WASHINGTON – President Barack Obama offered the U.S. auto industry a bargain on Monday: Accept tougher standards on how much fuel your vehicles use, and we’ll think about helping you find the money to meet them.
Following through on a campaign promise, Obama ordered his administration to reconsider rules by California to limit greenhouse gas emissions from new cars and trucks that had been blocked by the Bush administration last year. The Bush move also kept 17 other states and the District of Columbia from adopting the rules, which would have covered a majority of the U.S. market.
California’s law would boost fuel-economy standards on new vehicles to roughly 35 mpg by 2016 and to more than 40 mpg by 2020, depending on the mix of vehicles sold. Federal law sets a lower standard of 35 mpg by 2020, and the government had estimated Detroit automakers would need to spend $30.5 billion from 2011 to 2015 to meet interim targets.
With two of three Detroit automakers surviving thanks only to $17.4 billion in federal loans, and General Motors Corp. cutting 2,000 assembly jobs Monday because of a worsening economy, Obama said the decision was not meant to “further burden an already struggling industry. It is to help America’s automakers prepare for the future.”
Obama also promised to set a new fuel economy standard for 2011 model-year vehicles while the administration works on a more comprehensive rule. “This commitment must extend beyond the short-term assistance for businesses and workers,” he said. “We must help them survive by building the cars of tomorrow and galvanizing a dynamic and viable industry for decades to come.”
The auto industry – including Detroit, Japanese and European automakers – opposes the California rules and has fought them in court repeatedly. Industry officials have argued the California rule will set a fuel economy standard that has to be met state by state, increasing their costs, while giving some foreign automakers a free pass.
The California rules would have “a negative impact on the auto industry as a whole and a particularly negative impact on the Big Three,” said Sen. Carl Levin, D-Mich.
Obama spokesman Robert Gibbs said the decisions would lead to vehicles that “will be more appealing to American consumers,” but demurred about whether Obama supported making more money available to help automakers meet the standards. The government has $25 billion in loans available to help retool U.S. plants for more efficient models, and has required GM and Chrysler LLC to show by Feb. 17 the cost cuts they will take to survive.
Cars and trucks accounted for 17 percent of the nation’s greenhouse gas emissions in 2007, but such emissions likely fell last year following the fuel price spike that cut into driving and gasoline demand. Congressional estimates say if the California rule was adopted in 17 states, the rules would cut U.S. greenhouse gas emissions by about 200 million tons a year in 2030 – a 3 percent reduction.
Environmentalists roundly hailed Obama for reviving the California rules, which they have argued could become a national standard. Phyllis Cuttino, director of the Pew Environment Group’s U.S. Global Warming Campaign, said Obama sent “a clear signal to America and the world that his administration will play a leadership role on energy and global warming.”
Automakers said they would work with the Obama administration on the rules, which will take several months, but some industry executives said putting the California law into effect could create an unfair advantage for some automakers.
The California rules through 2016 would apply only to automakers which averaged at least 60,000 vehicles sold in the state over three years. After 2016, the limit might drop to 4,000 vehicles a year.
Since California’s limits would apply nationally, that would mean Detroit’s automakers and the three largest Japanese firms would have to meet the standards, but companies such as Volkswagen, Hyundai – and perhaps BMW – would not. The rules would also not apply to new competitors, such as automakers from China or India.
Only two of the eight worst gas guzzlers listed by the Environmental Protection Agency would fall under the rules in any state, since small luxury brands are excluded. “A patchwork regime – with its exemptions, loopholes and unintended consequences – would only exacerbate the economic turmoil in the auto sector, for little to no environmental or energy security benefit,” the National Automobile Dealers Association said last week.