Bush goes through the motions with US auto company CEOs

by James Bryant, November 21st, 2006, 7:00 am

Last week the CEOs of Detroit’s big three automakers – Richard Wagoner (GM), Tom LaSorda (Chrysler Group), and Alan Mulally (Ford Motor) finally got some face time (about an hour’s worth) with President Bush after waiting nearly 18 months. Surpise! Not much was accomplished, although no one really expected much.

Rick, Al, and Tom have an agenda and they aren’t shy about pushing it. They want lower health care costs, wider availability of alternative fuels, and they want an even playing field with the Japanese. The President isn’t in a position to do much about these things, but a sympathetic ear is nice, I guess. Cue up the Stones’ “You Can’t Always Get What You Want.”

While the Japanese government shoulders much of the burden of health care costs for Japanese carmakers, that burden is squarely on the shoulders of GM, Chrysler, and Ford here in the US. The Big Three estimate they will spend more than $12 billion on health care in 2006 – or expressed another way, everyone who buys an American car gets to pay what amounts to a $1,000 bloated health-care-benefits tax.

And that’s only the start of the American automotive industry’s Japan-related woes. The Boys from Detroit also accuse the Japanese government of artificially deflating the value of the yen by messing around with currency markets. The weak yen makes competition nearly impossible as it translates to as much as a $9,000 per vehicle cost subsidy.

With health care and currency disparities factored in, there is as much as a ten-grand premium the US consumer has to pay for the privilege of driving, say, a Ford Focus.

But what of the newly empowered Democrats? Can they help? Maybe. The Detroit CEOs could get traction with the Dems on health care. What the CEOs would like is the closing of a Medicare prescription drug benefit loophole. The so-called “doughnut-hole” makes consumers pay up when their drug bill hits $2,250. The consumer has to make up the difference until they hit the $5,100 mark, at which point the program starts paying out again. If the consumer is a US autoworker, guess who picks up the shortfall between $2,250 and $5,100?

The big question is, how much trouble do you have to be in before you go to the US government in search of a workable solution to your problem? Oh well. I bet Rick, Tom, and Al got some cool White House swag, anyway.