Editor's note: This article appeared in the September 24, 2008, edition of Quirk's e-newsletter.
The domestic auto industry is the subject of much recent rhetoric by the presumptive presidential candidates. Both candidates now say they will back domestic automakers with loan guarantees to help the industry restructure, support "cap and trade" programs to reduce carbon emissions, develop new energy sources and fund the development of green vehicles. But their platforms diverge sharply where the rubber meets the road, according to analysis by CSM Worldwide, a Detroit automotive forecasting firm.
Sen. Obama has outlined an aggressive approach to improving fuel economy: doubling fuel economy standards within 18 years; increasing fuel economy standards by 4 percent per year; partnering with the domestic automakers by offering $4 billion in retooling tax credits and loan guarantees; and allowing $25 billion in low-interest loans authorized - but not funded - by Congress last year under the Advanced Technology Vehicles Manufacturing Program. Consumers, meanwhile, will be able to claim a tax credit of up to $7,000 for purchasing advanced technology vehicles. Inside the Obama plan is a proposal to make the entire U.S. vehicle fleet flex-fuel-capable and put one million plug-in hybrids on the road by 2015.
In contrast to Sen. Obama, Sen. McCain is on the record stating that he will enforce existing CAFE standards and raise fines and penalties for non-compliance - fines routinely paid by automakers like BMW, Porsche and Daimler. McCain's campaign is calling for Congress to fund the Advanced Technology Vehicles Manufacturing Program; a 10 percent research and development tax credit; a $300 million prize for the American automaker that delivers a technology package that would allow for commercialization of plug-ins and zero-emissions vehicle technology; and incentives of up to $5,000 to encourage consumers to buy green vehicles. Sen. McCain also has called on automakers to accelerate the introduction of flex-fuel vehicles that can run on ethanol. At the same time, he proposes eliminating mandates, subsidies, tariffs and price supports that focus exclusively on corn-based ethanol.
Regardless of which candidate wins the election in November, CSM predicts higher vehicle prices and lower industry volumes due to the cost of complying with today's fuel economy regulations. This reality may be what prompted Sen. McCain to reconsider loan guarantees for Detroit, and it may eventually lead Sen. Obama to scale back his calls for a technology revolution, or at least offer more assistance to achieve it.