On Tuesday, after weeks of buzz from a viral media blitz, GM finally answered its own marketing spin, “What is 230?” Apparently, the new Chevrolet Volt – set to hit show room floors in 2010 – will achieve an astounding city fuel economy of 230 miles per gallon.

GM Chief Executive Officer Fritz Henderson exclaimed in a press release on Tuesday that the Volt is sure to be a “game changer.” He went on to note that “based on the results of unofficial development testing of pre-production prototypes, the Volt has achieved 40 miles of electric-only, petroleum-free driving.” This, taken in conjunction with the Department of Transportation’s findings that nearly 8 in 10 Americans drive less than 40 miles per day, means that “many Chevy Volt drivers may be able to be in pure electric mode on a daily basis without having to use any gas” – unlike other hybrids such as the Toyota Prius.

The Volt, however, could cost about $40,000, putting it out of reach of many middle income consumers. GM believes that government incentives and battery warranties can make this new PHEV model an appealing option to climate- and cost-conscious consumers, despite the Volt’s high production costs. Prime among these government measures is a $7,500 consumer rebate in the 2009 stimulus package for purchasing qualifying electric plug-in vehicles such as the Volt. The Volt will become more economically attractive when oil and gasoline prices rise during the worldwide economic recovery. In contrast to their conservative predictions in 2008, the Energy Information Agency now expects oil prices to increase to $110 a barrel by 2015.

Critics say the 230 mpg claim for GM’s new plug-in is misleading – and even if it does live up to the hype, the Volt’s fuel range will pale in comparison to Nissan’s new plug-in model, the Leaf, due out in 2012. In a show of industry competition for most fuel economy supremacy, Nissan’s EV Twitter feed posted this yesterday: “Nissan Leaf = 367 mpg, no tailpipe, and no gas required. Oh yeah, and it’ll be affordable too.”

Japanese auto makers aren’t the only competition GM will have in the PHEV market. China announced last December it’s new plug-in, the F3DM, which will only cost an estimated $21,000 and has a battery range of an estimated 63 miles. Though it is unlikely that this model meets other U.S. safety standards, it is yet another sign that China wants to dominate the development and sale of clean energy technologies.

General Motors hopes the release of the Volt will signal to consumers the company is heeding the call for a new generation of super fuel efficient vehicles. The Center for American Progress hosted auto industry executives and independent engineers back in 2008 at an event to discuss the future of plug-in electric technology where GM Vice President Jonathan J. Lauckner acknowledged that “the automobile industry can no longer exclusively rely on oil as fuel for our vehicles.”

GM and the Volt may notably affect the electric car battery industry as well. Bob Kruse, GM’s executive director of global vehicle engineering, said on Friday that lithium-ion batteries – the kind that powers the Volt – are expected to come down in price and weight as the Volt is brought into mass production: “Getting the energy density up, getting the weight out, getting the cost out, that’s all part of what we are going to be challenged to do,” said Kruse.

Efforts to design the long range batteries of the future got a boost on August 5th when President Obama announced at a speech in Elkhart County, Indiana that the Department of Energy would invest $2.4 billion in advanced battery research. The funding is from the American Recovery and Reinvestment Act, and is expected to save or create tens of thousands of jobs in Indiana.

In addition, investments in a new smart grid will also be pivotal to the full scale deployment of PHEV’s. Britta Gross, General Motors’ manager of Hydrogen and Electrical Infrastructure Development spoke at length in an interview last November about the partnerships GM has built with utility companies such as Duke and Edison and her confidence that these companies are more than prepared for the wide-scale deployment of the Volt.

This announcement by GM is sure to please the White House, considering then-candidate Obama’s pledge last August to put 1,000,000 plug-in hybrid vehicles on the road by 2015. The Volt and other super efficient cars are an essential element to meet President Obama’s new fuel efficiency standards that the White House believes will “result in savings of 1.8 billion barrels of oil over the lifetime of vehicles sold in the next five years alone.” Plug-in vehicles like the Volt are essential to cutting our nation’s addiction to foreign oil and reducing global warming pollution. It may just be the “game changer” GM – and America — needs.

Foremost among these has been Sen. Jim DeMint (R-SC), who appeared on CNBC this morning to deride the “centrally planned economic scheme we’re working on here.” And even when presented with the argument that cash for clunkers will successfully provide economic stimulus along with environmental benefits — which is exactly the point — DeMint retorted “it’s still a horrible policy.” Watch it:

Here are some of the things that DeMint evidently finds “horrible.” According to analysts at Action Economics, the boost in consumption thanks to cash for clunkers will cause “third quarter GDP to grow 1.8% rather than his previous forecast of 1%.” Thanks in part to the program, auto sales in July rose to an annualized pace of 11.3 million units, the highest since September 2008. And as the Associated Press reported, “if the Senate approves the additional money, it’s likely to lead automakers to increase production and bring back laid-off workers.”

