Editorial: Between The Lines: Barack Obama's Shot Across Detroit's Bow

Senator and president-elect Barack Obama held his first post-election press conference on Friday– the same day that Ford and GM revealed their respective arterial sprays of red ink and third degree cash burns. Rather than highlight those stats and go for the close, bailoutwise, Obama played his political cards close to his chest. The exact text of his remarks are extremely revealing, in that politicians don’t really reveal anything unless they absolutely have to kinda way. “The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.” Translation?

Obama’s opening salvo reveals that America’s next President expects Detroit to stop messing with Democratic promises to improve America’s vehicular fuel efficiency, buckle down and build fuel sippers.

The implication doesn’t exactly plow new political ground. Lest we forget, Detroit and Washington have been at loggerheads regarding Corporate Average Fuel Economy (CAFE) regulations since they were first introduced in 1975. For CAFE’s most recent update, Motown [once again] lobbied Democrats to keep the standards as low as possible, then cried poverty when it was clear they’d lost the fight. The Department of Energy loans were designed to assuage Motown’s sore-headed losers by providing access to $25b to do what they’re legally obliged to do.

Bottom line: any new federal money for The Big 2.8 will come with the same old strings attached. In case you missed the point…

“I would like to see the Administration do everything they can to accelerate the retooling assistance that Congress has already enacted.”

Retooling = building more fuel-efficient cars. As TTAC has highlighted, federal foot-dragging is not Detroit’s enemy. The regs for the $25b Department of Energy loans have been written with unprecedented haste. In fact, they’re more or less done. The more part is that they’re done.

The less part is that Detroit can’t use the money for anything other than which it was intended (fuel efficient cars not corporate liquidity). What’s worse, GM, Ford and Chrysler don’t qualify under strictures regarding financial viability. Obama’s message was code: tacit clearance for Congress, the DOE, President Bush, someone, anyone to pervert the legislation’s original intent and current restrictions.

Does Barack Obama know that the situation is well beyond retooling? If he does, he ain’t admitting it. And if he doesn’t, his economic advisers might want to write a memo on that one. STAT.

“In addition, I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States.”

Weather the economic crisis. Now that’s what Detroit’s talking about! The first part of the statement is a not-so-clear signal to Motown (plausible deniability rules) that financial assistance will arrive via the Troubled Asset Relief Program, another economic relief stimulus bailout pork barrel package, and whatever clever shit the Obama administration and Congress can devise (tax credits for loan interest, etc.). But the second part of that statement… again with the fuel-efficient cars.

Clearly, Obama doesn’t want to be seen using taxpayer money to help Detroit build more SUVs, pickup trucks or automotive gas guzzlers. Which puts Motown in even more of a bind than before. Before, they could meet CAFE regs by balancing production of small, relatively fuel-efficient, uncompetitive, unprofitable small cars with sales of large, gas-guzzling, competitive, profitable trucks. Reading between the lines, Obama’s not going to let one red cent of public money sustain that mix.

So Detroit’s being painted into a corner: build competitive, fuel-efficient cars or fuck off and die. But what are the chances that GM can build these fuel-efficient machines and sell them in enough quantity at enough of a profit to make enough money to pay off their existing loans PLUS the federal assistance? Teen-tiny. Ford. Slim. Chrysler. None.

“I have asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.”

Translation: Obama is not throwing the weight of his political victory– assured in no small part thanks to Motown/UAW-friendly states– behind a wider Detroit bailout (under some sort of new economic stimulus passage). Not yet.

For Detroit, that’s an industrial-size mixing bowl of not good. Without Obama’s unqualified support, and soon, they’ve got a real PR mountain to climb. On a more general level, the same “lack of urgency” that put GM, Ford and Chrysler where they are today could ruin their chances in the political sphere. If so, it’s game over.