WASHINGTON, March 2 (UPI) -- The cost of providing healthcare to its retired workers is crippling U.S. carmakers and the federal government should cover part of the cost in exchange for investments in more fuel-efficient vehicles, Sen. Barack Obama, D-Ill., said.
The freshman senator told the Governors Ethanol Council Tuesday that the federal government should subsidize up to 10 percent of the retirement healthcare costs of U.S. automakers.
"In exchange, the auto companies would then use some of that savings to build and invest in more fuel-efficient cars," he said. "It's a win-win proposal for the industry -- their retirees will be taken care of, they'll save money on healthcare, and they'll be free to invest in the kind of fuel-efficient cars that are the key to their competitive future."
Obama is sponsoring a bill to that effect in the Senate, which has been sent to the Finance Committee. A companion bill in the House of Representatives is being sponsored by Rep. Jay Inslee, D- Wash.
"We all need to get serious here," Obama said. "Automakers need to get serious about shifting their technology to greater fuel-efficiency, consumers need to get serious about buying hybrid cars, and Washington needs to get serious about working together to find a real solution to our energy crisis."
Alan Reuther, legislative director for United Auto Workers, said the union supports the idea of the trade-off.
"The central idea that we support is the notion this can be a win-win situation," he said. "It's an exciting thing -- it is a way to break out of the quagmire of CAFE standards to make progress on jobs and the environment, a way to unite environmental movement and labor movement."
The Corporate Average Fuel Economy standards are applied on a fleet-wide basis for automakers and must average at least 27.5 mile per gallon for the manufacturer to comply with the standard. Violators are fined.
Obama acknowledged the difficulty of tying fuel economy standards to incentives like healthcare subsidies, which the bill does not attempt to do.
"Historically in Detroit there is strong resistance to CAFE standards," he said. "The minute you mention raising fuel-efficiency standards everybody gets kind of leery.
"They love the idea of getting help on the legacy costs, they don't like the string attached. We're trying to work through the argument that you can get something for nothing, that people expect that the auto industry be a partner in our move toward energy independence."
One of those partners could be the oldest U.S. automaker, Ford Motor Co.
"(Sen. Obama) is addressing two of the nation's greatest challenges, energy security and healthcare," Ford said in a statement. "... Like every large employer, we do face increasing healthcare costs driven largely by an uncompetitive health care market. We look forward to working with the senator in finding solutions to that dilemma."
General Motors, another member of the Big Three U.S. carmakers, has been advertising the growing investment of its flex-fuel line of vehicles, which can take a corn-based ethanol blended E85 fuel or regular gasoline. But Obama argued technology was not enough to make biofuels viable.
"Right now, one of the biggest costs facing auto manufacturers isn't the cars they make, it's the healthcare they provide," he said. "Health care costs make up $1,500 of the price of every GM car that's made -- more than the cost of steel."
GM would not comment on Obama proposal.
The idea of creating government incentives for increased production of alternative fuel technology is not unique to the Healthcare for Hybrids legislation.
Sen. Joseph Lieberman, D-Conn., has proposed a tax credit for building projects that employ fuel-cell technology. But while the trade-off idea is cropping up more these days, it may not be widely popular.
"This is a terrible idea," said Joseph Antos, health policy expert at the American Enterprise Institute, a conservative Washington think tank. "This is classic example of government interference in not one market but two."
Antos said companies such as GM are already making the investment in flex-fuel and hybrid vehicles, to the extent that it makes business sense.
"Is it really necessary to pay (automakers) to do what they are in a better position to do than Congress, to make a judgment of where they should put their money? Do they need a tax subsidy to do that?" he said. "The subsidy will substitute for money they would spend anyway. And I don't think it will cause accountants to be reliable in reporting costs for research and development, it will only cause them to re-label them."
But for Obama this cause for scientific innovation is a charge that needs to be led by the government much like the space race or the Manhattan project.
"The federal government can help ... we can reduce the risk of investing," he said. "We already do this in a number of ways by funding projects critical to our national security. Energy independence should be no different."
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