Horace Cooper: Three Ways to Turn Around the Auto Industry
By Horace Cooper
Legal Commentator/Senior Fellow, National Center for Public Policy
Former Bush Administration Labor Official

3. Instead of having U.S. government backed warranties, we should lower the costs of servicing and maintenance of all vehicles.

The so called "Motor Vehicle Owners' Right to Repair" should be enacted to require that both dealer and non-dealer repair shops can provide automobile repair service. President Obama's decision to put the federal government in the business of "backing" the warranties of American automakers is exactly the wrong policy. It perpetuates a monopolistic practice and shifts the burden of keeping the automakers operational to all taxpayers (even those who can't afford to buy a new car) all the while doing nothing to encourage potential customers concerned about repair and servicing costs.

Because new cars and trucks are increasingly sophisticated virtually every aspect of the vehicle is either monitored or controlled by computers. The upside is that these vehicles are far more efficient, environmentally friendly and reliable than ever before (even without the government mandates).

But the systems necessary to keep them in safe and efficient working condition requires access to complete and accurate repair information from the car companies. The auto industry has refused to make this information available outside of their dealer network even on a fee basis. Notably the cost of dealer service is a major hindrance to auto buying even for late model used cars (which are increasingly just as sophisticated as new vehicles) and this is especially true during this recession.

The costs to car owners when they have their vehicle repaired at the dealership is estimated to be as much as 25 percent higher with labor charges alone, according to a study comparing dealer repair tags compared with those of an independent service center. And the problem is worse for those who live in rural areas as the added cost of gas and travel time to the nearest dealership is an added burden.

There is no safety issue involved here - in fact just the opposite. Some newer vehicles are not getting properly serviced at all as job layoffs and recession worries cause them to delay or put off altogether a costly dealer servicing visit. While this monopolistic practice might have been overlooked during a boom time now that the taxpayers are subsidizing the automobile industry this practice must come to an end.

In conclusion, in essential respects US policy towards the automakers is shortsighted and in most respects unlikely to accomplish any other objective than saddling the taxpayers with ever greater levels of debt. Each of these three solutions focus on returning the American automakers back to profitability by doing what they do best - selling the types of automotive products that consumers want without unneeded mandates and monopolistic interventions.

After dismal car and truck sales in 2008, and with demand off more than 33 percent in the first three months of this year already unless we want to see the ultimate demise of the auto industry major industrial policy changes are in order.