From an article in USA Today:
Carmakers lean toward higher gas tax to fuel small-car sales
Well isn’t that just special!
For the two of you are are still wondering whether bailing out the Big 3 was a good or bad thing, wonder no more.
The govt. has become a significant shareholder of GM, Chrysler and soon to be Ford. Those stakes are likely to be dramatically increased once Obama et. al. send another $12 – $18 billion their direction. Don’t forget that as a part of the Big 3 bailout the Govt. gets to have an auto Tsar oversee and approve all kinds of activity of the Big 3 including how focused they are at loving Mother Earth and ostensibly whether they will make any money.
It’s well known that the Big 3 make most, if not all of their profit (well, if they make any profit at all), on large vehicles; trucks, SUV, large sedans. The smaller the car, generally, the less money they make. In fact, the Prius is still believed by many auto experts not to produce any profit at all.
It seems like the Big 3 are left between the proverbial rock and hard place. On one hand they need to deliver a plan that shows they can be profitable. On the other hand, in order to show their lover for Mother Earth and meet CAFE standards they need to find a way to sell more small cars, where they make less money. How do they achieve both? Simple!
The Obama administration will have to show that all the money they will pump into the auto companies has at least the facade of returning to profitability. They also want lots more Green cars made and sold. The magical part of this equation is that the Obama administration will soon be the most influential shareholder of the Big 3 and through gas taxes, have the ability to dictate higher gas prices thus driving consumers to smaller vehicles in a way that normal market factors can not.
As an added consumer benefit, as demand for the smaller vehicles is driven by higher gas prices the price of the smaller vehicles will increase as well. While this is counter to normal market forces you’ll need to remember that govt. induced decisions are not normal market forces. Don’t believe me? They say it themselves:
Automakers want to be able to charge premium prices for their smaller cars to make up for profits lost when sales of high-margin trucks fell off a cliff. They also must cover the cost of fuel-economy-related hardware and materials needed to meet federal rules "” as much as $1,000 a car.
Free markets provide the most options for the lowest price. In contrast, government intervened markets give you all kinds of perversions in both options and pricing.
Perversions used to be exception and something that “nice folks” tended to avoid. With the ever expanding hand of government influencing markets of all kinds it looks like you’ll need to be perverse to avoid being compromised in the governments perversions.