And then there are the environmental benefits. The Department of Transportation reported that “the average fuel efficiency of old cars traded in via the program is 15.8 miles per gallon, while new cars had an average MPG of 25.4.” As the Economic Policy Institute found:

On average, total gas consumption will drop by 87 million gallons per year, and American consumers will use 22.2 million fewer barrels of foreign crude oil. The environmental impact of reduced gas consumption is considerable as well. We estimate that the program will result in about 850,000 fewer tons of CO2 emissions per year (3.4 tons per vehicle annually).

This program is definitely not the most efficient way to stimulate the economy or reduce emissions, if either was the program’s sole purpose. But cash for clunkers is worthwhile because it does both, which DeMint clearly finds objectionable.

Evidently, Rep. Michele Bachmann (R-MN) feels that a program proving to be more successful than anticipated reveals the government’s incompetence:

Rep. John Boehner (R-OH) said the same thing, stating that “there are a lot of questions about how the administration administered this program. If they can’t handle something as simple as this, how would we handle health care?”

The initial proposal for the cash for clunkers program included $4 billion in funding, which Congress decided to cut to $1 billion. But besides underestimating demand, it’s hard to see how implementation of this program was mishandled.

The popularity of cash for clunkers actually shows that consumers are willing to spend, if the incentives are there. With the economy as a whole slowing its contraction, but with consumer spending still falling, programs that provide the right incentives (thus causing stimulus and preserving and creating jobs) are a good thing.

As Derek Thompson pointed out, there’s currently an “historic pent-up demand for cars…And when the government sweetens historic demand with cash guarantees, it’s easy to burn through $1 billion in a week.” Some forecasts indicate that industry-wide sales for July “could top 10 million vehicles on the annualized basis tracked by analysts.” If that happens, it would be the highest sales rate of the year.

The House voted today to infuse $2 billion of stimulus money meant for renewable loan guarantees into the program, and the Senate will vote next week. It might be worth finding the money somewhere else, though. For instance, Treasury could reprogram TARP funds, of which there are about $80 billion uncommitted, by making a request to congressional appropriators.

I noted at the time that cash for clunkers is not the most efficient way to upgrade the fuel efficiency of the nation’s auto fleet, and the environmental impact is not going to be huge, but given the economic benefits and the help in combating some traditional pollution the program is worth continuing.

Sen. Dianne Feinstein (D-CA) has put together her own version of cash for clunkers, and of the two, Feinstein’s is far stronger. Thus, Elana Schor at Streetsblog expresses proper concern that “if Sutton’s plan wins House approval this week, Stabenow’s Senate counterpart could potentially get a leg up over Feinstein’s”:

Feinstein’s proposal would require drivers to achieve a 25 percent fuel-efficiency increase before receiving a tax credit for ditching their clunkers. But Michigan Sen. Debbie Stabenow (D) is pushing for a trade-in tax credit that’s very similar to Sutton’s — truck owners would only have to increase their fuel efficiency by 2 miles per gallon to be eligible. The requirements for car trade-ins aren’t much better under the Stabenow and Sutton plans, with a mere 4 mpg increase in fuel economy triggering the $3,500 tax credit.

In light of the new CAFE standards announced by President Obama — which stipulate that cars and light trucks will have an average mile requirement of 35.5 miles per gallon by 2016 — why would we want to incentivize the extremely modest fuel efficiency improvements in Sutton’s bill? For instance, a “2009 Hummer H3T, which gets 14 mpg in city driving and 18 mpg on the highway, could qualify for the incentives” under Sutton’s plan. That’s not really doing anyone a favor, except for the firm that built the Hummer.

Ultimately, cash for clunkers is not the most effective way to upgrade to a more fuel efficient fleet. The vouchers for new vehicles seem to apply only to upgrades within the same type of vehicle (so truck owners get new trucks, car owners get new cars, etc.) which doesn’t encourage a transition away from trucks, even though a truck with good fuel efficiency is way less efficient than a fuel efficient car. The program is essentially economic stimulus for the auto industry, and could turn into a huge handout if the standards aren’t high.

That said, a properly designed program could have some valuable effects in terms of stimulus and combating traditional pollution. And if that is indeed the goal, Sutton’s bill doesn’t seem like the best way to get the ball rolling.

“We don’t think it is the role of government to intervene…We need to let the market and the laws work the way they are already in place.”

But doing it then, without a pre-packaged agreement amongst creditors, suppliers, workers and management, alongside protections for consumers, could have been disastrous.

