GLENN: So we have now a new CAFE standards coming for the auto industry. Sure, the auto industry is ailing, yes. The auto industry is really having a hard time selling cars, sure. But now what our federal government has decided to do is to add another $1300 of cost onto each vehicle that General Motors and Chrysler and Ford can sell. This is fantastic. New CAFE standards which, Stu, how does this work? You have to ‑‑ you have to have how many of the cars?
STU: It's the average of your fleet. So they ‑‑ you can have a car that gets 10 miles a gallon but you better have one that gets 80 miles a gallon to even it out essentially. It's the entire fleet.
GLENN: Is it what's sold or what you make?
STU: Yeah, see, I don't think ‑‑ I'm not 100% sure on it. I believe, because you could just go and make a car that gets 500 miles per gallon that no one would ever buy and sit one on each lot and get ‑‑
GLENN: That's a good idea.
STU: That's a great plan, but I believe they do it by sales. There's some formula with sales on it.
GLENN: But that doesn't ‑‑ people don't want to buy a ‑‑ I mean, you can have ‑‑
STU: We will make them buy them.
GLENN: Okay, wait, this hurt the car companies. They are saying that one of the reasons why they were having such problems, or they were saying before they were owned by the U.S. Government that one of the reasons why we're having problems is because of the CAFE standards. What was it, 32 miles to the gallon had to be the average miles per gallon?
STU: You are saying the one Bush did was 35.
GLENN: 35 miles a gallon. And they were saying, we can't hit that standard by 2020, that's ‑‑ they all said we can hit that standard by making a car that is less safe. We'll make it with thinner metal, it will be less safe, it will be a crap box. It will be a deathtrap. And it's costing us a lot of money to do it. So now this was one of the problems that they had and now the government comes in today at the height of the problems and says, "By the way, new higher CAFE standards. It's going to be 42 miles to the gallon." What does the Prius get right now?
STU: Let me check that real quick. It's between ‑‑
GLENN: It's like 43 miles to the gallon, I think.
STU: It might be more than that but I know they used to have over 50 and ‑‑
GLENN: But that's not real ‑‑ yeah, because it wasn't real. Let's just say they get 48. That's the Prius! Your average vehicle. How are you going to do that when you have an SUV? SUVs are a thing of the past. You won't be able to produce a car that makes 13 miles to the gallon. And those are the cars that people want. Let's just play this out in our heads, gang. So if American car companies have to produce crap boxes that nobody wants to drive ‑‑ remember, the Prius isn't selling because of fuel standards. The Prius is being sold because people who buy it say it says something about me. It's an ego car, not an eco car. An ego car. So now, what happens? They are not selling Priuses left and right. They were a good selling car but that wasn't the biggest selling car. That wasn't the car everybody was scrambling for. So now if half of your fleet has to be that, what happens when a car company comes in ‑‑ do all car companies have to ‑‑ does half the BMW have to have that, Stu, to sell here in the country?
The government approved SUV of the future?
STU: You are asking questions, I would think so. Any car manufacturer that ‑‑
GLENN: No, but they couldn't say half of the fleet has to have that.
STU: Well, the average.
GLENN: Well, the average.
STU: Because the BMW has hybrids, don't they?
STU: I think they do.
GLENN: I mean, I think they are brand‑new.
STU: Right, I think so.
GLENN: I think Mercedes is coming out with one.
STU: I know Lexus has a hybrid.
GLENN: Yeah, but half their fleet is ‑‑ I mean, the average of their fleet is not ‑‑
STU: There's no doubting that this is an incredible new hoop for car dealers to go through.
GLENN: So what happens? How do they possibly hit this? And if you are not doing this to the car companies overseas, then how is an American car company supposed to survive? Can you find out? Who would know? Who do we know that would know the ‑‑ see if Joe even knows. Joe might know.
STU: The CAFE standard calculation?
GLENN: Yeah. If it matters to what happens overseas.
