It is time for the Clinton Administration and Congress to end one of the most unnecessary corporate giveaways in recent times. The name is soothing — The Partnership for a New Generation of Vehicles (PNGV) — but the program is aggravating.
PNGV is a collaboration between the Clinton-Gore administration and the Big Three automakers — General Motors, Ford, and Daimler Chrysler. In return for federal funding, and access to the research efforts of seven federal agencies and twenty federal laboratories, industry participants have pledged to create production prototype vehicles of a “Supercar” that would be, according to the Department of Commerce, “an environmentally friendly car with up to triple the fuel efficiency of
today’s midsize cars—without sacrificing affordability, performance, or safety.”
The House of Representatives, Committee on the Budget has publicly denounced the program as corporate welfare asserting that the auto industry does not need the money, the same research is already being conducted by the Big Three, any technologies that do emerge as a result of PNGV will mainly benefit foreign manufacturers and foreign consumers, and a “Supercar” is unlikely to ever be mass-produced. Members of Congress such as John Kasich, (R-OH), John E. Sununu (R-NH) and Robert E. Andrews (D-NJ) are taking a pro-taxpayer stand by opposing this boondoggle.
The PNGV initiative has served as a smokescreen behind which the automakers have hidden for nearly a decade to protect themselves from more stringent CAFE (Corporate Average Fuel Efficiency) standards.
It is hard to imagine an industry less in need of government support for research than the auto industry given that they raked in nearly $20 billion in profits in 1999. Through PNGV, the government is supporting research that the industry would or should do on its own in response to market competition, and should be mandated to undertake to meet tougher environmental standards. Instead, automakers insist that CAFE standards should not be raised since they are voluntarily participating in the PNGV initiative and are pursuing its long term goal of developing a “Supercar” capable of achieving up to three times the fuel efficiency of today’s vehicles. In the meantime, the automakers choose not to deploy existing technologies that could dramatically enhance auto fuel efficiency and reduce greenhouse gas emissions.
It is unconscionable that to date the cost of PNGV is larger than the yearly combined budgets of the National Highway Traffic Safety Administration and the Consumer Product Safety Commission. More than a billion dollars in taxpayer money has been thrown at the highly capitalized auto industry through PNGV. Furthermore, there is virtually nothing to show for this expenditure—except a lost decade in the quest for heightened fuel efficiency. The PNGV program does not even require the deployment in mass production of the technologies it seeks to develop. In March 2000, GAO concluded that “although PNGV has made progress toward building production prototypes that meet many of the PNGV objectives, at this point it does not appear likely that such a car will be manufactured and sold to consumers.” Congress and the public should demand a much fuller accounting of what the auto industry has produced, than that which was provided by the GAO in its March 2000 report on the PNGV.
The structure of PNGV creates special anti-competitivenessproblems as the program provides the auto industry with an effective exemption for antitrust laws, with predictable and harmful consequences. Oligopolistic collaboration is prone to all kinds of pitfalls, from bureaucratic sloth to corrupt suppression of research—as the auto industry’s own history makes clear. In the 1960s, the Justice Department filed suit against the automakers for product fixing—for refusing to introduce air quality enhancing technologies. Among other claims, the Justice Department alleged that the U.S. automakers and their trade association had conspired “to eliminate all competition among themselves in the research, development, manufacture and installation of motor vehicle air pollution control equipment.” The 1969 consent decree prohibited the auto manufacturers from further conspiring to impede the development and marketing of improved air pollution control technology. The settlement agreement specifically barred the auto manufacturers from exchanging information on emissions control technology or from submitting joint statements to government regulatory agencies. Now PNGV is putting the government’s imprimatur on this kind of collusive behavior even though competition in research and
development is more likely to yield innovation than bureaucratized collaborative arrangements.
Why should the government waive antitrust laws and pay the highly profitable auto industry to collude on research that it could and should undertake on its own? What is the rationale for failing to extract guarantees that newly developed technologies will be deployed? Where are the procedural mechanisms to allow citizens to challenge this government-authorized and -funded corporate welfare collusion? What are the paybacks to taxpayers for this program? Seven years and $1.25 billion have gone into the program, and there is nothing to show for such taxpayer largesse. PNGV is corporate welfare at its worst.