Is the GOP Good for Detroit?
Midterm elections could signal changed industry outlook.
With Republicans rolling through midterm elections on their way to regaining the House and restoring some of their political clout, the reversal of political fortunes has raised many questions -- but I haven't heard the one I'm interested in. What does this mean for the auto industry? Considering the bailout and rescue of GM and Chrysler, the Democrats might seem to be Detroit’s bosom buddy. But David Cole, director of the Center for Automotive Research in Ann Arbor, Mich., said that Detroit always has a place in its heart for the business-first mindset of the GOP.
“The election may signal a movement to a stronger market focus and less aggressive regulations,” Cole said. “The message was that many Americans want smaller government, and the auto industry would usually say 'amen' to that.”
From GM to Toyota, every automaker is on path to meet new fuel-economy rules, enacted under President Barack Obama, that will require a fleetwide average of 35.5 mpg by 2016. That's the biggest jump since the Clean Air Act and the first mileage rules of the '70s. But Cole said a more optimistic plan floated by the Obama administration, to reach 60 mpg by 2025, may be reined in by Republicans. That lofty target might well founder for various reasons: because of the costs it imposes on the industry; because those costs are passed on to consumers, many of whom are still hurting, in the form of higher prices for cars; and because it's hardly a given that lawmakers and voters would support such a move.
I expect the Republicans to fight any expansion of pollution regulations or global-warming remedies. They will do this under the reasoning -- valid or not -- that environmental regulations will hamstring the industry, curtail jobs and slow the economic recovery.
Some Republican leaders, including in Southern states where Nissan, Hyundai and other foreign automakers build cars, made hay attacking Detroit during the bailout. But that was a safer position when the Republicans were holding no power. Now that they’re sharing power with Democrats -- and with the auto industry bailout currently viewed as a success -- Republicans may have to walk a finer line. There will certainly be some hindsight moaning during GM’s initial public offering, some reminders that taxpayers may never see every penny of the $50 billion poured into the company. But with a fragile auto industry being nursed back to health, attacking Detroit now can come off as being anti-jobs and anti-middle-class.
“I was philosophically opposed to the bailout myself, but it became clear that there was no choice to avoid an industry depression,” Cole said.
An ongoing issue that's a bit more subtle, Cole said, is whether the government at large will see the value of manufacturing -- and support that industry. That would include education reform that would turn young people on to a career in the auto industry. Cole recalled meeting a senior official from Japan’s Ministry of Trade who suggested that, among every industrial nation, America’s government was the least supportive of and sympathetic to manufacturing.
“We understand service, finance and tech, but not manufacturing,” Cole said. “And with (baby) boomer beginning to retire, we don’t yet know where our future work force will come from.”
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