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Business Review Board / Jul. 1, 2016

Picking Winners and Losers in the Car Market

VW-Tesla, GM-Toyota — there's a common theme.

Volkswagen deservedly landed in hot water last year for creating a method of foiling EPA emissions testing. The German automaker recently settled for nearly $15 billion to make things “right” — i.e., fix the cars by making them less powerful and efficient. “But this wouldn’t be the Obama era if the settlement didn’t include some insider dealing for green energy,” writes The Wall Street Journal. Here’s what they mean:

The EPA and CARB say consumers can also keep their noxious Volkswagens if they like them—for now. However, regulators are bribing consumers to return their cars for a complimentary cash payment of between $5,100 and $10,000. The settlement warns that “individual states” might require fixes “at some point in the future.” So drive at your own risk.

There’s more. VW will also have to pay $2.7 billion into an environmental mitigation trust — state distributions are based on population — for programs that aim to reduce NOx emissions, namely vehicles, boats and machines that run on alternative fuels as well as hydrogen fuel-cell and electric car charging equipment. Tesla maintains 655 supercharging sites nationwide.

If consumers don’t agree to junk or fix their cars, VW will have to pay more to the slush fund. If merely 75% of consumers respond to VW’s recall, state governments get to spend an extra $985 million on green welfare.

Looking at the fine print, upscale electric car maker Tesla potentially stands to benefit from this arrangement, just as it does from other government subsidies. And that wouldn’t be the first time Barack Obama’s government has played favorites with automakers. Compare the settlements reached by GM and Toyota for deadly malfunctions. “Government Motors” got off with a light slap on the wrist compared to the smackdown Toyota suffered. So if we’ve learned anything in the Obama economy, it’s that he and his cronies pick the winners and the losers.

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