Alcohol lobbyist fighting GM

BY JEFFREY McCRACKEN

FREE PRESS BUSINESS WRITER

February 24, 2005

http://www.freep.com/money/autonews/gmadd24e_20050224.htm

Combating Drunken Driving

• General Motors Corp., which is a lightning rod for criticism on everything from air pollution to auto quality, has now become a target for, of all things, one of its charitable efforts -- its financial and political push to combat drunken driving.

• A national campaign -- called MADDatGM -- has been launched with the backing of 17,000 bars, taverns and liquor stores to attack the automaker and Mothers Against Drunk Driving, mostly for their efforts to lower legal blood-alcohol levels. The effort has so far been a low-key one, but GM officials say the Washington-based trade group behind it is threatening that its members will quit buying GM vehicles for corporate fleet use -- which could cost the automaker millions of dollars.

Prohibition?

• The campaign, which already has a Web site and says it will distribute posters and coasters at various stores and bars, argues that MADD is no longer just trying to halt drunken driving, but has become a prohibitionist group that wants to criminalize all drinking.

• The campaign argues that GM, with its long-running support of MADD, supports prohibition and that tavern or liquor-store owners should think twice about buying GM cars or trucks.

Response

• MADD denies that it's trying to halt social drinking, saying its mission is focused on three things: preventing drunken driving, helping victims of drunken driving and halting under-age drinking. MADD notes that the MADDatGM push is from businesses that make money off alcohol sales and are angry MADD successfully lobbied for tougher national blood-alcohol levels for drunken driving.

• GM is one of MADD's top corporate sponsors, donating over $3 million the last five years and placing executives on MADD boards. GM spokesman Alan Adler says the automaker supports MADD because "our focus is on drunk driving and the 17,000 people killed each year by drunk driving on the highways."

The Economics – Market Failure

• Look at demand and supply of liquor.

• You get market price and market quantity.

• You can treat the alcohol level restrictions as a tax, … BUT

Quantity

Price

D S

P0

Q0

D´

DW

The Economics – Market Failure

• Don’t liquor sales have an external cost?

• What is it? Traffic fatalities and damage.

• This is a cost that is not priced!

• As a result, market equilibrium at P0 Q0 gives us too much drinking and too much driving.

• We want to be at Q1, where the properly accounted supply and demand are equal. Quantity

Price

D S

P0

Q0

D´

DW

S´

Q1