Killing Detroit


While still holding "president-elect" status, Barack Obama embraced handing Detroit automakers billions of dollars, calling the corporate bailout "necessary."

At a Chicago news conference in December, Mr. Obama said, "With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together, including labor, dealers, creditors and suppliers, to make the hard choices necessary to achieve long-term viability."

But on Monday, less than a week after being sworn as president, Mr. Obama issued a series of directives that have the potential to hasten the demise of a domestic industry already battling just to make it through spring.

Under the guise of reducing America's dependence on foreign oil -- and in a sop to the green lobby -- the new president ordered the EPA to essentially embrace California's effort to impose Draconian emission standards on new vehicles sold in the state. In addition, Mr. Obama ordered new federal bureaucrats to craft guidelines for implementing tougher fuel efficiency standards on vehicles sold beginning in 2011.

These moves do not come free of costs. At the same time Mr. Obama was placating the environmental crowd, General Motors was announcing that it will cut 2,000 jobs at plants in Michigan and Ohio and will halt production for several weeks at nine U.S. sites over the next six months due to slow sales.

Of course, those cuts weren't directly related to Mr. Obama's Monday pronouncements. But they highlight the fragile condition of America's domestic auto industry. Forcing companies to meet even more Washington mandates will cost the automakers billions of dollars -- money they couldn't afford to spend today even if they actually had it.

An industry trade group noted last year that the new standards are not "economically practical" and "would require manufacturers to expend resources at a pace that is excessive given the fact that the auto industry is already under economic stress."

The Bush administration estimated the cost of these new regulations at $100 billion.

Many critics will highlight management missteps to explain the demise of the Big Three. Fair enough. Yet increasing the bureaucratic weight under which these once-mighty manufacturers must operate doesn't help.

Mr. Obama said Monday that he isn't trying to "further burden an already struggling industry." But that's precisely what he's done.

 

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