By on April 23, 2010

With Senator Chuck Grassley (R-IA) already taking the White House and Treasury to task for possibly helping GM avoid paying the “TARP Tax,” Republican representatives Darrell Issa (R-CA) and Lamar Smith (R-TX) are attacking the auto bailout from another angle, writing a letter to nine automaker CEOs requesting clarification of the negotiating process that led to recently-passed final rules on a ramp-up of greenhouse gas (GHG) emissions standards. In their press release on the issue, Issa and Smith note:

It is unclear whether the Administration used leverage created by the possibility of a taxpayer bailout of GM and Chrysler to secure their cooperation and support for new fuel economy standards.  Moreover, there is reason to believe Administration officials used inappropriate tactics to ensure broad based support across the industry. Given the clear conflict-of-interest issues at play, which naturally arise when the government is in a position to pick winners and losers and impact the future viability of private entities, it was imperative that the Administration act with the utmost transparency. Instead, the White House imposed an unprecedented level of secrecy.

Are Issa and Smith on to something, or is this simply a partisan dogpile on an unpopular policy? Hey, this is politics… does it even matter?

Superficially at least, it does seem that Issa and Smith’s fears are well-founded. Negotiations on the emissions-standards bill were held contemporaneously with bailout talks, and the White House announced the deal last May, when both GM and Chrysler were both still in bankruptcy. In theory, it would have been the perfect opportunity to pressure the long-recalcitrant Detroit automakers into accepting an emissions deal that they might have otherwise refused. And with an estimated $52b in costs to the auto industry, Issa and Smith can be forgiven for expecting automakers to put up more of a fight than they did.

On the other hand, the automakers have made it clear that the national emissions deal was actually the lesser of two evils. When California received an EPA waiver allowing its Air Resources Board to increase state emissions standards (which were then adopted by a number of other states), the auto industry was facing the prospect of a multi-state patchwork of emissions standards. And according to the Alliance of Auto Manufacturers’ spokesman Charles Territo, that would have been even worse for automakers than the unification of national standards around California’s more aggressive schedule. Territo tells the DetN:

For years, automakers made no secret of their desire for a national fuel economy/greenhouse program. The regulations finalized earlier this month eliminate the patchwork of conflicting standards and restore federal leadership on this important issue

Moreover, Issa and Smith’s fears are further mitigated by the fact that non-bailed-out automakers like Ford, Honda and Toyota (all AAM members) signed the agreement despite the fact that the White House had no bailout-related leverage over them. The Obama Administration was quick to pick up on this discrepancy, and press secretary Robert Gibbs made it the centerpiece of his defense of the deal, saying:

[Issa and Smith] might have a point if [GM and Chrysler] were the only two companies that were standing behind [President Obama], but Ford has not received any assistance. The notion that you have collectively an industry speaking with one voice and, in this time speaking with a voice for reform, I think that honestly says all you need to hear.

Finally, there’s one more reason to suggest that negotiations involved plenty of give-and-take between officials and automakers: the fact that the new standard is absolutely riddled with loopholes. Had Obama merely strong-armed the automakers, why would he have included such giveaways as the “super credit” which allows super-efficient cars to act as multipliers for overall fleet efficiency?

Unfortunately, even though the evidence suggests that negotiations were above-board (at least by D.C. standards), the White House is lending credence to Issa and Smith’s concerns by refusing to release documents from the negotiations. Their presser states:

According to one participant to these negotiations, the President’s Environment and Energy Czar, Carol Browner, imposed a vow of silence over the negotiations that included representatives from Chrysler and General Motors (GM), the United Autoworkers, and California Air Resources Board Chairman Mary Nichols, and the Environmental Protection Agency.

The White House has steadfastly refused to respond to two previous letters asking whether the Energy and Environment Czar violated the mandates of the Presidential Records Act when she orchestrated the secret negotiations.

Does this sound at all familiar? Thanks to past Democratic attacks on Bush Administration secrecy, and an unwillingness to release documents on GHG/CAFE standard negotiations, the Obama Administration is casting doubt on what would otherwise be a fairly airtight defense of a major policy accomplishment. And that plays into widespread fears of the conflicts of interest that seem to be unavoidable when the government involves itself with industry. Straightforward answers to these, and Senator Grassley’s TARP Tax concerns should be forthcoming if the administration hopes to maintain any credibility as an ethical, neutral actor in the economic recovery.

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21 Comments on “GOP Reps: Did The White House Pressure State-Owned Automakers Into Accepting GHG Standards?...”


  • avatar
    undrgnd40

    when i see articles about fuel economy standards i always wonder why the USA has not offered more diesel powered mid sized cars? if it were up to our news media we should all drive plug in electric cars because electricity is magic and free and comes from an outlet in your garage. as far as the government making new fuel standards, it seems like the same old song and dance of fooling the american public into believing they’re doing something good or worthwhile.

    • 0 avatar
      mythicalprogrammer

      Plug-in technology is own by Chevon, GM sold them patents and all.

      Diesel is heavily regulated by EPA (which also regulate water). The technology to kill those harmful particles Diesel emits is costly.

    • 0 avatar
      psarhjinian

      when i see articles about fuel economy standards i always wonder why the USA has not offered more diesel powered mid sized cars

      The big one is emissions. En-masse diesel emissions would be a health disaster in California, and California buys more cars than any other state. And the states that subscribe to California’s standard also buy lots of cars.

      Meanwhile, the states that haven’t implemented California’s standard don’t buy very many cars at all. If you want more diesels, you need the red states to buy more cars than the blue.