STU: I don't think it matters ‑‑
GLENN: If you're a German car company ‑‑
STU: Yeah, I think if you want to sell them here, I think it applies. It doesn't matter what you're doing in Germany. But I mean, these cars are trying to come up with their own ‑‑ some of them are still following hydrogen, some of them are doing electric cars. Everyone's coming up with their new fancy car.
GLENN: We're giving everything away. We're stopping what we're trying to do now is just pursue electric cars. We've given up now on hydrogen. I've driven the hard general car. What a waste of money that was for GM, huh? And so now we're going for the electric car. GM is being told that the government thinks the electric car is too expensive, the new Chevy Volt. Well, who the hell are you to even say that? Oh, take that back, think major shareholder.
STU: Yeah. Exactly. GM, first of all, GM is going to go ahead with their hydrogen car.
GLENN: How are they going to do that? They are going to regulate hydrogen stations. They have a partnership with Shell. They are going to regulate the hydrogen stations.
STU: Yeah, that will make them a nightmare. Looking at the way they calculate CAFE was your last question. So they take the gross ‑‑ of course it gets complicated. It is the government. But basically they take the total production volume. So they have to produce these cars, okay? And so it's not just by model. Total production volume. Then they divide it by the weight over the fuel economy for each model. You got that? So if you make 350,000 cars, 130,000, gross ‑‑ it's just so governmenty, I can't even take it. Gross vehicle weight, okay, is divided by the miles per gallon. You add all the cars up. Then that number is at the bottom of the fraction ‑‑ I don't even know how to say that ‑‑ of the total production of cars. That didn't help at all, did it?
STU: After I said it, I realized ‑‑
GLENN: No. Do they do it now for the foreign cars?
STU: All right, hold on. I'm on the calculator.
GLENN: The only way they are going to do this is if they start forcing you to buy the cars that you don't want. Americans don't want ‑‑ how are you going to take your family around in a Prius? How are you going to be, you know, going to the soccer game in a ‑‑ I mean, look. Other countries do it, but we're not other countries! Other countries also live on top of each other like they do here in Manhattan, in buildings that are 500 years old. That's not America.
You don't have an answer, do you? You are looking at it. You are like trying to figure it out. You are like, I don't know.
STU: Well, there's another, yet another wrinkle to this which is ‑‑ I know this is confusing. But anyway, so let's say BMW comes in and they are over the CAFE standards. They can pay a fine to get out of them essentially, at least that's the way it currently is. So you've got ‑‑ it's 550 per tenth of a mile per gallon for each tenth under the target value times the total value of ‑‑
GLENN: What are you even talking about?
GLENN: How do you run a business this way?
GLENN: How do you run a business? Look, China is going into electric cars. What are we doing? We're going to go into electric cars. China is going to be able to build electric cars far cheaper than we're ever going to be able to do it. So happens? Do we say no to Chinese cars? Is that what we do? Do we start putting tariffs up? Do we start being protectionist? That is the end game. You can't survive. Business cannot compete in this atmosphere unless you become protectionist. The minute we become protectionist, everyone becomes protectionist.
Have you seen the latest news on China and Brazil? China and Brazil are going to start doing business with each other but they are going to use their own currencies instead of the United States dollar. They are not going to trade in dollars anymore. China is moving towards the front of the pack, and what are we doing? Look, why are we developing our country? And following the model of California! Can we not see that the California model doesn't work! I mean, it's not conjecture. It's not like, "Well, I don't know. Let's see." It doesn't work!
President Obama is meeting today with Arnold Schwarzenegger, that conservative of conservatives, where he's going to beg the president, please enslave my people. This is the opposite of the Moses story! Let my people go. No, Schwarzenegger comes and says, "Don't put the giant chains around the necks of my Californian people." We have a governor going to beg the president to enslave a state and he will be more than happy to do it. And we will then use California as the model for the United States government! Look at how they spent. Look how they drove business out. We should do that for the ‑‑ for all 50 states. What has happened to us? Where did we just unhinge from common sense entirely?