Post Top Ad

Your Ad Spot

Thursday, August 22, 2019

Trump vs. Automakers, and What's the Deal with Their Bizarre Fuel-Economy Fight

  • President Trump, in a series of tweets on Wednesday, claimed automakers' stubbornness is all that stands between consumers and much cheaper, safer cars.
  • Several major automakers have signed a deal with the California Air Resources Board to meet voluntary fleet averages of roughly 50 mpg by 2026, which conflicts with Trump's interest in lowering fuel-economy standards.
  • Carmakers are afraid spending the money to meet California's stringent fuel-economy targets could be a waste given the Trump administration's opposition to the higher standards.

President Trump's reaction to automakers refusing to back his backtracking on fuel-economy standards requires more than 280 characters to explain. This is a genuinely bizarre play—by the auto industry.

Of Trump's three consecutive tweets on Wednesday decrying Ford and General Motors for "wanting to build a much more expensive car that is far less safe and doesn't work as well" and invoking Henry Ford and Alfred P. Sloan, the sentence that made actual sense was a rebuke of California's separate emissions standards that will affect 2021–2026 model-year cars.

"Car companies should know that when this Administration's alternative is no longer available, California will squeeze them to a point of business ruin," the president wrote. (For its part, Ford responded that it is seeking "regulatory stability.") Setting aside his other words, here's what that means.

In August 2018, the EPA released its proposal for the 2021–2026 model years that lowered fuel-economy targets—and thereby increased greenhouse-gas emissions—in relation to the original Obama-era rule enacted in 2012. The proposal, which explicitly called for revoking California's waiver to the Clean Air Act that has allowed the state to set separate standards since 1970, was favored by most automakers and their lobbies in 2017, back when Trump announced he would consider loosening the regulations. The 2012 rule mandated this "midterm review" to let automakers petition for a more realistic set of rules for 2017 and later cars that would better reflect the current market at that time.

The idea, as with most federal policies, was that things change and laws should be able to change with them. However, in an effort to block an immediate rollback by the incoming Trump administration, Obama's EPA rushed the review and finalized the rule more than a year ahead of schedule, without changes, in the months before Trump took office in January 2017. This ran contrary to the agreement reached with automakers in 2012 and their assumption, however wrong, that California would no longer force a costly, separate standard upon the industry.

Since October, the California Air Resources Board, which for decades prior had mandated separate, more stringent fuel-economy regulations for new cars, voted to revoke its "deemed to comply" rule that linked both state and the Obama-era policies together. That meant CARB and the 12 other states that follow its emission rules—a bloc representing 35 percent of all U.S. auto sales—would revert to the original, tougher standards. It also meant those states, in order to "not fall victim to the Trump administration’s rollback," as CARB chairwoman Mary Nichols said, would refuse to negotiate—at all.

After talks between the White House and CARB had come to a halt, in late July four automakers (BMW, Ford, Honda, and Volkswagen) quietly brokered a deal with CARB to meet voluntary fleet averages of roughly 50 mpg by 2026. The deal came a month after 17 automakers sent a letter to Trump urging him to renegotiate with CARB. Every major automaker, except Fiat Chrysler Automobiles and Ferrari, was on the list. They signed without Auto Alliance or Global Automakers, their two major lobbies. However, while CARB had agreed in spirit to negotiate, Nichols said her agency's October ruling would "cover only vehicles that meet the standards originally agreed to by California, the federal government, and automakers in 2012."

Suddenly, out came two separate emissions standards for new cars about to launch in less than two years—and for cars in development that auto executives had budgeted years before. Automakers had assumed, as they took billions in government grants, loans, and tax credits, that electric cars in particular would eventually become profitable. Faced with billions of dollars spent, more billions earmarked to comply with stricter laws worldwide, and a weak national demand for EVs, automakers now faced a major problem. Fight for the lower standards they really wanted seven years ago, or forget it?

Obama's fuel-economy targets for the 2012–2025 model years were the most aggressive in history—laudable for their attempt to fight climate change, but heinously expensive. Only the late Sergio Marchionne of Fiat Chrysler publicly stated just how much automakers were losing on EVs. Automakers conceded anyway. Those targets, first drafted in 2008, assumed a continuation of record-high gas prices, a heavy adoption of electric vehicles, and could not predict a U.S. oil boom that dramatically increased domestic production.

Fully invested in these policies, automakers have taken a vocal stand against the Trump administration in ways they never did when Obama was in office. They're worried they'll overspend to meet California targets that could ultimately be stricken by the feds. While they claim to be environmental stewards, automakers aren't so much concerned with the planet as they are to reducing risk to their shareholders. California is a reckonable force that threatens their sales, and Trump is standing in the way of their profit and loss calculations. As automakers forecast their business plans, they think it's too late to go back.

By: Car and Driver

No comments:

Post a Comment

Compare & get cheapest Flights

Post Top Ad