Two years ago, they would have dug in their heels and braced for a battle royale.
Two years ago, they would have taken no prisoners.
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That was then.
Today, when President Barack Obama announced that automakers must meet average U.S. fuel-economy standards of 35.5 miles per gallon by 2016, four years sooner than previously planned, representatives of the nation’s auto industry shrugged their shoulders and appeared to acquiesce.
Recognizing the sage advice that a “good crisis” never should be wasted, the President realized that because of their weakened posture, the automakers are in no position to put up a fight.
They’ve already accepted billions in bailout, the President effectively fired former G.M. CEO Rick Waggoner, Chrysler is in bankruptcy, General Motors is close behind, and Ford is hanging on by its fingernails. With dealerships being shuttered and new car sales in a steep decline, Detroit has no fight left in it for this battle.
Foreign automakers like Toyota, Honda, Kia, Hyundai and their European counterparts are giddy because they already manufacture several lines of vehicles that meet the new fuel efficiency standards. They know that the U.S. automakers will have to play catch-up in a race they’ve already won.
While we love our muscle cars, most American consumers are tired of hearing that it can’t be done. The predominant view is that if we are going to be footing the bill for Detroit to retool, then we ought to expect them to finally get it right or get out.
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The Corporate Average Fuel Efficiency (CAFÉ) regulations were enacted in1975 in wake of the 1973 Arab oil embargo. To comply and to meet the public demand for more gas efficient cars, the industry started churning out faded collector classics like the Pinto, Pacer and Gremlin. But when gasoline prices fell, Detroit went back to its old ways, leaving the fuel efficiency niche to the Japanese.
Through his recent actions, the President is trying to get the rest of the nation to follow California’s lead.
California has been trying for years to reduce the greenhouse gas emissions from passenger vehicles 30 percent by 2016. The state has been waiting since 2005 for the U.S. EPA to grant its request for a waiver of the current federal tailpipe emissions standard so that California and 13 other states can enforce their own stricter regulations.
California’s actions, the subject of intense political debate, have spawned several lawsuits challenging the state’s authority to set a higher standard that effectively would force automakers to produce different cars for California than for the rest of the nation.
Clearly, the automobile industry sensed that a threat of double-standards across the country would have been worse than higher standards across the board.
Dave McCurdy, president of the Alliance of Auto Manufacturers, summed up the industry’s new position. “For several years, there has been a debate over whether states or the federal government should regulate autos,” he said. “President Obama's announcement ends that old debate by starting a federal rulemaking to set a national program.”
In other words, they’re going to ride the Mustang in the direction it’s headed.
Because the new federal standards are so close to California’s, the President’s action will also likely result in the dismissal of the many lawsuits that still are pending in federal court. Higher fuel efficiency standards also could significantly reduce that portion of the U.S. trade deficit that is heavily weighted by the import purchase of foreign oil.
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While the President’s stated goal is to combat global warming, this measure may also help ease the growing world food crisis. Less fuel in cars could free up acreage now devoted to corn-based ethanol in favor of food production.
After seven years of fighting, everyone, including the auto industry, finally may be on the same page.
Kind of scary, isn’t it?
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