As Susan Helper, an economics professor at Case Western Reserve University, told the Huffington Post, “I thought filing for bankruptcy in December would be a disaster…It would have focused people on fighting over who was going to get paid, rather than making the companies work better.”

Merely plunging into bankruptcy proceedings without a prepackaged plan would have left suppliers and manufacturers of intermediate goods (who provide parts and materials for every car company with factories in the Unites States — including Toyota and Honda) struggling to secure credit, forcing cascading layoffs and stalled production that would have caused slowdowns throughout the industry. Combined with customers who would steer clear of Detroit brands because of uncertainty surrounding maintenance warranties, a messy bankruptcy could have have kicked off a vicious downward spiral that could have ended in liquidation and enormous job losses.

A study from the Center for Automotive Research suggests that an unsuccessful bankruptcy of GM and Chrysler would have cost approximately 1.3 million jobs. “Instead,” reports the New Republic, “the likely hit from the twin restructurings is 250,000.”

A GM in bankruptcy last November, in the midst of a nearly frozen credit-market, would have found it nearly impossible to find creditors to finance them through a Chapter 11, so without government assistance, they probably would have had to undergo a rapid and jarring liquidation under Chapter 7. This would have meant mass layoffs, a sell-off of assets at bargain basement prices, dismantling of factories, and hundreds of thousands more Americans straining states’ fraying unemployment safety nets, and a denial of millions of dollars in revenue to starved state budgets.

The current bankruptcy agreement, backed with public dollars, is a big improvement on what could have been put together last December. After the Bush administration kicked the can down the road, the Obama administration has worked as quickly as possible putting together an agreement that pairs an investment of public money with concessions from creditors, management and unions, and predictability for suppliers and guarantees for potential customers. Prepackaged bankruptcies are usually preferred amongst ailing companies as the best way to preserve value for creditors (which, in the case of GM, means taxpayers). As economist Dean Baker explained, “Back in December and January, when none of these pieces were in place, there was still enough up in the air that I think it would have been reckless to have done a bankruptcy.”

It still may not work, but taking the time to put together a careful pre-packaged Chapter 11 filing and averting a slide towards reckless liquidation was most likely worth the time and money. After all, the livelihoods of hundreds of thousands of American families are at stake.

Democratic leaders have tried to assure them that the proposals of House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) won’t be coming to the floor. But Democratic members from conservative districts are watching warily….The budget Congress passed earlier this year included $324 billion for transportation, but Oberstar will soon roll out a transportation bill that could require revenue beyond what the 18.4-cent gas tax can provide.

While the political implications of raising the gas tax are probably very real for the Democrats expressing concern, we found out this week that the Highway Trust Fund (which is funded by the gas tax) is about to go broke for the second consecutive year. If the Fund were to flop, that would mean scaling back or canceling infrastructure projects. It’s not often that I find myself agreeing with Sen. James Inhofe (R-OK), but he had it right in saying that canceling projects “would have a detrimental effect on the economy and will negate any gains made by the stimulus.”

Matthew Yglesias, Ryan Avent, and the Christian Science Monitor’s editorial board have all made compelling cases for raising the gas tax now. As Avent put it, “given the various externalities associated with driving and burning gas, it should be clear that reduced driving and gas consumption are good things, to be encouraged. Given the economic damage sustained by high oil prices last year, it again seems clear that reduced gas consumption is a good thing.”

But the Monitor points out that “eventually government –- both federal and state –- will need to find other revenues from transport users.” Indeed, with new CAFE standards and a greater emphasis on fuel efficient vehicles (hopefully) coming down the turnpike, it makes no sense to think that we can rely on the gas tax as a steady source of revenue indefinitely.

Whether it’s through congestion pricing, changing toll structures “so that different classes of vehicles would pay their respective costs,” or a vehicle miles traveled (VMT) tax, a new revenue stream needs to be found. Whatever the ultimate decision, Oberstar spokesman Jim Berard had it right in saying that a failure to find a new source of revenue “simply kicks the problem down the road.”

Rep. Eric Cantor (R-VA) picked up on the meme today during an interview with CNBC:

This is really unfathomable, you’re right…So now what we’re seeing, as you suggest, is the White House coming in and favoring the UAW, basically making the rights of the bondholders inferior, outside any kind of legal framework whatsoever. There has been a downright suspension of the law.

Watch it:

Cantor and the others screaming about the legal rights of bondholders are off the mark. As the Washington Post noted, “there are a number of precedents for retiree health funds getting preferential treatment during bankruptcies, particularly in the steel industry in recent years when Bethlehem Steel and others were sold off.” And as Felix Salmon pointed out, an unsecured creditor like a bondholder “has no ‘legal right’ to get exactly the same outcome as any other creditor”:

The creditor does have the legal right to kvetch to a judge about fairness, that’s about it. And if the bondholders have a better idea of what’s fair, they’re more than welcome to provide tens of billions of dollars in debtor-in-possession financing in order to make that happen. But of course they’re not willing to put in so much as a nickel, which means that it’s not up to them, and the entity providing the financing — in this case, the US Treasury — gets to call the shots.

