuel-efficient cars, automakers won't produce them, period. (Without credit-worthy borrows able and willing to pay the costs of bank loans, they won't be issued, either.)

You might think that the recent memories of $5-a-gallon gas would transform nearly everyone into prospective buyers of hybrids that get more than 30 miles a gallon. Think again. Consumer memories are dreadfully short. With gas prices settling down to half that sum, buyers (to the extent they still exist in this recession) are moving back to SUVs and pickup trucks, which automakers are all too happy to provide given the larger profits that come with gas-guzzlers. We're witnessing a repeat of what occurred immediately after the oil crises of the 1970s. As soon as cheap gas was readily available, consumers who had said they wanted fuel efficiency went back to their old ways -- and so did the Big Three.

 

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