The Auto Industry Talks Some Sense into the Obama Administration

An agreement on car mileage rules can save money and jobs—thanks to industry.

The automotive industry managed to talk a bit of sense into the Obama administration and thereby save thousands of jobs and probably billions of dollars.

The administration in 2009 had brazenly announced it would change the law for fuel standards, raising the future Corporate Average Fuel Economy (CAFÉ) standard by four years. Then, earlier this year, the administration laid out four mileage levels—as if to see what it could get away with.

It had called for future (CAFÉ) standards with the highest being 62 miles per gallon by 2025. Then it dropped the requirement to 56.2 mpg in 2025. Still too much to expect, said the industry.

The Alliance of Automobile Manufacturers launched a barrage of radio ads in key battleground states charging that the 56.2 mpg fuel economy rules would mean job losses and higher car prices just when the industry is making a comeback.

The industry, which has fought mandatory CAFÉ since it was first enacted in 1975, is now, however, more willing to go along with the final standard of 54.5 mpg by 2025 (an increase of 5 percent a year in mpg starting in 2017). The industry agreed partly because of the reduction, plus consumers’ renewed interest in better mileage because of high gas prices, and because of more industry innovations.

The industry’s position of resistance to any higher standard was aided by the Center for Automotive Research (CAR), which spent 11 months of extensive research with help of the National Research Council and other sources to examine the effects on mileage, car sales, prices, and other factors. It found the higher standards the administration first called for could raise the average price of a car by $10,000, cut auto sales by a third, and cost hundreds of thousands of car industry jobs in the U.S.

The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Transportation (DOT) formally unveiled their joint proposal to set the lower but somewhat tougher fuel economy and “greenhouse gas pollution standards” for model year 2017-2025 for passenger cars and light trucks. They began praising it as if it had been their proposal all along.

Cars, SUVs, minivans, and pickup trucks are currently blamed by the petroleum-fearing bureaucrats for 60 percent of U.S. transportation-related greenhouse gas emissions.

Their announcement was termed the latest in a series of executive actions the Obama administration is taking to “strengthen the economy and move the country forward because we can’t wait for Congressional Republicans to act,” as the heads of DOT and EPA phrased it in their totally non-partisan statement.

When combined with other missteps this administration has taken to increase energy efficiency, this proposal will, the agencies guessed, save Americans over $1.7 trillion at the pump, nearly $8,000 per vehicle by 2025. How this President loves to save Americans money! But the figures are largely happy guesses.

These bureaucratically controlled actions also are supposed to “reduce America’s dependence on oil by an estimated 12 billion barrels, and, by 2025, reduce oil consumption by 2.2 million barrels per day – enough to offset almost a quarter of the current level of our foreign oil imports.” Taken together, these actions will also “slash 6 billion metric tons in greenhouse gas emissions over the life of the programs.” Even if true, it won’t matter because greenhouse gases have very little, if any, effect on climate.

These “unprecedented standards” were proudly labeled a “remarkable leap forward in improving fuel efficiency, strengthening national security by reducing our dependence on oil, and protecting our climate for generations to come.”

"By setting a course for steady improvements in fuel economy over the long term, the Obama Administration is ensuring that American car buyers have their choice of the most efficient vehicles ever produced in our country,” added purported automobile authority Lisa Jackson, the EPA Administrator. "This is an important addition to the landmark clean cars program...”

The “progress we made with the help of the auto industry [Read: twisted arms], the environmental community, consumer groups and others will be expanded upon in the years to come...” A warning for the future.

Transportation Secretary LaHood and Jackson said, full of optimism, the new fuel regulations would save consumers up to $6,600 in fuel costs over the lifetime of a model year 2025 vehicle for a net lifetime savings of $4,400 after factoring in related increases in vehicle cost (which no one on earth can foretell). Overall, the net benefit to society from this rule would total more than $420 billion over the lifetime of the vehicles sold in model year 2017-2025. Another wild guess.

Major auto manufacturers are already heavily invested in developing advanced technologies that can significantly reduce fuel use and greenhouse gas emissions beyond the existing model year 2012-2016 standards. In addition, a wide range of technologies are currently available for automakers to meet new standards, including advanced gasoline engines and transmissions, vehicle weight reduction, lower tire rolling resistance, improvements in aerodynamics, diesel engines, more efficient accessories, and improvements in air conditioning systems, plug-in hybrids, and electric vehicles.

There will be an opportunity for the public to comment on the proposal for 60 days after it is published in the Federal Register. In addition, DOT and EPA plan to hold several public hearings around the country to push for public support.

The Center for Automotive Research now expects Detroit car manufacturers and their suppliers to add 167,000 jobs by 2015, a return to pre-recession levels. But that increase would still replace only a third of the jobs lost in the past several years.

With unemployment hovering at 9 percent, this is not great news for one of the most important industries in the country.

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