Even CNBC’s Carl Quintanilla wasn’t buying Cantor’s claims, saying “some might argue, Congressman, that that is sort of akin to having someone help you repair your house, but complaining about the color of paint they used…Don’t you think you’re almost nitpicking, given the amount of trouble the administration had to tackle?”

Every decision the feds have made since December suggests that nonpolitical management will be impossible…Treasury bludgeoned the bond holders in both Chrysler and GM to take pennies on the dollar, which will not make creditors eager to lend to the companies in the future.

And conservative members of the House:

“The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company’s diverse group of bondholders,” according to a letter from 20 House members, led by Rep. Jeb Hensarling (R-Tex.), to Treasury Secretary Timothy F. Geithner. “Contractual rights of investors are being trampled by the government under the rationale of ‘extraordinary circumstances.’ ”

We went through the same song and dance with Chrysler’s bankruptcy filing earlier this month, and the concerns don’t hold any more weight now. As the Washington Post noted today, “there are a number of precedents for retiree health funds getting preferential treatment during bankruptcies, particularly in the steel industry in recent years when Bethlehem Steel and others were sold off”:

“We felt that we needed the strong support of the union going forward,” said Wilbur Ross, who ran the private-equity firm that acquired Bethlehem after its 2001 bankruptcy filing. “It’s one thing to compromise a union contract. It’s another thing to get them working with good morale.”

“The only difference here is that you have the government playing the role of the vulture investor,” Ross added. “They are the only ones willing to make this investment, so they’re calling the shots.”

It’s also likely that the GM bondholders would get no more in liquidation than they are getting under the current deal, which may be why a majority of bondholders (54 percent) have jumped on board. Plus, as Harold Meyerson put it, “shareholders and bondholders knew they were taking risks when they invested in the company, but workers were flatly promised pensions and health benefits in retirement, payments for which were deducted from their paychecks.”

GM workers have already given up a lot in wage and benefit cuts, and they’re going to see their ranks thinned by some 21,000. In light of this, refusing to gut their health trust seems like the right decision.

You might be surprised to hear who’s cheering the Obama Administration’s announcement of a national program to regulate greenhouse gases (GHG) and fuel economy: the auto industry.

Yes, the automakers whose products emit about 17% of the man-made CO2 in the US are saying today that a challenging federal set of GHG regulations is a good start. We believe this is a solid alternative to a regulatory train-wreck of conflicting standards across different agencies and states.

The EPA’s recent finding on the danger of GHG has driven home the fact that we are all in this problem together. The Obama administration’s announcement drives home the fact that we are all in the solution together.

We now have a genuinely national effort to address the GHG produced by all emitters in order to reach tomorrow’s low-carbon economy.

But setting the challenging national program is only the first step. The next steps are crucial. A national effort of this magnitude will require a comprehensive mix of support for new technologies, investment in infrastructure, and smart regulation.

The auto industry has already been working on the technology – actually, we’ve been working on it for years. In addition to improving the efficiency of gasoline and diesel engines, we’ve poured billions of our R&D dollars and engineer’s time into hydrogen, ethanol and electricity alternatives.

While we’ve made a great deal of progress in those areas, we have also learned that there is no single “silver bullet” technology that will satisfy all of our energy and environmental needs.

Achieving the tough new federal program will require everything on the table…and moving out the door. After all, it’s going to take a lot of efficient vehicles to make a dent in total emissions. So, we hope politicians will commit to providing real incentives that enable consumers to quickly adopt those newer, more efficient vehicles.

But consumers are going to need the infrastructure to support this progress, and that is out of our hands. Government will have a critical role to play to ensure the infrastructure is ready for the commitments we are all making.

Finally, long term progress requires long term planning, and the auto industry has stressed that we need smart, consistent regulation – especially a national emissions program. This announcement by the Obama administration gives us that challenging set of national standards.

We thank President Obama for committing to be a leader on these issues; we congratulate President Obama for fulfilling that commitment.

Today’s announcement has confirmed that we are all in this solution together. We are hopeful that this is only the beginning of a comprehensive national policy.

When the automakers’ plans for viability were due three months later, Fox went at it again, claiming that the Big Three should enter bankruptcy because the union hadn’t made significant concessions.

