Automakers Love and Hate Government Role

The U.S. auto industry traditionally hates and resents government regulation – unless, of course it benefits the industry.

If Ford, GM and Chrysler win a government bailout, the victory is going to be more bitter than sweet.

Take a look at just a few of the bullet points in an open letter Congressional Democrats – theoretically the allies of the Detroit automakers – sent the car companies on Nov. 21. The letter says that to pass muster with Congress, recovery plans from the automakers must:

• ”Provide a forthright, documented assessment of the auto companies’ current operating cash position, short-term liquidity needs to continue operations as a going-concern, and how they will meet the financing needs associated with the plan to ensure the companies’ long-term viability as they retool for the future;

• ”Provide varying estimates of the terms of the loan requested with varying assumptions including that of automobile sales at current rates, at slightly improved rates, and at worse rates;

• ”Bar the payment of dividends and excessive executive compensation, including bonuses and golden parachutes by companies receiving taxpayer assistance;

• ”Provide for specific measures designed to ensure transparency and accountability, including regular reporting to, and information-sharing with, any federal government oversight mechanisms established to safeguard taxpayer investments.”

That last one will be particularly galling to Chrysler’s parent company, privately held Cerberus, which until now has done its best to stiff-arm nosy reporters and Wall Street analysts. A few months ago, Chrysler demoted the importance of its public relations operation and put it under the control of its human resources department.

If it wasn’t for the fact that Daimler still owns 20 percent of Chrysler, there would be even less public information about Chrysler than there is. A lot of the Cerberus investor relations effort, such as it is, is devoted to disputing Daimler’s accounting for its share of Chrysler.

The idea that the government is demanding transparency must be a nightmare for Cerberus. The U.S. auto industry has a long history of wanting it both ways – government benefits, without government interference.

As much as industry executives complain about gas-mileage mandates, emissions controls and safety regulations, they don’t complain about the so-called “Chicken Tax,” a 25-percent tariff on imported trucks, which has benefited U.S. automakers since the 1960s.

Ironically, the Chicken Tax in the long run is one reason why Ford, GM and Chrysler have such a dominating market share in trucks. That’s come back to haunt them now that trucks are out of fashion.

The original beef behind the Chicken Tax, so to speak, was a trade dispute with Europe, which put a tariff on U.S. agricultural products, like chicken. In retaliation, the U.S. government put a tariff on imported trucks. At the time, the tariff was aimed more or less squarely at Volkswagen. Back then imported vehicles from Europe, not Japan, were seen as the big competitive threat.

To this day, the 25-percent tariff helps make imported trucks uncompetitive. Another unintended consequence is that import brands like Toyota built factories in North America, which in the long run made them even more formidable competitors.

No telling what the unintended consequences of the current bailout could be – if it passes, which looks doubtful at this point.