GM SPEAKS UNTRUTH TO POWER / THE WALL STREET JOURNAL OP EDITORIAL

GM Speaks Untruth to Power

Forget the techno-babble. Detroit needs to engage in straight talk about regulation.

By Holman W. Jenkins, Jr.     

 

General Motors CEO Mary Barra at the Consumer Electronics Show in Las Vegas, Jan. 6. Photo: Alex Wong/Getty Images

 

General Motors Co. GM -0.76 % last week disclosed its $500 million investment in the ride-sharing startup Lyft, and the announcement was a gem of obfuscatory PR that could only have been cooked up by GM itself. The two companies, it said, were joining up to create a “network” of driverless, ride-sharing robot vehicles.

Let’s see: Ride-sharing is largely an urban phenomenon, but congested urban settings will not soon be hospitable to robot cars. Autonomous vehicles will be practical sooner in exurban environments, particularly on the freeway, but these environments don’t fit the ride-sharing business model. In short, GM and Lyft are selling vaporware for the more gullible sort of tech geek.

Don’t fight the meme! And the meme today is all about electric cars, self-driving cars, ride-sharing. But GM’s puffery is also typical of an industry deeply habituated to public disingenuousness as part of its strategy to survive the relentless onslaught of politicians and their regulations.

Never mind that the Big Three earn most of their sales and profits from pickups, and pickups are not especially urban or shareable (next time you’re in Manhattan, count the number of Ford F150s on the streets). Also, that self-driving cars are still a long way off and far from ready to handle snow, rain, poorly marked and changing roads, or human traffic. At a recent Hyundai-sponsored competition in South Korea, all but four of 12 vehicles failed on Day 2 because, as one blog put it, “a strange liquid [i.e., rain] fell from the sky.”

Electric cars’ enlistment in the climate wars makes little sense either: Two-thirds of America’s electricity is produced by burning fossil fuels, and U.S. passenger cars account for less than 2% of global emissions anyway. Converting them to electricity solves nothing.

Detroit as an industry has long put up with unusually close public and political attention and has developed PR habits that amount to a comprehensive smokescreen around its decision making and internal motives. That especially means not talking about what’s really on its mind.

GM CEO Mary Barra played the game during 2014’s congressional Cobalt hearings when she declined to acknowledge the troubled, money-losing small car was built by GM only to meet federal fuel-economy mandates.

The auto industry has learned much from Elon Musk, who does not let a month go by without a gee-whiz announcement, if not a real announcement then a fake one about plans for a hyperloop or something.

The real reason, however, for GM’s Lyft deal is to use GM’s money to strengthen the No. 2 player in ride sharing, Lyft, in case the No. 1 player, Uber, takes ride-sharing in a direction unfriendly to GM.

Uber has been noticeably standoffish from Detroit. It also has $10 billion in investor cash in its pockets. Yet so credulous has been the oohing-and-ahhing in the tech media, some bloggers actually accuse GM of intending to rush robotic vehicles into production to put Lyft’s current drivers out of work.

In fact, the deal is reminiscent of the Big Three’s hurry in the late 1970s to buy rental-car agencies (since unloaded). GM, which took stakes in National Car Rental and Avis, sought to assure itself of a dumping ground for the money-losing sedans it was obliged to churn out under fixed-cost labor contracts and government fuel-economy mandates. GM’s Lyft deal has less in common with GM’s big investments in Electronic Data Systems and Hughes Aircraft in the 1980s, which were genuinely aimed at bringing advanced technology into GM.

This is a good moment to notice something: Today’s pie-in-the-sky burble about fully autonomous vehicles notwithstanding, robotic technology has actually been remarkably slow to take hold in the auto sector. GM’s Hughes affiliate demonstrated a practical collision-avoidance system for autos more than 20 years ago. Such systems are only reaching consumers now.

A big factor—unless economics is a deluded field of study—is the forced diversion of billions in vehicle investment dollars into fuel economy, which Detroit should be loudly criticizing. Take the Obama rules requiring 54.5 mpg (from today’s 24.9) by 2025: These are expected, depending on how much testing fakery and loophole-exploiting the government allows, to cost auto makers $3,000 to $5,000 per car, crowding out lots of features consumers might prefer for their $30,000 sticker price.

The industry is so cautious, for political reasons, about admitting this reality that it’s a wonder the SEC doesn’t place its leadership in handcuffs. But if $2 gasoline persists for more than a couple of years, a financial calamity lies ahead for an industry that won’t be able to sell its mandated electric and high-mileage vehicles for anything resembling the cost of building them.

In welcoming visitors to this week’s Detroit auto show, the Detroit News warned that “a sudden reversal in the industry’s now-robust health” could be just around the corner. No kidding.