No loans for car makers while they oppose CO2 legislation

Editorial by Dudley Curtis

This is the industry that has spent two decades opposing legislation on cleaner cars and now says it wants a cheap loan so it can build them.

The audacity is breathtaking. In 1998 Europe’s car makers signed a voluntary agreement to improve fuel efficiency.

It failed (by a long way) because there were no penalties for non-compliance and no requirement to publicly report progress of individual companies.  It’s now clear the makers did develop the technology to meet the target, they just didn’t introduce it across their model ranges, yet they are still not embracing the need for fuel efficiency.

In fact they are now campaigning hard to weaken the proposed obligatory CO2 targets and the corresponding penalties for non-compliance.

The figure of €40bn is also arbitrary. The US government recently agreed a loan of $25bn to the American car industry, and Europe’s automotive umbrella Acea merely calculated that Europe has twice as much car manufacturing so should have twice the sum, hence €40bn. And this would be in addition to the millions of euros of public money that the global car industry has received in the form of subsidies and research grants, with little or no public scrutiny of the results.

This is surely no deserving case for a taxpayer-backed loan from Europe’s governments. And yet the car industry seems to be persuading senior figures in the Commission that they should get at least something.

The car makers’ argument is that if the world’s governments can put several hundred billion euros into rescuing the banks, and banking employs a lot fewer people than the automotive industry, might there perhaps be some justification for a loan to the car makers?

The parallel with the banks is interesting. Public money for banks has come with preconditions, the main one being representation for the public in the governing structure of the banks, effectively giving the taxpayer a say in how the banks are run.  Why not do the same for car makers? When the US government rescued Chrysler in 1980, it required major concessions, including an end to developing fuel-inefficient rear-wheel-drive cars, an equity interest in the firm, and selling its corporate jets.

So what could be given in return for a loan to Europe’s car makers? Possibly representation on the board so, for example, the case against developing SUVs can be heard.

There may be other options, but one thing should be clear. A loan should not even be on the table for discussion until car makers have dropped all opposition to the car fuel efficiency legislation and accepted the Commission’s terms. This means accepting that the industry as a whole must achieve a fleet average of no more than 130 g/km by 2012 – no phasing-in, no ‘eco-innovations’ to farm out obligations to other means.

This is not just for environmental reasons but for economic ones too – after all, a cheap loan to prop up the unsustainable business model of selling heavy, inefficient cars with the 100-year-old technology of the internal combustion engine looks a very bad risk.