May 31, 2006
Op-Ed Columnist
A Quick Fix for the Gas Addicts
By THOMAS L. FRIEDMAN

Is there a company more dangerous to America's future than General
Motors? Surely, the sooner this company gets taken over by Toyota, the
better off our country will be.

Why? Like a crack dealer looking to keep his addicts on a tight leash,
G.M. announced its "fuel price protection program" on May 23. If you
live in Florida or California and buy certain G.M. vehicles by July 5,
the company will guarantee you gasoline at a cap price of $1.99 a
gallon for one year — with no limit on mileage. Guzzle away.

As The Associated Press explained the program, each month for one
year, G.M. will give customers who buy these cars "a credit on a
prepaid card based on their estimated fuel usage. Fuel usage will be
calculated by the miles they drive, as recorded by OnStar, and the
vehicle's fuel economy rating. G.M. will credit drivers the difference
between the average price per gallon in their state and the $1.99
cap." Consumers won't get any credits if gas prices fall below $1.99.

"This program gives consumers an opportunity to experience the highly
fuel-efficient vehicles G.M. has to offer in the mid-size segment,"
Dave Borchelt, G.M.'s Southeast general manager, said in the company's
official statement. Oh, really?

Eligible vehicles in California include the 2006 and 2007 Chevrolet
Tahoe and Suburban (half-ton models only), Impala and Monte Carlo
sedans, G.M.C. Yukon and Yukon XL S.U.V.'s (half-ton models only),
Hummer H2 and H3 S.U.V.'s, the Cadillac SRX S.U.V., and the Pontiac
Grand Prix and Buick Lucerne sedans. Eligible vehicles in Florida
include the 2006 and 2007 Chevrolet Impala and Monte Carlo, Pontiac
Grand Prix and Buick LaCrosse.

Let's see, the 6,400-pound Hummer H2 averages around nine miles per
gallon. It really is great that G.M. is giving more Americans the
opportunity to experience nine-miles-per-gallon driving. And the
hulking Chevy Suburban gets around 15 miles per gallon. It will be
wonderful if more Americans can experience that too — with
G.M.-subsidized gas.

Our military is in a war on terrorism in Iraq and Afghanistan with an
enemy who is fueled by our gasoline purchases. So we are financing
both sides in the war on terror. And what are we doing about that? Not
only is GM subsidizing its gas-guzzlers, but not a single member of
Congress, liberal or conservative, will stand up and demand what most
of them know: that we must have some kind of gasoline tax to compel
Americans to buy more fuel-efficient vehicles and to compel Detroit to
make them.

Where are the presidential aspirants on this issue? I have yet to hear
John McCain, Mitt Romney, George Allen, Al Gore or Hillary Clinton
support at least a $3.50 floor price for gasoline, so that it will
never fall below that level and the alternatives can really flower and
spread.

But if you go to G.M.'s Web site, here's what you will see: an ad with
a young African-American boy saluting an American flag, above the
following offer for U.S. military personnel: "In appreciation of your
commitment to our country, G.M. extends a $500 exclusive offer to
active duty military and reserves when you purchase or lease select
2005, 2006 or 2007 G.M. cars, trucks and S.U.V.'s — just show your
military ID!"

That's really touching. First G.M. offers a gasoline subsidy so more
Americans can get hooked on nine-mile-per-gallon Hummers, and then it
offers a discount to the soldiers who have to protect the oil lines to
keep G.M.'s gas guzzlers guzzling. Here's a rule of thumb: The more
Hummers we have on the road in America, the more military Humvees we
will need in the Middle East.

You want to do something patriotic, G.M., Ford and Daimler-Chrysler?
Why don't you stop using your diminishing pools of cash to buy votes
so Congress will never impose improved mileage standards? That kind of
strategy is why Toyota today is worth $198.9 billion and G.M. $15.8
billion. G.M. is worth just slightly more than Harley-Davidson, the
motorcycle company ($13.6 billion).

President Bush remarked the other day how agonizingly tough it is for
a president to send young Americans to war. Yet, he's ready to do
that, but he's not ready to look Detroit or Congress in the eye and
demand that we put in place the fuel-efficiency legislation that will
weaken the forces of theocracy and autocracy that are killing our
soldiers in Iraq and Afghanistan — because it might cost Republicans
votes or campaign contributions.

This whole thing is a travesty. We can't keep asking young Americans
to make the ultimate sacrifice in Iraq and Afghanistan if we as a
society are not ready to make even the most minimal sacrifice to help
them.

article, I’m personally shocked that Flathead didn’t know GM had announced the discontinuance of the Hummer H1 model:

First in company’s line of Humvee-inspired vehicles ends production in June

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Why would he so viciously denigrate that company when they’re trying so hard? Surely they're responding to the wishes of the American market?

mention the H1. He specifically named the H2 and H3 but no H1.

And yes, they are to a certain extent "responding to the wishes of the American market" as you put it. But they've done a lot to skew and manipulate that market in their time too.

I have known Tom for nearly a decade now, so I give him the benefit of the doubt and call him disingenuous rather than using the other alternative term. To illustrate my point, I'll begin with a story.

I recall the tale of a suburban young man who once walked barefoot on the front lawn of his new home. He stepped on an acorn that hurt his foot, so he buried it to restore the smoothness of his lawn. Forty years later on that very spot, an oak tree had grown. The tree was destroying his sidewalk. He sued the builder of the sidewalk, claiming it was defective. Unfortunately for him, he sued in one of the few courts which still demand that citizens exercise personal responsibility. The court found that his planting of the acorn was the culpable act, and that the builder had no responsibility to engineer an oak-proof sidewalk for the cost of a normal one.

This is analogous to what Friedman expects from GM. In the 1960's GM was very profitable, feeding cars to a market that was buying them as fast as they could be made. Their executives gave in to a rapacious Congress that had been heavily lobbied by the UAW and by the AFL-CIO. The result was the series of labor agreements that are at the root of GM's current problems. I noticed that Friedman made no mention of lobbying by those two unions; each of them has spent more on lobbying than GM in the past 4 decades.

Toyota does not have to deal with either union under the Wagner Act, which sets the terms demanded of GM. As a result, Toyota's direct labor cost is 40% less and their labor overhead is less than half that incurred by GM. The much-vaunted "Toyota way" that enthralls so many business academics is arguably a better method of production, but only marginally so. What's more, it can only be effectively implemented in a new plant. Would Friedman have us close all the plants that currently employ those 138,000 people at GM? GM is making the best of a bad situation only partly of its own making. Its critics would do well to focus on a solution rather than castigating the company with an incomplete set of facts.

With respect to questionable lobbying efforts, the actions of Ford Motor Company lobbying for subsidies to build hybrid vehicles is silly. There is a rapidly growing market for hybrid vehicles and there is no need to subsidize them. All we will accomplish with subsidies is to enrich Ford stock-holders at public expense.

GM is guilty at most of reacting to markets rather than shaping them in the mold of what its critics think the market should want. It would be more appropriate (and effective) for critics of the status quo to spend time trying to re-cast the American public's love of large vehicles. This would be much more productive than wasting time criticizing GM for catering to a market that already exists.

It is particularly hypocritical of Friedman to criticize markets, which he rightly prescribes as the only viable long-term solution for global poverty. Markets are messy and they don't always lead us to the place we thought we should go, but they are far more effective and fair than any other method of accomplishing societal goals. The problem with GM was that pesky acorn we buried in the labor contracts of the 1960's. Until we realize that this is the problem, we'll never even begin to fix it.