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In Boost for Detroit, Obama to Buy Fuel-Efficient Fleet for Uncle Sam

Friday, April 10, 2009

President Obama yesterday announced plans to buy 17,600 American-made, fuel-efficient cars and hybrids for the government fleet, the White House's latest gambit to steer aid to the nation's beleaguered automakers.

The move came in a week when the administration accelerated efforts to revive an industry suffering it lowest sales in decades. Earlier this week Obama dispatched a team of 15 finance experts to Detroit to work with General Motors and Chrysler on restructuring efforts. On Wednesday, the Treasury Department began to release $5 billion in aid to parts suppliers. And yesterday Ed Montgomery, the president's new adviser on auto communities and workers, visited Ohio to discuss what assistance might be needed there.

By June 1, the government plans to spend $285 million in stimulus funds to buy fuel-efficient vehicles from General Motors, Ford and Chrysler. The purchase is slated to include 2,500 hybrid sedans, the largest one-time purchase of hybrid vehicles to date for the federal fleet.

"This is only a first step, but I will continue to ensure that we are working to support the American auto industry during this difficult period of restructuring," Obama said in a statement.

Each vehicle must have a better fuel economy rating than the one it replaces. The government aims to boost the new fleet's overall fuel efficiency at least 10 percent.

The new cars are intended to reduce the government's gasoline consumption by 1.3 million gallons a year and prevent 26 million pounds of carbon-dioxide from entering the atmosphere, the administration said.

The General Services Administration, which is buying the cars, will also pledge $15 billion to test advanced technology vehicles, such as compressed natural gas buses and all-electric vehicles, in the federal fleet. These orders will be placed by Sept. 30.

"We look forward to showing him the many GM vehicles we have that will fit this purpose," GM spokesman Kerry Christopher said. Industry-wide, car companies expect to sell less than 10 million cars and trucks this year, the lowest level in more than two decades. Consumers are avoiding showrooms, and major rental car companies have cut back on fleet purchases as businesses and vacationers cut back on travel.

In the first quarter, 271 U.S. auto dealers went out of business, according to the National Automobile Dealers Association. The association estimates that about 1,200 dealers -- primarily sellers of domestic brands -- will close their doors this year.

Although Obama's purchases will give U.S. automakers some needed sales, it won't bring the industry back up to the boom years when Americans bought around 16 million vehicles annually.

"On the big scale, no, that's not going to change anyone's bottom line," said George Augustaitis, an analyst for CSM Worldwide.

But it is symbolic.

"This is a welcome and important step that reflects the president's commitment to the survival and revitalization of the domestic auto industry," Rep. Sander M. Levin (D-Mich.) said in a statement.

The administration has already loaned GM and Chrysler a combined $17.4 billion, and has offered more if the companies can cut debt and reduce labor costs. It continues to work to increase the flow of credit to potential car buyers and dealers. The president has also pledged to work with Congress to pass a "cash-for-clunkers" bill, which would offer cash incentives to people who trade in their older, fuel-inefficient cars for cleaner models.

During his campaign, Obama spoke of his desire to convert the White House fleet to battery-powered vehicles within the year, as security permitted, and by 2012 he said he wanted half of the cars the federal government buys to be plug-in hybrids or electric.

Meanwhile, Cleveland Mayor Frank G. Jackson met with Montgomery yesterday and emphasized his desire that local businesses that benefit from government help reinvest in the Cleveland economy. "Those dollars turn around the economy multiple times and help support small- and medium-size businesses that are on the brink," he said.

Montgomery promised he would bring that message to Washington.

"He understands, he understands," Jackson said. - nation, world, technology and Washington area news and headlines

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So what does fuel-efficient mean?

Government To Buy 17,600 Domestic Vehicles

Fordescapehybrid The Obama administration announced it will use part of the $787 billion stimulus package to purchase new vehicles made by the Big Three.

The government will spend $285 million in taxpayers’ money to buy 17,600 fuel-efficient vehicles, 2,500 of which will be hybrids.

All the vehicles will be purchased through the General Services Administration, which deals with logistics and procurement. GSA will only buy vehicles from General Motors, Ford Motor Company and Chrysler.

So what does fuel-efficient mean? The vehicles purchased must be 10% more efficient on average than the vehicles being replaced.

That gives the government a lot of leeway in buying the gas-guzzlers it says Americans don’t want or need. For instance, the last-generation Chevrolet Suburban got 13-15 mpg, while the latest generation gets 16 mpg — so in government speak, a new Chevy Suburban is fuel-efficient.

Another issue is that by only buying cars made by the Big Three, the government is missing out on some great vehicles made in the U.S. by foreign automakers, like the Toyota Tundra and Camry, which are high on’s American Made Index and are arguably more “American” than the most fuel-efficient Big Three vehicle: The Mexican-built Ford Fusion Hybrid.

The government will try to buy all these vehicles before June 1, which should give a temporary boost to U.S. sales. However, keep in mind that 17,600 sales is just over half of what the Ford F-150 does even in an off month, as in the recent sales decline. So while the purchases couldn’t hurt, they’re not exactly going to solve the domestic auto industry’s problems.

According to the administration, this act will save 1.3 million gallons of fuel annually and prevent 26 million pounds of CO2 from entering the atmosphere.

That’s good, but the government still operates 642,233 vehicles that cost American taxpayers $3.4 billion a year, according to the Associated Press.

In terms of making the government’s fleet more fuel-efficient, this act appears to be mostly a symbolic gesture.

LINK:Government To Buy 17,600 Domestic Vehicles - KickingTires
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