Ed Wallace

Unnecessary Battles

Capitalism is an ongoing war: Competitors vie against competitors, ideas against ideology, bosses vs. workers, and often, it’s claimed, the government against bosses. The most confusing part of our capitalistic society is that, while we love to play the victim of its sometimes harsh nature, most benefit from it. Ironically, it seems, in America the more money you make, the more you get to play the victim. This in spite of the fact the reverse is actually the truth.

But the bigger the money plays and the bigger the chance of total failure, the stress can ramp up until it brings down even the strongest warriors. Just this week the book, Super Pumped, revealed the inside story of Uber. In it we learned about the day that Uber’s president hosted an offsite meeting with senior executives to discuss surveys he had instituted. The results showed that the public loved Uber, yet was equally turned off by its co-founder, Travis Kalanick — the one person told not to attend that meeting.

Travis showed up anyway and immediately dismissed all the charts showing nobody liked him and deprecated the survey scores on the walls of the meeting room. But that attitude lasted mere minutes because Bloomberg released a video, during that very meeting, showing Kalanick berating and trashing an Uber driver. As he and the upper staff watched it on a laptop, aghast, Kalanick fell to the floor, wailing, “What’s wrong with me?” over and over again.

You Win or You Die

That scene differs only in minor details from the continuous palace coups at the Ford Motor Company, a game of thrones instituted by Henry Ford himself. He often pitted one executive against another to see which one would end up on top, no matter what means it took to get there.

In one case his corporate gladiators were two exceptional production men, Big Bill Knudsen and Charlie Sorenson; in the end Sorenson made Knudsen’s life so miserable that he departed for General Motors. Only late in his life did Sorenson clear his conscience about his career at Ford, repeating his regrets over his actions to anyone who would listen.

Paul Ingrassia’s 1995 book Comeback describes one Chrysler meeting in the late eighties where Bob Lutz took production man Dick Dauche out into the hallway, threw him up against a wall,and said, “I’m a Marine and trained to kill.” If Dauche ever talked to him that way again, the suggestion vibrated, he would regret it. Neither executive was forced to attend sensitivity training.

What’s Wrong with this Picture?

The question remains, does our government help everyone do better in this game? Or is government fighting unnecessary battles and building unnecessary walls to inhibit the best of the best?

That became a legitimate question the other day, when our currently misnamed Department of Justice said it had opened an antitrust investigation into four automakers — Ford, Volkswagen, BMW, and Honda. What’d they do? They signed an agreement with the California Air Resources Board to increase the average fuel efficiency of their vehicles to 50 miles per gallon by 2026. How dare they improve their gas mileage?

The MIT Technology Review, also stunned, published a column with the headline, “Antitrust Regulators are Probing Automakers for ... Making Cleaner Cars?” That article also quotes David Hart, a science policy professor at George Mason, as saying, “The intent of antitrust laws is to prevent monopolies and cartels. It’s not to block regulations that could drive innovation and cut climate emissions.”

MIT’s article went on to point out that the DOJ “wants to know whether this deal may artificially limit the types of cars and trucks the auto companies offer to consumers.” Other articles say DOJ officials are taking the position that this is somehow a collusion between these four manufacturers to put their competitors at a disadvantage.

That’s right; in this era of rubber-stamping the creation of super-monopolies through mergers with a cheery, “You bet,” with an eye toward future political donations, the Justice Department seems poised to turn its ire into blocking car companies from delivering better fuel efficiency to you in the future.

Surprise Attack

At the same time, government officials have told the State of California that it does not have the right to set its own emission standards outside of those required by the federal government. That’s amazing. Because California passed the Mulford-Carrell Air Resources Act in 1967 to deal with that state’s horrendous pollution issues. It was Ronald Reagan, then governor, who signed that act into law, creating the California Air Resources Board. And, when the Federal Clean Air Act of 1970 was passed, signed by another California Republican Richard Nixon, his home state was already the nation’s trendsetter in this area, so an exception was carved out requiring the EPA to grant waivers to California to apply its own regulations.

Now, other states can choose to follow California’s standards for emissions instead of the federal standards. Currently 12 states and Washington DC — oh, and Canada — now follow California’s lead.

So, we have the feds in open war against California and some of the most beloved automakers in the world over whether this president’s EPA has the right to set fuel efficiency standards for everyone or not. This is one of those unnecessary battles in capitalism, in that the automakers claim they don’t want two national standards. They wanted the feds and California to agree on one.

You see, this all started once Obama was out of office; automakers ran to the new president whining that the fuel efficiency standards set by the former administration were out of reach. Apparently not by much; the deal those four automakers cut with California puts back the deadline by just one year and drops the fuel economy requirement from 54 to 50 miles to the gallon. So, why haven’t the other automakers signed on to this deal? Maybe they’re afraid of this administration’s retribution.

Now before you think that’s out of the question, take note. In late August David Welch, formerly of the Star-Telegram, currently Detroit Bureau Chief for Bloomberg, published a small column observing that General Motors now has the lowest number of UAW members of any of the Big Three. Well, that’s just Tweet storm material. The President immediately blasted, “General Motors, which was once the Giant of Detroit, is now one of the smallest automakers there. They moved major plants to China BEFORE I CAME INTO OFFICE. This was done despite the saving help given them by the USA.”

Wouldn’t it be great if writing and publishing software came with both a spell-check and fact-check embedded in it? Well, in spite of the tweet, GM still sells more vehicles in America than Ford or Chrysler, and it employs more people in America than Ford or Chrysler; it just has fewer UAW members. Oh, and it didn’t “move” American factories to China; it opened shop in China and built factories for that market. Yet GM’s Mary Barra had to dutifully go the White House for a meeting with the president Thursday a week ago. Neither she nor the president had comments about what was discussed.

Now What, Kemosabe?

So where does all of this go now? Lawsuits. Washington will try to strip California of the right to set its own emission standards — a right enshrined in federal law for 49 years.

Automakers will continue to find ways to improve fuel economy anyhow, because nobody knows how this will end up.

The four car companies targeted by our former (and, one hopes, future) Department of Justice will spend untold millions preparing documents for subpoenas and possibly taped depositions, while all the companies that didn’t sign on to California’s rules will lie back and hope they aren’t targeted next. If this were the old days this would be over in a flash: The first federal judge to get this case would look up the Clean Air Act of 1970, see that California has this right, send clerks out to see if any subsequent law rescinded that right and, finding that none had, rule in California’s favor. At least, that’s how it’s supposed to work and once did. But in today’s angry politicized world nothing is a given anymore.

MIT is right; all of this is simply to beat up and punish automakers who dared agree to find a way to get better fuel efficiency than the President of the United States wants them to get. Folks, I’ve been around the auto industry for almost 50 years and I’ve never once seen the federal government actively try to hold car makers back from improving their product. In fact, in the past the feds sometimes had to stand by with a whip to force innovation to deliver safer and more fuel efficient vehicles for the public.

All that said, the automakers brought this on themselves. They started it when they ran to the new president crying about the last one and wanting relief from the fuel economy standards. Now they’re having to live with the consequences of their actions.

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: edwallace570@gmail.com