So, now that Chrysler has been pushed into bankruptcy by a few hedge funds that were unwilling to compromise — and with GM potentially set to follow — Fox should be pleased, right? Wrong. Because bankruptcy is evidently also too good for the unions.

Bloomberg reported today that GM’s bondholders are balking at the auto company’s latest offer, and that President Obama will attempt to “safeguard union health-care benefits” if GM were to file bankruptcy. This led Fox News anchors Bill Hemmer and Megan Kelly to go on the offensive, claiming that the administration is “pushing GM toward bankruptcy to benefit the unions.” Watch a compilation:

Even Fox’s correspondent at a shuttered Chrysler plant wasn’t having it, reminding the anchors that the autoworkers worked for and earned the benefits in question. Harold Myerson completed this point:

Shareholders and bondholders knew they were taking risks when they invested in the company, but workers were flatly promised pensions and health benefits in retirement, payments for which were deducted from their paychecks. In sum, even as the administration’s policy toward the banks has a bias toward capital, its policy toward auto has a bias toward labor. Which, in the latter case, is entirely as it should be.

For Fox, meanwhile, any situation in which the union comes out with its jobs and benefits intact is evidently unacceptable.

As Bloomberg reported, “Obama’s team had first offered secured lenders $2 billion for their $6.9 billion in loans, and then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion, and Obama’s patience ran out.” Steven Pearlstein put these numbers into perspective:

What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt. Of course, to get that extra 15 cents, the hedge funds would probably have to fork over a penny or two to pay the army of $700-an-hour lawyers needed to spend two years working it through the bankruptcy process.

The greed factor here is really appalling, but bad intentions can sometimes produce a good result. Chrysler has been headed toward a pre-packaged bankruptcy for a while, and repeated infusions of cash was simply punting the inevitable down the road. And handing these companies billions while they shed jobs was, as Robert Reich wrote, the equivalent of “’saving’ Vietnam by bombing it to smithereens.”

Now it will be up the bankruptcy court to figure out how best to handle the various Chrysler creditors. Felix Salmon conveys the appropriate sentiments:

As for the smaller creditors who stood in the way of a deal which would have avoided bankruptcy, I have very little time for their plaints. They’re offering nothing which will help Chrysler in the future: they just want to get the maximum return on selling the bonds they picked up for pennies on the dollar. I hope and trust that the bankruptcy judge will give them short shrift.

Two people briefed on the plan say General Motors Corp. will close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles. The people did not know exactly when the shutdowns would occur, but both say they will include the normal two-week closure in July to change from one model year to the next.

But just yesterday, the Associated Press reported that GM spent $2.8 million lobbying Congress — nearly $1 million per month — in the first quarter of 2009, which is actually 15 percent less than it spent on lobbying in the final quarter of 2008. GM also said this week that “it is completing the layoff of 3,400 white-collar workers in the U.S.”

“We’re a part of what is arguably one of the most regulated industries and provide a voice in complex policy discussions. We meet strict reporting requirements and our spending is reflective of the breadth of issues that affect our business,” said GM spokesman Greg Martin. But it’s worth asking: How many days could GM keep some factories open with that money? How many workers could have earned just a little bit more in wages if that lobbying hadn’t occurred?

This comes one day after General Motors CEO Rick Wagoner resigned at the White House’s request. As the Washington Post reported, “the administration effectively rejected as untenable the business plans that GM and Chrysler had submitted to restructure their companies,”a failure for which Wagoner was the casualty.

Wagoner’s ouster does bring up an interesting question, though: why is the administration okay with dismissing the head of an auto company, while going to great lengths not to get involved with personnel decisions at federally bailed-out financial institutions (aside from AIG)? As Rep. Thaddeus McCotter (R-MI) put it, “when will the Wall Street CEOs receiving [bailout] funds summon the honor to resign? Will this White House ever bother to raise the issue? I doubt it.”

There does seem to be a bit of a double standard when it comes to the respective rescues of the financial system and the auto industry, even beyond management decisions. Ali Frick at ThinkProgress noted that during the AIG bonus debacle, AIG’s contracts were considered sacrosanct, while United Auto Workers has repeatedly agreed to “make major concessions in its contracts,” in an attempt to make the auto companies viable.

So what’s the difference? Tim Fernholz posited that “it’s not a problem of political clout that allows bankers to be more insulated from political pressure, it’s a problem of knowledge“:

Though the auto industry has a lot of problems that will be difficult to solve, those problems are easier to understand and chart, because at the end of the day, manufacturing is a comprehensible industry. Meanwhile, the banks aren’t making anything but bets, and they’re making insanely complicated bets that are not clearly understood.

Fernholz added that he believes that “the administration is much more likely to make bolder moves” once the banks’ stress tests are complete. And maybe this will be true, if the stress tests confirm that the banks are in far worse shape than previously thought.

