business

As Detroit Asks for Help: The Silent Elephants in the Room

Inside the hearing room on Tuesday where the CEOs of GM, Ford and Chrysler asked for government loans to help them bridge the Recession, there were two elephants in the room that got no time for testimony. And I don’t mean missing Republicans.

In all the chatter and posturing about how Detroit got into the financial predicament they are in, and whether they deserve to be supported, there was no talk about the lack of energy policy or healthcare policy that ushered Detroit into this mess.

There was no talk, for example, about the fact that Japanese automakers in their home country do not have to handle the healthcare costs of employees or retirees. Japan has national healthcare. A private room in a hospital in Nagasaki costs about $100.00 to the patient. A non-private room costs about $15 to $20. Germany has a form of national healthcare as well.

The reason the U.S. doesn’t have national healthcare, at the same time it has much worse statistics on mortality and disease prevention than these countries, is a failure of Washington, not Detroit.

Europe and Japan both have energy policies that keep gasoline too pricey for people to load up their highways with Hummers and Tahoes. The average size engine in Europe and Asia is less than two liters. The average size engine in the U.S. is about 3.5 liters.

It’s not that GM and Ford can’t produce cars that get 40 mpg. They already do. They make them in Europe and Asia where the energy policies dictate the marketplace. They make money in those regions in part because they don’t have the healthcare cost overhang.

It’s not that Detroit is blameless. Management has been mostly hideous. But the game-board they have been playing on has been equally hideous.

The closest a Senator came in the hearing to take some blame was Ohio Democrat Sherrod Brown who admonished his colleagues for shaking a finger too vigorously at the CEOs after Congress failed in 2005 to pass tougher fuel economy standards that would have better prepared the companies to cope with $4.50 per gallon gas earlier this year.

Not even the CEOs brought up the healthcare disparity between Detroit and the companies like Toyota and Honda as Senators kept throwing those companies’ performances up to them. Why? GM’s Wagoner told me once, as he was walking down Pennsylvania Ave., that you don’t raise issues that are politically impossible when you are trying to get something out of Washington. That day, I asked Wagoner why he didn’t make more noise to the President about instituting gas taxes as a way of getting Americans to buy more fuel efficient vehicles—-like they do in Europe and Japan. “Because it’s a non-starter” he told me.

I’ll be looking at the silent elephants again today in the House of Representatives.

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