Forget Chrysler, which has needed a bailout from Washington or Stuttgart in three of the last four recessions. The tragedy of GM and Ford is that, inside each, are perfectly viable businesses, albeit that have been slowly murdered over 30 years by CAFE. Both have decent global operations. At home, both have successful, profitable businesses selling pickups, SUVs and other larger vehicles to willing consumers, despite having to pay high UAW wages.
All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don't want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.
Jenkins puts his finger on a key problem here. If the government's goal is to get Americans to drive more fuel efficient cars, the way to do that would be to raise federal gas taxes steeply. Then, Americans would effectively be forced to buy smaller, more fuel-efficient cars, and the domestic automakers would be able to sell them the sort of more expensive, higher-margin small cars they successfully sell in Europe. Politically, of course, it's easier for Congress to raise CAFE standards than raise gas taxes.
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