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Let The Predictions Begin: How Will New CAFE Rules Affect Cars?


 

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While the details of President Obama's new CAFE and emissions regulations aren't yet known, TCC has been studying potential outcomes for some time. That search turned up testimony presented to the EPA by Eric Fedewa, VP, Global Powertrain Forecasts, from CMS Worldwide (a privately held company that provides independent market and forecasts to automakers and suppliers). Fedewa's testimony was in direct response to California's waiver request (A.B. 1493), but also applies in general to the President's new dictum.

Highlights (or lowlights depending on your take) from Fedewa's presentation note:
- Overall vehicle sales will be reduced because of added cost for compliance; approximately $2,000-3,000 per vehicle
- Consumer choice will be frustrated because vehicles will be legislated out of existence
- All C02 savings will have a negligible 0.6-percent impact on global C02 emissions

You can read Fedewa's testimony here below.

In the meantime, expect to hear the leaders of the industry say they're on board and smile as the government regulates a larger portion of the auto industry (of which it now owns two major players).

Candidate Obama promised change ... and now we see another facet of what that means?

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Testimony of Eric Fedewa
Vice President, Global Powertrain Forecasts
CSM Worldwide

As prepared for delivery on March 5, 2009 before the Environmental Protection Agency’s public
hearing on California’s request for a Clean Air Act waiver to regulate CO2 emissions.

Good morning.  My name is Eric Fedewa, and I am the vice president of global powertrain forecasts at CSM Worldwide.  I’d like to thank the panel for this opportunity to offer testimony today.

CSM is a privately owned, global company.  We are totally independent and an objective provider of forecasting services to 85 percent of the world’s automakers and suppliers.  We know the OEM and supplier cycle plans, what they’re capable of today, what they’re planning for the future and how such they can “stretch” to get there.  That includes gauging the impact of fuel economy and emissions policy, such as California’s waiver request (A.B. 1493).

There is no question for us that improving fuel economy and curbing CO2 is in the national interest. But our analysis suggests that allowing California to regulate CO2 emissions, and thus fuel economy, will further damage companies that are struggling, like GM, Ford, Chrysler and much of their supply base, and potentially destabilize relatively healthy companies like Toyota and Nissan.

We also are concerned that granting the waiver will create, to borrow a phrase from the National
Automobile Dealers Association, a “patchwork” of regulations that will require a unique compliance strategy for each state that follows California’s lead.

The impact of granting the waiver request will be far reaching:
• Overall vehicle sales will be reduced
• The product mix will shift to less profitable and even loss-making vehicle lines
• Consumer choice will be frustrated
• Compliance costs and complexity will increase dramatically.

This will put the billions of taxpayer dollars invested in the auto industry at even greater risk for what the Congressional Research Service concludes is a modest 2.5 to 3 percent impact on CO2
emissions nationally and a negligible 0.6 percent impact on global CO2 emissions.

For all of these reasons, we believe that setting a single national standard for fuel economy and
CO2 emissions, and aligning other policies to create a robust and stable market for fuel-efficient
vehicles, are in the national interest.

As the panel knows, automakers already have committed to a 40-percent increase in fuel economy by 2020, to an average of 35 miles per gallon.

For the initial phase from 2011 to 2015, the Department of Transportation says CAFE will reduce CO2 emissions by 521 million metric tons over the lifetime of the vehicles sold during those model years.

The American Council for an Energy Efficient Economy, for its part, estimates that the standards
will reduce CO2 emissions by 47 million metric tons annually by 2020 and 404 million metric tons annually by 2030.

At CSM, we estimate that by 2020, U.S. vehicles will be equal to today’s European and Japanese
fleets in terms of fuel economy and greenhouse gas emissions, which is a major accomplishment
given the significant differences in driving habits, fuel prices and consumer preferences that exist.

It’s important for the committee and the public to understand that delivering these improvements will be staggeringly expensive to the manufacturers.   Many of those costs will be passed on to consumers.


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Comments (2)
  1. "CO2"

    It works to get your point through when you focus on the negatives but a bit of objectivity wouldn't hurt. I believe the main objective is to reduce the enourmous amounts of foreign oil we use in this country and we've proven to be too stupid and ignorant to do that by ourselves especially when oil is "cheap". We're one dumb bunch of people (can't tell a difference between Saudi terrorists and the Iraqis), so I trust this man more than the mob to make decisions for us. Trucks will be required to get mid 20s I believe, so there will be enough metal even for the rednecks and their guns to retreat into the mountains to wait for the arrival of the Beast.
     
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  2. "Danger for US car makers"

    The issue for me is the weakness of the current American Car makers, other than Ford, more so if GM loses Opel/Vuxhaul. The reason being that they are severely under capitalised and the Obama treatment of bond holders will ensure no sane investor will invest in Car makers bonds in the future and the banks will be unwiling to lend, which means either they have to sell more shares and who in their right mind would buy them? Rely on more Gov't handouts (but this has to stop at some stage) or just rely on the products they have now and make cosmetic changes, what they have been doing wrong for a long time.
    If Chrysler survives, and is a big if, then it may do OK with Fiat sourced small cars or at least small car platforms. But it will take time and money to adjust those cars to US tastes.
    If GM loses Opel, it is doomed. It needs Opels expertise and volume to make profitable small cars. It cannot rely on Daewoo sourced products, they are nasty pieces of work, so GM would have to fight at the lower end of the market if it uses their products which means less profit and competing with the very nimble Hyundai and new chinese entrants. That will end bad.
    1 Ford program may help Ford, along with its alliance with Mazda to build better small cars and be able to tailor them to US tastes.
    While I suspect the Corvette will survive not sure any of the other American sports cars will so as I said before buy up your Camaro's, Mustang's and Charhers now, they will either die or be strangled. Japanese and Euro turbo 4's will probably dominate this space but wil not be of interest to a lot v8 lovers.
    SUV's? The only hope for this segment will be to adopt Deisel engines. The RAM and F-series Fords will only survive in either deisel or in weak v-6's and lose most of their appeal.
    Large rear wheel cars will go except maybe for big caddies but even then Cadillac will probably have to find an international partner.
    Pick up trucks, as much as many in carconnection bagged the G8ST, expect to see more car based pickups.
    Medium size cars will probably end up dominating because they offer the best mix of size, driving ability and fuel economy. Station wagons will probably re-emerge as the family car as the weight of vans and SUV's will go against them.
    I think the lack of money for design and development as well as little experience in building smaller cars wil hit the US car makers very hard. You may see some smaller European brands try and take advantage of their experience in small cars to re-enter the US amrket (eg Peugeot/Citroen, Renault and VW brands such as Skoda and SEAT).
    It will eb rgeat for Chinese car makers as they will be starting from scratch with money when US car makers don't have any. It woiuld be in the US best interest to get Chinese cars improted now, Why? Becuase theya re awful, get them in now while they make crap so their name is synonmous with crap.
    Tesla will either die or be swollowed by someone. Fisker will fail.
    Oh yeah and electric cars will prove to be bad choice.
    There is an alternative to CAFE though which migh undo much of thie bad news and help US car makers.
     
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