Thursday, January 19, 2012

CAFE Hearings Focus Opposing Viewpoints

Published January 19, 2012

By Jeff Cobb

In Detroit on Tuesday some strong arguments were heard either in support of or against the proposed 2017-2025 Corporate Average Fuel Economy standards and the auto industry is split on the issue.

The hearing will be followed by two more this month, and these are required by federal government regulators prior to finalizing fuel economy standards by the National Highway Transportation Safety Agency later this year that would mandate a fleet average of 54.5 miles per gallon (about 40 mpg on sticker) by 2025.

The proposed rules are poised to amend standards already set to rise to 37.5 mpg by 2016, and among automakers who’ve spoken in favor of stricter rule include General Motors, Toyota and Hyundai, while others are against, including Volkswagen and Daimler.

GM’s Vice President-Sustainability and Global Regulatory Affairs, Mike Robinson, told Wards Auto that GM would be open to accelerating the pace of fuel-economy improvement if substantial technological advancements are made in coming years.

“If there are breakthroughs in technology that exceed what the assumptions are, it works both ways,” Robinson said.

Presenting an opposing view, Don Chambers, chairman of the National Automobile Dealers’ Association (NADA) government relations committee said government projections of the actual cost of forcing fuel savings technologies into place are way low.

According to an NADA study to be released in February, the real costs will be higher by as much as 60 percent, which work out to new vehicle sticker prices rising by as much as $5,000, Chalmers said.

Or sliced another way, he contended that new CAFE rules will jack up monthly payments by $60 to $70 or more, and as others have said, this will result in unsold vehicles.
"I want to sell more fuel-efficient cars," Chalmers said. "If the customer can't get financing, it makes no difference."

The NADA represents 16,000 new-vehicle dealers who operate 32,500 franchises, and indeed several speakers spoke as representatives for larger sized organizations.

This would also include the United Auto Workers Union which has come out on the side of environmentalists and is in favor of the proposed CAFE rules.

UAW President Bob King said Tuesday that he is convinced the new standards will promote new technologies and thus help to create new American jobs.

“The proposed rules are sensible, achievable, and needed,” King said, adding “the incremental increase in the price of a vehicle will covered by the money consumers will save by using less fuel,” said King, who added the UAW not only wants clean factories, it also wanted clean lakes.

According to the Detroit Bureau, King has previously said the UAW needs to reestablish ties to various groups in the environmental movement to improve its place in American society.

“They are good for the auto industry and its workers, good for the broader economy, good for the environment and good for our national security,” said King. “The drive to bring innovative fuel-saving technologies to market is transforming the auto industry in the United States and creating good jobs from the research lab to the factory floor.”

And among those who have spoken directly from the environmental movement, Larry Schweiger, CEO of the National Wildlife Federation was quoted as touting the benefits of the federal enforcement of green goals that is the CAFE standard.

“With these rules in place, there’s a much smaller chance you’ll see ugly pictures of beautiful birds covered in petroleum,” said Schweiger. “We’ll reduce greenhouse gas pollution by 2 billion tons, and cut our consumption of oil by 3.4 million barrels a day. That will reduce the need for risky drilling in fragile habitats,” Schweiger said.

Whether this is the case or not, Daimler AG and Volkswagen – which already sell some of the most fuel-efficient vehicles in the U.S. – won’t back the CAFE proposal because there’s no incentive for diesel-fueled vehicles.

And for his part, the head of the Alliance of Automobile Manufacturers, Mitch Bainwol, said at the end of the day, consumer buying habits will ultimately decide whether automakers can actually meet the CAFE rules.

Bainwol proposed a thorough mid-term review of the CAFE policy to see if the rules actually relate to fuel price trends, technological advances and consumer buying habits.

“Looking into the future, consumer purchasing patterns will be the biggest unknown,” he said, adding that in the past CAFE has had a hit-or-miss track record, and looking at past lessons could help portray a clearer picture of what’s to come.

Attempting to Legislate Enlightened Practices

Two more hearings are scheduled: one on January 19 in Philadelphia, another on January 24 in San Francisco.

The federal initiative mirrors goals being set in Europe to regulate greenhouse gases and mandate wiser fuel usage habits.

So what do you think of this? Are mandates that will lead to top-down research and development of green vehicles a good idea or not?

The auto and its supporting industries want to sell cars. The government, environmentalists and others who side with them are mindful of diminishing petroleum supplies and pollution.

Issues that will affect energy security, the trade deficit, technological competitiveness, whether money is made or lost, and more are being decided.

Is the government’s approach the best that it could be? Is it being overbearing and meddling where it ought to let free market forces decide? Or is the truth somewhere in between?


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