GM chief: Tax­ing gas to $4 a gal­lon worth con­sid­er­ing

The Washington Times Weekly - - National - BY DAVID M. DICK­SON

In a sur­pris­ing turn­about, Gen­eral Motors Corp. Chief Ex­ec­u­tive Of­fi­cer Rick Wagoner said March 17 that in­creas­ing the fed­eral gaso­line tax to guar­an­tee a min­i­mum price of $4 a gal­lon is an idea “wor­thy of con­sid­er­a­tion.” Few in­dus­tries have been more vig­or­ously op­posed to hik­ing the gas tax than au­tomak­ers. But GM, which is bet­ting its fu­ture on high-priced, en­ergy-ef­fi­cient cars, has switched its his­toric view and is now open to the fed­eral gov­ern­ment set­ting a new, higher floor on fuel, which would act as an in­cen­tive for con­sumers to buy hy­brid and elec­tric cars. “It’s great that smart peo­ple are talk­ing” about ideas to con­serve en­ergy, Mr. Wagoner told re­porters. He was re­fer­ring to re­cent com­ments by Michael Jack­son, the chief ex­ec­u­tive of Au­toNa­tion, who rec­om­mended a huge in­crease in the gas tax to en­cour­age Amer­i­can con­sumers to buy fuel-ef­fi­cient ve­hi­cles. “Michael Jack­son is a smart guy,” and his idea de­serves to be con­sid­ered, Mr. Wagoner said at a brief­ing spon­sored by the Chris­tian Sci­ence Mon­i­tor. When the price of gaso­line jumped above $4 a gal­lon in July, Au­toNa­tion, the na­tion’s largest chain of new-car dealers, had a two-day sup­ply of Honda Civic gaso­line-elec­tric hy­brids. By the end of the year, when gas prices dipped sig­nif­i­cantly, Au­toNa­tion had a 148-day sup­ply of hy­brids. “I have fuel-ef­fi­cient ve­hi­cles parked at my deal­er­ships as far as the eye can see,” Mr. Jack­son was quoted as say­ing in the Wall Street Jour­nal on March 17. “I can’t give them away.” Gas priced at $4 a gal­lon would be “a good start,” Mr. Jack­son said. The chair­man and CEO of Gen­eral Motors did not dis­agree. The av­er­age price for a gal­lon of reg­u­lar gaso­line was $1.91 on March 17, ac­cord­ing to the En­ergy In­for­ma­tion Ad­min­is­tra­tion. To reach $4 a gal­lon, the fed­eral gas tax would have to in­crease from 18.4 cents a gal­lon to­day to more than $2 per gal­lon. A GM spokesman ac­knowl­edged that the au­tomaker is think­ing about the price of gaso­line as an in­cen­tive to buy hy­brids. “Ev­ery­body talks about $4 a gal­lon be­cause, un­til gas prices hit $4, no­body saw any shift in con­sumer be­hav­ior,” said Greg Martin, GM’s Wash­ing­ton, D.C., spokesman. “Only then did peo­ple put fuel ef­fi­ciency front and cen­ter.” The En­ergy In­de­pen­dence and Se­cu­rity Act of 2007 man­dated an “ag­gres­sive in­crease in mileage stan­dards,” Mr. Martin said. As a re­sult, GM is build­ing fuel ef­fi­ciency into its en­tire fleet. How­ever, a lot of fac­tors that raise fuel ef­fi­ciency “are not par­tic­u­larly sexy,” he said, adding that it would take $4-a-gal­lon gas for the mar­ket to shift con­sumer be­hav­ior. GM has been strug­gling to stave off bank­ruptcy. It has laid off thou­sands of work­ers and bor­rowed $13.4 bil­lion from the U.S. Trea­sury’s Trou­bled As­set Re­lief Pro­gram to main­tain op­er­a­tions. To qual­ify for an­other $16.6 bil­lion in aid, which the au­tomaker re­quested last month, GM must prove to a gov­ern­ment task force by March 31 that it can be vi­able over the long term. Mr. Wagoner down­played the idea of a GM bank­ruptcy fil­ing. Debtor-in-pos­ses­sion fi­nanc­ing, which GM would need to fund op­er­a­tions while in bank­ruptcy, would be “po­ten­tially huge” and only the gov­ern­ment could pro­vide it, he said. Even the “fast, prepack­aged” ver­sion of bank­ruptcy would “bring sig­nif­i­cant risk,” he said. If it couldn’t be com­pleted in 30 to 60 days, “a long pe­riod of bank­ruptcy could bring about an end to the com­pany,” Mr. Wagoner said, cit­ing re­search show­ing that con­sumers would hes­i­tate to buy cars from a bank­rupt com­pany. Peo­ple who ca­su­ally talk about bank­ruptcy have never been bank­rupt, said Mr. Wagoner, whose com­pany lost $38.7 bil­lion in 2007 and $30.9 bil­lion in 2008. To achieve long-term vi­a­bil­ity, GM is ne­go­ti­at­ing with its stake­hold­ers, in­clud­ing the United Auto Work­ers, its dealers and its bond­hold­ers. “Ev­ery­body’s got skin in the game,” he said. Mr. Wagoner de­clined to de­scribe ne­go­ti­a­tions with bond­hold­ers, who re­port­edly have been balk­ing at gov­ern­ment de­mands that they take a 67 per­cent hair­cut. He did ob­serve that GM’s bonds are trad­ing at about 15 cents on the dol­lar. GM’s stock, which closed at $2.41 on March 17, has lost 94 per­cent of its value from its Oc­to­ber 2007 peak of $42.84 per share.

MARY F. CALVERT / THE WASH­ING­TON TIMES

Re­mem­ber how much fun this was? A Shell gas sta­tion shows prices over $4 a gal­lon in An­napo­lis, Md. on May 23, 2008.

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