But that doesn’t change the fact that the government has expected the auto companies to profoundly change the way in which they do business, while not asking for the same level of change from the financial giants. Even within AIG, executives called the Credit Risk Committee, who “oversaw some of the company’s biggest bets,” are still plying their trade.

So as Paul Kedrosky put it, if you want to make catastrophic mistakes and keep your job, “you need to do it in a place where your errors nearly take down global capitalism.” Otherwise, “keep your resume up-to-date.”

With the auto makers plans for viability due to Congress today, Fox is back at it, arguing that if the UAW doesn’t make more concessions, then the companies’ plans should be rejected. Anchor Steve Doocy asked “if the United Auto Workers union does not make substantial concessions, should we continue to give the auto companies all that dough?” Watch a compilation:

The notion that the UAW hasn’t made any concessions is as absurd now as it was in November. The UAW has already agreed to suspend its Jobs Bank, delay automaker payments to a retiree health care fund, and the union has implemented a plan to permanently shift retiree health costs into a UAW trust fund in 2010.

The union also initiated a two-tier wage system, under which “new hires receive $14 an hour, about half the wage of current workers, as well as less-extensive benefits.” Part of the restructuring plan is offering buyouts to older workers, in order to hire more “tier two workers” at a lower cost.

Simply put, there is very little left that the union can feasibly cut. As David Madland wrote in the LA Times, “labor costs are less than 10% of the cost of a car; the other 90% goes toward research and development of new product lines, parts, advertising, marketing and management overhead”:

Surely this 90% is more likely to be a source of poor competitiveness, especially because, according to data from the latest Harbour Report, an annual study of manufacturing efficiency, nine out of the 10 most efficient auto assembly plants in North America are union plants, represented by either the UAW or the Canadian Auto Workers.

Obviously, the auto companies need to address some of the long-term problems in their outdated business models. However, the answer does not lie with the solutions prescribed by Fox, which seems to think that “there is something unholy about workers realizing some of the profits they help create.”

The auto lobby continues to fight this long-needed change. In an interview with National Public Radio, Charles Territo of the Alliance of Automobile Manufacturers claimed the California standard would bring catastrophe:

At this difficult time, what we need is certainty and consistency, not confusion and chaos. And I think we’re all concerned that this would create chaos, not only for consumers, but also for dealers and for manufacturers.

This is nonsense. The auto industry has long been able to handle California’s higher emissions standards for other pollutants. If two standards — California and federal — are too confusing for today’s automakers, it’s no wonder the companies are in decline. Jerry Brown, California’s attorney general, retorted with the fact that Detroit’s problems have come in large part because of its failure to innovate:

The irony here is the auto companies want a bailout, in many ways because they weren’t building the kind of cars that were compatible with today’s energy market — and at the same time, they want to keep going with their lawsuits, which have already cost millions and millions of dollars.

These auto industry lawsuits against the adoption of AB 1493 include:

Massachusetts

Massachusetts et al v EPA et al
Status: Industry lost in federal appeals and Supreme Court.

In 2003, the Environmental Protection Agency ruled it would not regulate transportation sector greenhouse gases. Massachusetts and 11 other states sued the EPA in the U.S. Court of Appeals. Auto industry trade groups argued in favor of the EPA’s inaction. The Court of Appeals ruled for the EPA in 2005. In 2006, the U.S. Supreme Court heard the appeal, and on April 2, 2007 ruled that the EPA had to begin the regulatory process for greenhouse gases. On July 11, 2008, the Bush administration grudgingly published draft regulations.

California

Central Valley Chrysler Jeep, et al v Goldstene et al (No. 08-17380)
Status: Industry lost in district court, filed federal appeal.

Filed in California district court in 2006 and stayed until the Supreme Court Mass v. EPA decision, the judge found against the plaintiffs in December 2007. The plaintiffs filed an appeal in the Ninth Circuit on October 30, 2008.

Vermont

Green Mountain Chrysler-Plymouth-Dodge v. Crombie (No. 07-4342, filed 10/5/2007, Second Circuit)
Status: Industry lost in district court, filed federal appeal.

On September 12, 2007, a federal judge in Vermont ruled that the state may impose its own greenhouse gas emission standards on automakers. Vermont Chrysler and Ford dealerships, with the Alliance of Automobile Manufacturers, the Association of International Automobile Manufacturers, Chrysler, and General Motors appealed the decision to the Second Circuit Court of Appeals.

Rhode Island

Lincoln Dodge, Inc et al v. Sullivan (No. 06-00070, filed 2/13/20065, District of Rhode Island)
Status: In district court.

