Then-Candidate Obama Checks Out New Jeep

Unlike most other industries, automaking has one firm that was once the largest in America and another once third largest perched at the precipice of bankruptcy. Ford is a small step back from the brink only because it mortgaged itself to the hilt (and Blue Oval). What’s more, these firms are at the apex of a supply chain and matrix of jobs that is broader and deeper than any other in the country. One thing the Obama administration brings is a more sympathetic ear to the employment ramifications of decisions affecting the industry. Politicians of all stripes talk about jobs like Mom and apple pie. But Democrats are more likely to protect workers tangibly and directly, as opposed to mainly touting the trickle-down benefits of bailing out bankers and Wall Street. For America’s home-grown automakers, that means a better chance at ongoing life support, or at least a kinder, gentler glide path to business structures more in line with sustainable market shares.

New car sales have long been a key barometer of the economy. While it’s not clear that boosting auto sales in particular is a good way to boost the economy in general, it is clear that restoring overall economic health is crucial for getting car sales back in gear. The Obama folks are making economic recovery Job One. Promising a stimulus package of massive proportions and enjoying the backing of congressional leadership, Obama’s ability to quickly push it through is sine qua non for whatever else might need to be done to reinvigorate Detroit.

The greening of Detroit

That brings us to some of the other ideas and the “green” ones in particular. During his May 2007 tough love speech before the Detroit Economic Club, candidate Obama called for higher Corporate Average Fuel Economy (CAFE) standards as being in everyone’s best interest. He chided automakers for “spending millions to prevent the very reform that could’ve saved their industry.” Well, stronger CAFE standards — long backed by environmentalists (including yours truly) — are now a done deal, thanks in part to none other than George W. Bush.

Who would have thought that a traditionally business-friendly regime would push for stronger regulation? That’s one history lesson to ponder when evaluating what candidates promise — or even don’t promise — against what’s actually going to happen. CAFE was created under Gerald Ford, Republican of Michigan. While the regulations were largely flat (aside from a temporary rollback) under Reagan and Bush pere, the largest increases since the 1970s came under latter-day GOP leader Bush fils.

Clinton ran on a pro-environment platform that included raising CAFE to 40 mpg. But less than a year after taking office, a fuel economy proposal was conspicuous by its absence when the Clinton team announced its climate plan. That Democratic administration instead launched a “supercar” research program, aiding Detroit R&D to the tune of a billion dollars over the course of eight years. Detroit delivered some fancy 80 mpg show cars in 2000, but new car and light truck fleets were burning more fuel per mile by time Bush fils took office than they were when Bush pere left.

One thing this all proves is that auto politics is far more parochial than it is partisan. Another is that when the temperature rises on energy issues, Detroit is one of the first targets in politicians’ cross-hairs. Not inappropriately, mind you, but auto efficiency regulation is far from a complete energy strategy.

The Obama Administration is for now spared any new big decisions on CAFE. Even though Bush dropped the ball on a new fuel economy rule that was all but finalized before the Motown meltdown, the parameters of that rule are largely set. No one is expecting big changes as the new team scrambles to finalize it before the April 1 deadline. Indeed, automakers bemoan the delay because they’d rather have the planning certainty. What’s less certain is how much the new administration will push the issue as time goes on.

Making pledges

There are several other car-connected pledges to watch. One is the promise to put a million plug-in hybrids on the road by 2015. The plan also includes a new $7,000 tax credit for advanced vehicles. Harking from Illinois, Obama is also a supporter of ethanol.

The big question around plug-in cars and ethanol is that making such options workable, affordable and environmentally beneficial on a large scale is far more daunting than any political obstacle to spending taxpayer money to subsidize them. The track record for such “promise and spend” adventures in winner picking isn’t a pretty one.

Obama also pledged to enact an economy-wide cap-and-trade program to “reduce greenhouse gas emissions 80 percent by 2050.” A similar policy has been backed by John McCain. From an automotive perspective, what’s notable about a carbon cap is that it spreads the regulatory burden across sectors — to the petroleum industry in particular — rather than leaving car companies with the lion’s share of heavy lifting.

General Motors, Ford and Chrysler (then still DaimlerChrysler, along with Toyota and the UAW) publicly embraced cap-and-trade at a congressional hearing back in March 2007. Some derided Detroit’s new-found love of the planet as a ploy to avoid CAFE (it didn’t work). Nevertheless, they’ve stuck by that stance even though any major climate policy is likely to ratify federal oversight in the form of higher car standards for years to come.

A boost to Obama’s prospects on this score is last week’s call by the U.S. Climate Action Partnership (USCAP), which includes the Detroit Three, for rapid enactment of climate legislation even in spite of the economic recession. (By way of disclosure, in his day job at the Environmental Defense Fund, this writer spent much of the past two years helping staff negotiations with the three automakers, three oil companies and the array of other interests comprising USCAP.)

All in all, the incoming administration doesn’t seem likely to be as hard on automakers as the last one. While the Obama team has signaled its intent to be more active with both carrots and sticks, the question that looms largest is whether any policy can hasten recovery enough to enable life beyond bridge loans. If so, a more coherent and sustainable energy policy could be in the offing. But if history is any guide as far as auto policy is concerned, the only thing to count on is to “expect the unexpected.”