Study: Fuel Efficiency Will Be Big For U.S. Automakers

June 23, 2009

Walter McManus and Ron Kleinbaum from the University of Michigan's Transportation Research Institute have conducted a study of the auto industry, and the results are sure to cause some controversy. Among their findings is this particular gem: "The more fuel-sipping cars they make, the more money the Detroit 3 can rake in."

Yes, McManus and Kleinbaum argue that rather than being a burden, higher fuel standards actually weigh in automakers' favor. Their logic? "[T]here is substantial evidence that the domestic auto industry has ignored customers' demands for fuel economy, and has consistently undervalued the impact of fuel economy on their profit potential." Or in layman's terms: customers have been clamoring for fuel-efficient vehicles, and if the Big Three offer them, sales will go through the roof! In fact, McManus and Kleinbaum estimate that boosting fuel-efficiency by 30% - 50% (via federal mandate) could generate $3 billion per year in additional revenue for Detroit.

We're not sure what the duo offer in the way of "substantial evidence", but if it's accurate, it flies in the face of the prevailing belief that customers will only buy fuel-sippers when gas hits a certain price (generally, around $3 per gallon). On the other hand, some of the study's other arguments are pretty conventional and merely confirm what many already believed--for example, that General Motors is too bloated and burdened with bureaucracy to make a speedy transition to fuel-efficient vehicle production.

McManus and Kleinbaum ought to know a good bit about that last point, since both are former GM employees. As for the rest of the report, we'll have to wait until we get our hands on a bona fide copy.

[DetNews]

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