On November 25, the district court in Rhode Island dismissed the automakers from the lawsuit, holding that they are already suing in California and Vermont. The co-plaintiff auto dealers are maintaining the suit.

New Mexico

Zangara Dodge, Inc et al. v. Ron Curry et al. (No. 07-01305, filed 12/27/2007, in District of New Mexico)
Status: In district court.

New Mexico car dealers and the National Automobile Dealers Association sued to block the New Mexico Clean Car program in April 2008.

Maine

Status: State court denied stay.

The Kennebec County Superior court denied a request by the Alliance of Automobile Manufacturers to stay Maine’s standards, and refused to send the matter back to the Maine Board of Environmental Protection (BEP) for reconsideration.

When asked by the Wonk Room how much his group is spending on these lawsuits, Territo said, “It’s not relevant how much money AAM has spent because there are so many other groups participating.”

In the NPR interview, Territo continued with this Orwellian description of his industry’s lawsuits and lobbying against higher standards:

I think that we’ve shown as an industry a willingness to change, a willingness to be part of the solution. And we’re looking to work with this administration to help meet all of our goals of enhancing energy security and reducing greenhouse gas emissions.

As Center for American Progress senior fellow Dan Weiss recommends, companies that receive bridge loans “should agree to cease challenges to the California program and new fuel economy standards.” In fact, all car companies should follow that advice — it’s a lot easier for companies to find solutions when they give the money to engineers instead of lobbyists, as incoming Energy Secretary Steven Chu has explained.

Exercising options already afforded them by law, under a Chapter 11 reorganization for example, the American automobile industry can make the necessary reforms and could soon return to profitability. A federal bailout of the automobile industry, on the other hand, would put taxpayer money at risk, shield the companies from making the reforms necessary to restore competitiveness again, and set a costly precedent that the federal government will bailout other failing companies and industries.

According to MinnPost.com, while announcing her stance, Bachmann declared that, “The real road out of this recession is through Main Street America, not Washington.”

Bachmann is not alone in advocating Chapter 11 bankruptcy for Detroit’s Big Three. In the Wall Street Journal, Todd Zywicki, a professor of law at George Mason University School of Law, claimed that “bankruptcy is the perfect remedy for Detriot.”

However, as Nobel Prize winning economist Paul Krugman explained, the current financial crisis preempts any chance of Chapter 11 bankruptcy being successful, and thus he is “very reluctantly screaming” in favor of a bailout:

[T]he credit markets are frozen. So normally a company can keep operating, declare Chapter 11 but keep operating — but that depends on being able to continue to get credit lines to do business. And you can’t do that right now. So Chapter 11 quickly becomes Chapter 7 which is liquidation. So we actually see the thing disappear and then we’re talking about a million plus jobs probably disappearing.

As Eugene Robinson explained, “it would be insanity to throw hundreds of thousands of auto company employees, and maybe a few million others in the supply and sales chains, out of work — leaving them and their families at the mercy of an economy that has no replacement jobs for them.”

Indeed, Bachmann’s proposition for the auto companies could result in unemployment for millions of Main Streeters — who would fall back into an already overextended and inadequate social safety net — which would make it awfully difficult for them to lead the way out of the recession.

During an appearance on CNN’s Late Edition yesterday, Center for American Progress Action Fund Senior Fellow Gene Sperling questioned the rationale behind the conservative demands, asking, “Why, in the middle of a recession, would you want to demand, in 2009, these type of brutal wage cuts? It’s not fair. It’s not economically smart.” Watch it:

The UAW has expressed an openness to negotiating pay cuts in 2011, when its current contract expires. Sperling is correct, though, to note that “it’s not economically smart” to cut wages during a downturn. Keeping people working — and spending — is a key component of reversing the downward trail of America’s ailing economy.

But preventing the loan entirely because there was no immediate UAW wage cut could have even more drastic consequences, if any of Detroit’s Big Three should fail. The New York Times reported today that, “With unemployment claims reaching their highest levels in decades, states are running out of money to pay benefits.” The fund in Michigan — the epicenter of America’s auto industry — has already run out.

The Times produced the following chart, showing that the states in danger of exhausting their unemployment funds are overwhelmingly in the auto-producing belt of the midwest:

The Big Three going under would exacerbate an already tenuous situation in these states. Having more workers rely on an overextended social safety net will merely make reversing the current downturn that much more difficult.

Last night a cadre of Senators drove General Motors and Chrysler to the brink of bankruptcy by voting against a $14 billion program to provide bridge loans to the auto companies. The loans have already been agreed to by President Bush and the House of Representatives.

Sixty votes were required to end a filibuster of the bill before final passage, and the vote was 52-35. A batch of conservatives, led by Senator Bob Corker (R-TN), objected to it because they wanted to squeeze even more wage and benefit cuts from factory workers who belong to the United Auto Workers.

