GM chief: Taxing gas to $4 a gallon worth considering
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.
Remember how much fun this was? A Shell gas station shows prices over $4 a gallon in Annapolis, Md. on May 23, 2008.