GM's Lutz: Higher gas tax would help

By Chris Isidore, senior writer


DETROIT (CNNMoney.com) -- Bob Lutz is generally not a close ally of environmentalists.

The vice chairman of General Motors is a frequent critic of fuel economy rules and once declared that global warming was a "total crock" of excrement, although he used a more common and colorful word in that description.

chevrolet_volt_with_lutz.03.jpg
GM Vice Chairman Bob Lutz with Chevrolet's electric hybrid Volt.

Lutz also declared in 2004 that hybrid cars didn't make sense to sell or buy. And just this week, as he and GM were hyping the new electric Chevrolet Volt, at Detroit's North American International Auto Show, he declared that internal combustion engines would dominate the auto industry for the next 20 years, no matter what advances were made in electric vehicles.

So Bob Lutz wouldn't seem a likely candidate to argue for significantly higher gasoline taxes, or to suggest that such taxes would be a good thing for the auto industry. But in a meeting with journalists at the auto show Monday, he did just that.

"If the rise in gasoline prices is gradual, I think that all of us in the industry would frankly welcome that, because there is nothing more illogical than forcing fuel-saving technology when gasoline is extremely cheap," he said when asked about any concerns about oil again rising above $80 a barrel.

Lutz was asked if that means he would favor higher gasoline taxes, as in Europe where taxes drive fuel to more than $5 a gallon. He said he couldn't speak for GM, but he said he saw a lot of value in a steady tax rise to much higher levels.

"You either continue with inexpensive motor fuels and have to find other ways to incent the customer to buy hybrids and electric vehicles, such as the government credits," he said. "Or the other alternative is a gradual increase in the federal fuel tax of 25 cents a year, which in my estimation would have the benefit of giving automobile companies a planning base, and giving families that own vehicles a planning base."

Lutz said if a car buyer knew that gas that costs $2.75 a gallon today would likely go to $3 next year and $3.25 the year after that, it would prompt some buyers to say: "You know sweetheart -- this time we should go one size down because we know what fuel is going to do."

The biggest problem hitting automakers from rising gas prices, Lutz said, is the fact that consumer preferences change suddenly when gas prices rise and fall, which makes it impossible to match supply of vehicles to demand.

"Every time gas prices go back down, everybody starts buying big stuff again. Gas prices go up a buck, the big stuff is unsellable and everyone wants small cars. Go figure," he said. "It's like the collective memory is about three weeks long. We can't run a business that way."

But the chances of Washington following Lutz's recommendation are slim to none, let alone his finding support for his argument elsewhere in Detroit.

Transportation Secretary Ray LaHood, who spoke at the auto show Monday morning, said that the Obama administration was not considering any rise in gasoline taxes. And House Speaker Nancy Pelosi also dismissed the idea at a press conference at the show Monday afternoon, saying there was no support in Congress for an increase gas tax.

Lutz said he's not surprised the idea isn't likely to go anywhere.

"Fuel taxation is the third rail of politics," he said. To top of page

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