      The other reason is cost: diesel powertrains are expensive to make. A modern TDI is not a whole lot less complex than a hybrid, and isn’t more reliable.

  • avatar
    troonbop

    There would be no need for pressure – it creates a paper trail. Government motors knows what is required and does it.

  • avatar
    DC Bruce

    Two points here. First, I’m not sure I see the problem with the government saying, in effect, you accept a bucketfull of taxpayer dollars, you’ll support us on these standards. To be sure, I’m not a fan of the government bail-out in the first place, but, as they say “in for a dime; in for a dollar.” A real conflict would be if the government exercised its regulatory power in a way that damaged GM or Chrysler’s competitors without harming GM or Chrysler. Kinda like what may be going on with Toyota here.

    The second point is that the government (EPA in this case) has the power to preempt state regulation of emissions entirely, should it choose to exercise that power. The economic reason for doing so is obvious; the political reason for not doing so is equally obvious, so long as California continues to overdose on green pills. (Not to worry, they will soon run out of money.)

  • avatar
    undrgnd40

    ford, honda and toyota already have viable efficient cars that help out their CAFE numbers. They look all that much better by just agreeing with it up front. that still leaves room for the leverage over gm and chrysler theory intact?

  • avatar
    musiccitymafia

    Excellent post. WRT coercion, if the government has GM and Chrysler “agreeing” to the GHG emissions standards then it wouldn’t be too awfully hard to get the others to agree:

    “Oh and by-the-way, you still want a level playing field in which to compete right …. well then we’re asking that you ‘agree’ to the same emissions standards that our two new partners gratiously agreed to … can I offer you another spot of tea?”

    • 0 avatar
      dkulmacz

      As I questioned below, why would the government care if GM and Chrysler — or Ford, Honda, and Toyota for that matter — ‘agreed’ with any new emissions standards? The government passes the regs, and the automakers comply (or don’t). They don’t need GM and Chrysler’s agreement to bully the rest into agreement; rather, they simply bully everyone into compliance via fines and to a lesser extend rhetoric.

      As the only other possible motive I can think of, what possible political hay could the administration make by trumpeting the support of two bankrupt, down-and-out automakers?

      I think it much more likely that GM and Chrysler (and the rest) either honestly agreed with the regulations, or they honestly realized that it was better to get some positive PR for feigning support versus negative PR for showing opposition (yet again).

      Either of those two alternatives are a non-story. I think this whole thing is a non-story.

    • 0 avatar
      musiccitymafia

      Meeting higher standards will cost hard money (theoretically offset by soft savings to society). Manufacturing will bear the brunt of these costs and try to pass them on to consumers. Our government does not simply pass higher standards without weighing the costs and benefits to society. A major stakeholder, the manufacturers, cannot be removed from that discussion. Normally we assume there is a balanced discussion with each side arguing their points. It is our confidence in this process that allows us to conclude that the best all-around decisions will be made. When we sniff-out unbalanced discussions it is our duty to make an issue.

  • avatar
    dkulmacz

    Why would the government need to strong-arm GM and Chrysler into supporting this? Why would they even care?

    With Ford, Toyota, and Honda onboard already, the administration could easily shame them into agreement, or ignore them entirely. Pointing out that stonewalling on fuel economy standards is “old school Big 3″ and “the attitude that drove them bankrupt” would seem to be enough.

    I don’t think there’s a story here.

  • avatar
    Gone4Day

    Politicians paying industry for favors? I though it was suppose to be the other way around. No wonder the GOP is pissed.

    • 0 avatar
      psarhjinian

      It’s been going on in defence, energy and agribusiness for years. Why should automobilia be any different?

      Heck, at least in this case the government vaguely above-board, or at least as above-board as an American government can be when it comes to corporatism, unlike the underhanded pandering that Lockheed or ADM have enjoyed.

  • avatar
    Gunit

    Who cares if they did twist their arm? You don’t think pollution standards are necessary, travel outside the US of A and visit a country without them.

  • avatar
    reclusive_in_nature

    They may strongarm the auto industry into making greener cars, but they still can’t strongarm me into buying them.

  • avatar
    Dr Lemming

    Issa has a long track record of machiavellian hyper-partisanship. I don’t take anything he says at face value.

  • avatar
    porschespeed

    The sad part is that ‘they’ have managed to distract almost everyone from the fact that cars are really a small portion of any emission equation.

    Pick your metric, the automobile is small potatoes when compared to most of industry.

    ‘Tis always easier to regulate the masses rather than the money.

  • avatar
    Bill Wade

    musiccitymafia

    Our government does not simply pass higher standards without weighing the costs and benefits to society.
    ______________________________________________________________________________

    You have got to be kidding.

  • avatar
    John Horner

    “Moreover, Issa and Smith’s fears are further mitigated by the fact that non-bailed-out automakers like Ford, Honda and Toyota (all AAM members) signed the agreement despite the fact that the White House had no bailout-related leverage over them.”

    Well, that does pretty much throw a bucket of ice water on the whole strong armed argument, eh? Nice choice of an ironic photo as well. That is Ford’s guy Obama is shaking hands with, yes?

    BTW, you don’t suppose any Republican administration has ever used strong arm leveraging tactics to get what it wants, do you?

  • avatar
    carguy

    The government “leaning” on automakers to improve GHG emissions? Next they’ll use the EPA to “pressure” coal companies to stop blowing the tops of appalachian mountains and stop polluting rivers. I’m telling you, it’s a government conspiracy! That’s it – I’m putting on a three cornered hat and a funny costume and joining the tea party.


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