Obama Proposes Health-Care Aid for Emissions Cuts (Update1)

By John Lippert

May 7 (Bloomberg) -- Democratic presidential candidate Barack Obama said the U.S. should help Detroit-based automakers pay for retiree health care while at the same requiring them and their overseas competitors to boost fuel efficiency and reduce tailpipe emissions.

The Illinois senator told the Detroit Economic Club today the U.S. can't afford to let health-care costs destroy jobs at General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler, even though the companies made the problem worse by investing in bigger cars and paying lucrative executive bonuses.

``So, here's the deal,'' Obama said in a speech. ``We'll help to partially defray those health-care costs, but only if the manufacturers are willing to invest the savings right back into the production of more fuel-efficient cars and trucks.''

Obama, 45, would help automakers cover 10 percent of their annual retiree health-care costs through 2017 and would require them to invest at least 50 percent of the savings into manufacturing fuel-efficient cars in the U.S., according to a statement released by his campaign.

GM, the second-largest private insurer after AT&T Inc., has 1.1 million employees, retirees and dependents, according to a regulatory filing. The company spent $4.8 billion on health care last year, including $3.3 billion for retirees. Detroit-based GM lost $1.98 billion last year on revenue of $207.3 billion.

``The auto industry accounts for one out of every 10 jobs. The notion that we can just abandon U.S. automakers and that we won't suffer consequences throughout the economy is just nonsense,'' Obama told reporters. ``We've got to yank that industry into the 21st Century.''

Increase Fuel Efficiency

In other comments, Obama said the U.S. should require auto companies to increase fuel efficiency by 4 percent per year unless the National Highway Traffic Safety Administration proves the increase is impossible technically, detrimental to safety, or too expensive. Specific targets would vary for different types of vehicles.

When Obama introduced a Senate bill mandating such changes in March, he was joined by four Republicans, including Senator Richard Lugar of Indiana, and two Democrats, including Senator Joseph Biden of Delaware.

GM believes federal fuel economy standards have been ineffective over the past three decades, said spokesman Greg Martin. The automaker opposes an increase now unless it's linked to policies that also limit carbon emissions and support investment in alternative fuels, Martin said.

Supreme Court Ruling

GM currently has 23 vehicles with highway fuel economy of 30 miles per gallon or better, the most of any automaker, and the most vehicles capable of running on biofuel such as ethanol, Martin said.

To limit greenhouse gases linked to global warming, Obama proposed requiring oil companies to reduce the carbon content of their fuel mix by 1 percent per year starting in 2010 by shifting to alternatives like ethanol. The U.S. Supreme Court said last month that the Environmental Protection Agency is authorized to regulate carbon dioxide emissions.

In his speech, Obama also proposed expanded tax credits to help Americans buy fuel-efficient cars, including those with gas-electric ``hybrid'' motors.

By 2020, the changes would cut U.S. oil consumption by 2.5 million barrels per day and eliminate the pollution that would otherwise be caused by 50 million cars, Obama said.

``At the dawn of the twenty-first century, the country that faced down the tyranny of fascism and communism is now called to challenge the tyranny of oil,'' Obama said in his speech.

To contact the reporter on this story: John Lippert in Southfield at jlippert@bloomberg.net

Last Updated: May 7, 2007 14:46 EDT

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