The $700 billion Emergency Economic Stabilization and Recovery Act — which created the TARP — passed in October, and included fewer strings and employee wage and benefit cuts than the auto loan package. Yet, there were 20 senators who voted in favor of rescuing the financial system, while voting against extending a $14 billion loan to the automakers. Ten others voted yes to the former and did not cast any vote last night.

These lawmakers were willing to write a huge blank check to Wall Street that gave AIG $123 billion, Citigroup $25 billion, and JP Morgan $25 billion, yet left America’s domestic auto industry out to dry. Had eight of these 20 voted for the White House proposal, the auto companies would avoid catastrophe this year:

In any case, hopefully President Bush will loan money from the Troubled Assets Relief Program to ensure that GM and Chrysler avoid bankruptcy for the next several months, thus enabling them to restructure, recover, and thrive by building the super fuel efficient cars of the future.

But various media outlets have reported that blocking the bill also had a wider purpose: sticking it to labor unions in advance of the anticipated debate over the Employee Free Choice Act. Often referred to as “card check,” the Free Choice Act would level the playing field for workers looking to form a union.

As the LA Times reported today, conservatives circulated “an action alert” calling for lawmakers to “stand firm and take their first shot against organized labor“:

In doing so, analysts said, Republicans were planting the seeds for a fundraising appeal to big business — other than the Big Three, of course — as they gear up for a major political fight next year over expected legislation that would make it easier for unions to organize.

The BBC noted this line from the conservative talking points:

This is the Democrats’ first opportunity to pay off organised labour after the election. This is a precursor to card-check and other items.

If the rescue loan was a “pay off” to the unions, it was a pretty lousy one, considering the UAW made serious concessions — including delaying Big Three payments into a retiree health care fund — as a prerequisite to the rescue bill proceeding.

Furthermore, conservatives denied the automakers their loan — potentially causing further harm to an already dismal economy — for the sake of preemptively sending a message on legislation that can help the economy. As David Madland and Harley Shaiken point out, competitiveness is “linked to productivity, quality, and innovation — all of which can be enhanced with higher wages” derived from unionization.

Yesterday, President-elect Barack Obama said that he wants to “strengthen the union movement in this country and put an end to the kinds of barriers and roadblocks that are in the way of workers legitimately coming together in order to form a union and bargain collectively.” It would appear that conservatives are already gearing up for the fight, even if that means sacrificing America’s auto industry and all the jobs that go along with it.

And conservatives are not stopping there. Rep. John Boehner (R-OH), Rep. Eric Cantor (R-VA), Rep. Mike Pence (R-IN), and others have put forth their own “no-bailout alternative” to the loan.

The “alternative” is all of two pages, one of which is spent criticizing the proposal passed by the House. With the remaining page, conservatives reveal that their plan for helping “the Big Three to become competitive again” amounts to busting their union. After stating that United Auto Workers hold “to concessions already made” conservatives demand that the union:

Concedes the elimination of Supplemental Unemployment Benefits; Concedes elimination of the Jobs Bank Program; Agrees to either reduce company retiree health care obligations or otherwise convert a portion of such obligations into equity; and Agrees to reduce wages and benefits to the levels paid by non-Big Three manufacturers.

Sen. Jim DeMint (R-SC) said yesterday on NPR that, in regards to an auto loan, “we’re not going to do it with the barnacles of unionism wrapped around their necks.”

First, it is worth pointing out that the UAW has already agreed to suspend the Jobs Bank, and delay automaker payments to a retiree health care fund. Furthermore, the union has implemented a plan to permanently shift retiree health costs into a UAW trust fund in 2010. Therefore, the second and third “concessions” that conservatives are demanding have, for all intents and purposes, already happened.

The other two “concessions,” however, are where the trouble really begins. The last one implies that Big Three workers are paid substantially more than their non-Big Three, non-unionized counterparts. However, as the New York Times and the New Republic pointed out, UAW workers don’t earn significantly more in hourly wages. The first, meanwhile, calls for cutting unemployment benefits at a time when economists and lawmakers are advocating extended benefits as an important response to the financial crisis.

Ultimately, these union-busting demands are counterproductive. As David Madland and Harley Shaiken note, “unions help foster a competitive high-wage, high-productivity economic strategy“:

Unionization and high worker productivity often go hand-in-hand. Fairness on the job and wages that reflect marketplace success contribute to more motivated workers. Given the pressures of globalization and competitiveness today, unions have been responsive to increasing productivity and embracing new innovations.

The UAW has already conceded to help the Big 3 manage their financial troubles. New innovations — not a lower-paid, uncared for workforce — will help Detroit get back on its feet.