Automakers, feds tussle on car mileage

Companies say 56.2 mpg achievable but too costly

7/4/2011

WASHINGTON -- The Obama Administration and the auto industry are locked in negotiations over new vehicle mileage and emissions standards that will have a profound effect on the cars Americans drive and the health of the auto industry over the next decade and beyond.

Depending on the standard, the deal also could reduce emissions by millions of tons a year and cut oil imports by billions of barrels over the life of the program, cornerstones of President Obama's energy policy.

The administration is proposing regulations that will require new U.S. cars and trucks to attain an average of as much as 56.2 miles per gallon by 2025, roughly double the current level.

That would require increases in fuel efficiency of nearly 5 percent a year from 2017 to 2025.

The standard would put domestic vehicle fuel efficiency on a par with that in Europe, China, and Japan, saving consumers billions of dollars at the pump.

Automakers say the standard is technically achievable.

But they warn that it will cost billions of dollars to develop the vehicles and they express doubt that consumers will accept the smaller, lighter -- and in some cases, more expensive -- cars that result.

"We can build these vehicles," said Gloria Bergquist, vice president for public affairs at the Alliance of Automobile Manufacturers, the leading industry lobby in Washington. "The question is, will consumers buy them?"

The talks have heated up and will continue through the summer, with the proposed new standard expected in September and completed early next year after public hearings.

The auto companies are asking the government to phase in the standard gradually to allow credits for using certain technologies and fuels and to include a review period that could lower the target if it proves too costly, industry and government officials said.

They are also seeking assurances that the government will help build the charging stations needed for electric and plug-in hybrid-electric vehicles, which will help to meet the new standard.

A senior administration official, insisting on anonymity, said the 56.2-mpg goal represented the government's opening bid and might not be the final figure.

The United States has the world's most lenient vehicle emissions and mileage standards, lagging as much as 10 mpg behind the rest of the world.

Europe is expected to reach about 60 miles per gallon by 2020.

The official added that arriving at a new mileage rule was particularly difficult because the auto industry has not yet fully recovered from the recession and the government is trying to force technological change more than a decade in the future.

On that, industry and government agree.

"It is very challenging," Mark Reuss, president of General Motors North America, said of the 56.2 mpg goal at a press event in Detroit last week.

"But it's up to us as engineers to provide high value to the customer and support the environment."

The auto companies and the government are returning to a familiar battleground, which the industry dominated for three decades beginning in the 1970s, using its clout on Capitol Hill and within the federal bureaucracy to keep fuel economy standards low.

But two years ago, when Chrysler Group LLC and General Motors Co. were clinging to life and the rest of the industry was slumping, car makers agreed to aggressive new nationwide fuel economy standards covering the years 2012-2016.

That deal, announced by Mr. Obama in May, 2009, as a dozen auto executives looked on, raises the domestic car and light truck fleet fuel economy to 35.5 miles per gallon by 2016.

Now the government wants to extend that mandate nine years, but is confronting a much healthier and feistier industry.

The lobbying is already in full swing.

The auto companies are seeking a standard at the lower end of the range proposed by the government, citing studies that say that meeting the stiffer regulation will add thousands of dollars to the cost of a new vehicle and require a significant downsizing of vehicles.

They also want certainty that there will be a single national standard and that California will not be permitted to pursue a tougher standard on its own.

"To reach a 56 mpg standard would mean a tremendous shift in the types of vehicles consumers buy," the National Auto Dealers Association said.

The group said that hybrids and plug-in electric vehicles now account for less than 3 percent of the domestic market, while meeting the new standard could require the fleet to be more than 50 percent hybrid or electric, an assertion disputed by advocates of the new rule.

The proposal is being developed by the Environmental Protection Agency, the National Highway Traffic Safety Administration, and the California Air Resources Board, which has led the nation in setting tough standards.