The Next Bailout: Handouts or Hybrids?

So another irresponsible industry is in deep trouble and wants a government bailout. This time, it's the auto industry. General Motors is literally worth nothing [1], according to Deutsche Bank, and needs "external government intervention" to survive. Ford and Chrysler [2] are in sorry shape as well.

The disastrous turn of events follows decades of automakers successfully resisting proposals to strengthen government regulation, raise fuel-efficiency standards and ensure that America would build the cars of the future.

Already this year [3], Congress has provided $25 billion in loans that U.S. manufacturers can only use to make cars that are at least 25% more efficient than their previous models. That's a nudge, not the transformation we need [3] to rapidly move towards a clean energy economy.

Such irresponsibility shouldn't be rewarded, but exploited. With the auto industry in dire straits, we taxpayers have maximum leverage to demand the cars necessary to help lower energy costs, cut carbon emissions and reduce our dependency on foreign oil.

HybridsCars.com rightly calls for a "New Deal For Green Cars:" [4]

The potential Detroit bailout is a once-in-a-lifetime crisis turned opportunity. A grand bargain is in the works: the federal government provides billions of dollars to the automakers, and in exchange, the automakers must retool to produce high-mpg gasoline cars, gas-electric vehicles, clean diesel cars, plug-in hybrids, and all-electric cars.

Al Gore's recent New York Times op-ed [5] lays out the importance of a green car fleet by linking it to a new energy-efficient "smart electric grid:"

...we should begin the planning and construction of a unified national smart grid for the transport of renewable electricity from the rural places where it is mostly generated to the cities where it is mostly used. New high-voltage, low-loss underground lines can be designed with “smart” features that provide consumers with sophisticated information and easy-to-use tools for conserving electricity, eliminating inefficiency and reducing their energy bills. The cost of this modern grid — $400 billion over 10 years [or, $40 billion annually] — pales in comparison with the annual loss to American business of $120 billion due to the cascading failures that are endemic to our current balkanized and antiquated electricity lines.

[Also,] we should help America’s automobile industry (not only the Big Three but the innovative new startup companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available as the rest of this plan matures. In combination with the unified grid, a nationwide fleet of plug-in hybrids would also help to solve the problem of electricity storage. Think about it: with this sort of grid, cars could be charged during off-peak energy-use hours; during peak hours, when fewer cars are on the road, they could contribute their electricity back into the national grid.

That's huge savings -- not just in energy use and carbon emissions, but in cold hard cash.

President-Elect Barack Obama has tied his support for assisting automakers to our clean energy needs [6], saying in Friday's press conference: "The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil." But in these early days of presidential transition, he has not yet announced support for a specific plan.

Automobile manufacturers desperately need help to survive. Americans need a rapid transition to a clean energy economy to survive.

Help for one must come with help for us all. That's the only responsible thing to do.

UPDATE: The Wonk Room's Pat Garofalo writes: [7]

If the auto industry bailout occurs, two things need to happen. First, it needs to have much stronger oversight than the bank bailout did. As CQ noted, “reports continue to circulate [8] about the banks potentially hoarding portions of the $250 billion Treasury has offered to invest in exchange for senior preferred stock, or using the money for purposes other than lending.” Sen. Chris Dodd (D-CT) pointed out, “That was never the intent [9]; that’s an abusive use of taxpayer money.”

More importantly though - as Pelosi and Reid said - “federal aid should come with ’strong conditions,’ such as requirements that car makers build more fuel-efficient vehicles.”

UPDATE 2: Joseph Romm at Climate Progress adds: [10]

The Detroit deal has to be not just meeting the new fuel economy standards, but meeting them increasingly with hybrids. The deal has to be multiple plug in hybrids car models. And most important, the deal has to be a new management team that is wholly committed to that green inevitable transition, a team that will not waste a penny of the taxpayer-funded bailout lobbying against the even tougher standards and regulations that will be needed to avoid the harsh consequences of catastrophic global warming and peak oil.

And Huffington Post's Laurie David weighs in: [11]

If Detroit needs more taxpayer bailouts to survive, we ought to demand some serious and real concessions in return, starting with an immediate cease-and-desist order for Detroit to drop its lawsuits against California, Vermont, Rhode Island, New Mexico and any other state that passes clean cars legislation requiring more efficient, less polluting vehicles. Enough already, Detroit. Stop fighting and start building clean cars now.

Congress should set strict guidelines to ensure that Detroit moves as quickly as possible to get clean cars into American driveways where they can help power a new smart grid like the one Al Gore described in Sunday's New York Times. Congress should also open the process beyond the Big 3, offering financial support to smaller entrepreneurial carmakers for large-scale production of their innovative all-electric and plug-in hybrid prototypes which lack financing to move from the concept contests and into dealer showrooms and consumer hands.