Detroit Stakes Out Political Path

Study Boosts Ethanol As Fuel by Joseph Szczesny (1/30/2006)
Emissions study finds it’s not “negative” on energy.

Bush Takes Ethanol Message on Road by Joseph Szczesny (2/6/2006)
Follow-ups to State of the Union press for break from oil “addiction.”

President George W. Bush seems to have ruled out any kind of a bailout for American carmakers. But that hasn’t stopped the domestic brands from soliciting support for policies related to research and healthcare that bolster their interests.

One aspect of theDetroit policy now coming together was on display during the press previews for the Chicago Auto Show. Ford, General Motors, and even Chrysler talked up ethanol aggressively, as new tax credits and subsidies are being heavily promoted in Washington. Opposition to the proposals in Detroit seems to have melted away in the wake of President Bush’s decision to extol the virtues of ethanol in the State of the Union address.

Executives from Detroit, in fact, spoke cheerfully about governmental support for ethanol and suggested the federal government ought to think about offering even more incentives to convert and develop vehicles for ethanol. Ethanol does seem to have broad political support, uniting agricultural interests, critics of urban sprawl who maintain the U.S. needs to protect and not develop farmland, and national security hawks who loathe transferring more American wealth to the Middle East.

This odd coalition is growing even broader as environmentalists, who were having a hard time deciding whether or not ethanol was a good idea, and deficit hawks, who eventually want to get rid of farm subsidies, are being won over to the idea of running motor vehicles on ethanol and ethanol blends such as E85. Even Mel Martinez, the Republican senator from Florida, could be heard on National Public Radio preaching that the U.S. needed to get serious about using ethanol because he didn’t want oil companies drilling for gas and oil off the coast of Florida.

Subsidies, ho!

Gordon Wangers of AMCI of Oceanside, Calif., suggests that using ethanol as a motor fuel isn’t going to happen unless the federal government steps in directly, probably with subsidies or big tax credits. The reason? There simply aren’t enough ethanol stations in the U.S. to make a dent in the demand for petroleum. The big oil companies, delighted with the profits from petroleum, certainly aren’t about to finance the infrastructure. “Ethanol makes sense for fleets,” says Wangers. “But there is still only one ethanol station in the entire state of California,” he notes.

Carmakers also are making some headway on the other key issue of healthcare, which once again has become a big topic of discussion in Washington. The growing consensus around Detroit now is that the sooner the current system of healthcare delivery collapses, the quicker it will be replaced by some kind of a national system paid for, in one way or another, by the federal government.

Richard Wagoner, GM’s chief executive officer, said last week that the nation’s current healthcare system isn’t working. GM’s decision to cap spending on retiree healthcare, combined with the Bush administration’s desire to hold down the rate of increase in spending by the huge Medicare program, which covers all senior citizens, is bound to put even more pressure on the healthcare delivery system.

In addition, dissatisfaction among senior citizens with the new Medicare drug benefit is leading to talk about the need for changes, including provisions that would force the pharmaceutical companies to offer discounts to the federally backed program. A new “Wal-Mart law” in Maryland , to a similar end, requires companies with a substantial employment base to put aside money for health insurance.

Meanwhile, a new pension bill, written partially with the concerns of the automakers and the United Auto Workers in mind, is now pending in the U.S. Senate. The bill would require companies offering pensions to pay larger premiums for the mandatory fund insurance offered by the Pension Benefit Guaranty Corp., but the full-funding requirements for pensions will be watered down, according to critics of the legislation. The legislation was envisioned as a way to tighten up the accounting requirements around traditional pension funds such as those operated by GM, Ford, and Chrysler.