CAFE Won’t End Automakers’ Troubles

December 18, 2007
President Bush’s signature on the new energy legislation raising the Corporate Average Fuel Economy (CAFE) mileage standard won't end the industry’s fuel-economy torment.Tom Stephens,, the executive in charge of General Motors’ powertrain group, said this week the real challenge for the auto industry is the new legislation calling for limits on greenhouse gas, which is pending in California and 20 other states.

The California greenhouse gas proposal amounts to a 43-mile per gallon fuel economy standard, one senior GM executive told TheCarConnection.com.

So far, the industry’s efforts to block the California proposals in court have been frustrated. Only last week, the industry lost a key fight in a Fresno courtroom when a federal district judge ruled that California had the right to apply its own fuel-economy rules under federal law.

The continuing court battles and new rulings by the U.S. Environmental Protection Agency, giving states more latitude to limit emissions of carbon dioxide, will have a huge impact on the industry, Stephens said.

“We’ll try to do whatever we can to satisfy the customer base. Obviously we’ll do it inside whatever regulatory activity we’re forced to live with,” Stephens said.

California’s greenhouse-gas legislation applies the standard across the entire fleet and doesn’t have the divisions and subdivisions that will allow automakers to meet the new federal fuel-economy standards embedded in the new energy legislation.

Thus, while GM can probably offset most of the impact from the new CAFE legislation by selling “300,000 or 400,000 Volts” and some hybrid SUVs, there is no way to meet the California standards without a dramatic downsizing of vehicles that would reach across the entire vehicle lines, noted the GM executive.

On the national level, the new standards adopted by Congress will boost fuel-efficiency guidelines by about 30 percent in the first substantial change to CAFE in three decades. New vehicles currently must meet a 27.5-mpg average for cars and 22.5 mpg for light trucks.
Automakers have expected to see some kind of increase in the CAFE standards since last spring. Efforts to water down the standards, however, fell short when Rep. John Dingell, (D-Mich.), the industry long-time champion, decided against an all-out fight with Democratic Speaker of the House Nancy Pelosi, who was a major supporter of the higher standards.

Thus, there was not a lot of public weeping on the part of the industry when Congress finally sent the bill to the President.

"Ford has worked with lawmakers to enact nationwide requirements that provide a significant increase in fuel economy while protecting consumers’ choices of cars, SUVs and light trucks. We are working to do our part to help reduce greenhouse gases and U.S. dependence on foreign oil,” the automaker said. “This legislation will provide one clear requirement for increasing fuel economy and provide greater certainty for our product planning. Ford is committed to providing safer, more fuel efficient, quality products – in high volume – that customers want and value.”

Meanwhile, Phyllis Cuttino, director of the Pew Charitable Trusts Campaign for Fuel Efficiency, noted that "Just two years ago, 62 members of the Senate opposed any increase in fuel efficiency.  Just six months ago, the auto industry was saying 35 miles per gallon was 'unachievable.'  Today, in a triumph of policy, process and politics, an energy bill has passed the House that will save 1.1 million barrels of oil a day, $25 billion for consumers annually at the pump in 2020.

"Some may criticize this bill for falling short, but they fail to recognize this significant achievement, unimaginable just months ago, and ignore its implications for the larger climate change debate," Cuttino added.

“It makes the auto industry the first major sector of the American economy that will reduce its global warming pollution -- by the equivalent of taking 28 million cars off the road. There's nothing underwhelming about that,” she said.

--Joseph Szczesny

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