Out of Control Policy Blog

Are Car Companies Going the Way of Public Utilities?

If anyone harbored hopes that America's automobile industry would remain competitive and independent, those thoughts should have been dashed today when they stood shoulder to shoulder with the President to back strict fuel economy standards. As the New York Times reports:

"On Friday, when President Obama announced even stricter standards — in fact, the largest increase in mileage requirements since the government began regulating consumption of gasoline by cars in the 1970s — the chief executives of Detroit’s Big Three were in Washington again.

"But this time they were standing in solidarity with the president, who was also surrounded by some of Detroit’s highest-tech — and most fuel-efficient — new vehicles.

"While the American carmakers, as well as their Asian rivals, once argued against even minimal increases in government fuel rules, they are acquiescing without protest to an increase to 54.5 miles per gallon by 2025, from the current 27 miles per gallon.

"The new standards are seen by the Obama administration as critical to reducing oil consumption and cutting consumer expenses at the pump, and the White House made it clear to Detroit executives that the changes were coming and they needed to cooperate."

Why were these executives standing in lock step with the president? Quite simply, in the wake of the bailouts and ownership restructuring led by the federal government, they are creatures of national political priorities. They are no longer beholding to the desires or preferences of consumers.

This shift from a consumer-driven business model to a government-directed one isn't wholely unprecedented. Electric utilities became regulated public utilities decades ago. So were traditional telephone companies until unregulated wireless technologies upended the entire communications industry.

While consumers may lament the decline of the consumer-driven business, it's perfectly in step with a progressive political view of the world where private interests are reined in and subordinated to government priorities and interests. President Obama certainly didn't let the economic crisis of 2008 go to waste and squander the opportunity to effectively take over this pillar of American economy.

For more on the automobile bailouts, see Shikha Dalmia's incisive commentaries here, here, and here.

Samuel Staley is Research Fellow


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