Would new CO2 rules bar big SUVs?
As anticipated in our preview post early this morning, President Barack Obama today made some quick moves on the auto industry’s two biggest energy and environmental issues. Although he’s not yet named a “car czar” to oversee financial aid and other federal activities on cars, Mr. Obama established that — whoever the czars or czarinas of his administration might be — they’ll all tow the line when it comes to advancing his agenda.
Signing two executive orders, the president handed one to his Secretary of Transportation and the other to his Administrator of the Environmental Protection Agency. DOT czar Ray LaHood was directed to quickly finalize a new Corporate Average Fuel Economy (CAFE) rule for model year 2011, and EPA czarina Lisa Jackson was ordered to provide an expedited review of California’s request to regulate greenhouse gas emissions from cars.
Thus, the president did get right back to the “governator,” responding to Gov. Arnold Schwarzenegger’s letter last week asking for speedy review of the California request. And the new team in the White House also wasted no time picking up the outgoing Administration’s dropped ball on stronger fuel economy standards. Bush’s CAFE fumble annoyed even automakers, who support a single national standard addressing both fuel efficiency and CO2 emissions from cars. The industry prefers planning certainty at this point, having resigned itself to ongoing increases in CAFE standards after years of blocking action.
Of course, past automaker reluctance was tied to the “roaring nineties” decade of cheap gas and consumer interest in mass, muscle, creature features and almost anything else other than fuel economy that could be wrapped in an appealing automotive package. But the industry’s lack of sympathy with energy and climate concerns, and successful obstruction of substantial action on vehicle efficiency over the course of nearly four administrations — Reagan, Bush senior, Clinton and all but the last year of Bush junior — is now coming back with a vengeance. Obama implicitly brushed away concerns about costs and consumer acceptance. During his announcement, the President said “Our goal is not to further burden an already struggling industry,” but rather to help the industry “thrive by building the cars of tomorrow.”
Bowing to this reality, public reaction from the industry was carefully phrased. Dave McCurdy’s statement from the Auto Alliance was headlined as being “in support of federal fuel economy/CO2 standards.” Rather than overtly attacking the California approach, the Alliance took the high road, noting that “automakers seek a federal-state solution that provides us with compliance clarity and one national standard.”
Action on CAFE and the California waiver were anticipated, of course, and aren’t a surprise to anyone following these issues. Taking the long view, and recalling Obama’s stated vision of seeking broad-based solutions to divisive problems, his strong-leader showmanship could set the stage for the negotiation of a yet-to-be-defined compromise that meets both the business needs of industry and the general need for a new energy and environmental policy. What the president really did today was use the event, held in the East Room of the White House but with Detroit as a distant stage prop, as another chance to show that there’s a new boss in town.
Saving Detroit/Domestic Auto Industry and OUR US Economy Quickly
LOANS for Short Term Survival Are Nice … But Detroit Really Needs Positive CASH FLOW & Expanded Markets … NOW!
*** A Quick, New, Low Cost, Low Risk Economic Stimulus Strategy ***
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A Clear Stimulus Package DEMONSTRATING that this New Administration/Congress Will act to improve OUR Economy Quickly … 44~63 mpg by March 2009
Tags: Saving Detroit, US Auto Industry, Economy, Jobs, Industrial Base, US Employment, Energy Independence, Oil Imports, Environment, Emissions, National Security, CAFE, Gas Guzzler Tax, Fuel Economy, Stimulus Package (self funding)
The current Federal loans for the Detroit auto industry are necessary for immediate survival (at least for Chrysler and GM). Although, survival has been highly questionable for Chrysler due to the lack of access to “fuel frugal” technology prior to the announcement of the Fiat agreement 1/20/09.
The “bailout” loans hopefully allow survival until “new” product is developed, produced, and introduced into the market in about 18 to 36 months (maybe even later). These “new” products are achieved with high cost of resources (money, time, and manpower) with the intended purpose of displacing “current” product with, hopefully, a “more desirable” set of offerings to stimulate greater demand. However, there are NO GUARANTEES that demand will be higher for this incremental product improvement! Since these incremental products are generally NOT radical or IMMEDIATE, they will probably only displace sales of the traditional product and NOT generate a noticeable increase in POSITIVE CASHFLOW even if demand and sales do increase (incrementally) after 24 months or so!
So … the problem remains … A NEED for IMMEDIATE … NEW … POSITIVE CASH FLOW!
Here is an idea that requires no taxpayer dollars, can be done quickly, requires no major investments by the Detroit auto industry (including lead time), addresses a previously neglected US automotive market segment, and CAN GENERATE … NEW … POSITIVE CASHFLOW almost IMMEDIATELY!
Simply waive temporarily, for 24 months, ALL import, tariff, safety, and emissions restrictions on new vehicles achieving more than 44 mpg(US) [53 mpg(Imperial)] combined cycle and that satisfy Euro Step IV (or Step V) emissions plus current Euro safety standards. This waiver can be granted by Presidential Executive ORDER under the War Powers Act because OUR industrial base, economy, and oil imports/energy independence are all National Security Issues.
As soon as the waiver goes into effect, Chrysler, Ford, and GM, with their European partners, could begin importing this class of fuel frugal vehicles and selling them through their existing dealerships for IMMEDIATE CASH FLOW utilizing their current excess European inventories and production capacity. During the 24 month waiver the consumer gets the opportunity to buy and use/experience an entirely new class of fuel saving vehicles. Meanwhile, Detroit discovers consumer preferences, retools/retrains manufacturing to DOMESTICALLY manufacture the newly clarified preferred product set. This same 24 month waiver period would also be used to bring this “new domestic design and production” into compliance with US emissions and safety standards.
This strategy requires no alteration of the “traditional” automotive product set since these “temporary imports” address a previously untapped market segment. The actual observed sales rates will be used to adjust future production strategies and volumes!
This is a minimum resource/cost, quick response solution for Detroit to start generating REAL POSITIVE CASH FLOW (in OUR weak economy) through temporary use of their excess non-domestic product and production capacity while they retool domestically for a more appropriate domestic product set based on known consumer acceptance/purchase rates. This would be a serious jumpstart to a new level of fuel frugal automotive product with lower emissions requiring unusually low risk and COST. It might, in the simplest form, just require putting emissions abated FUEL FRUGAL Euro type power trains into existing US vehicle designs.
And there has not even been a reference to CAFÉ.
Of course, if the Detroit manufacturers did not wish to participate in the distribution of these 44 plus mpg vehicles through their dealerships, the consumer would be free to import on their own or through importers.
Here are some of the benefits … IF … demand in this “new” segment is real and significant and then Detroit and others commit to and quickly built these “new existing” FUEL FRUGAL vehicles within the US in relatively high volumes, we could “kill 16 birds with one stone” … not limited to quick response, positive cash flow, expanded domestic market demand, job creation, improved economy, increased tax revenue, reduced fuel consumption/emissions/oil imports, stronger/more creative domestic auto industry/industrial base, improved National Security, self funding stimulus package … .
Note that there should be no immediate shift in demand from Detroit’s traditional product since these imported vehicles are outside ALL existing domestic market characteristics (unless of course, the traditional purchases are a result of “unsatisfied/compromised demand”).
And of course the most important thing … total domestic volumes could potentially expand to EXCEED 20 million units annually within 4 years because of the opening of this previously “untapped” fuel frugal segment (to the benefit of industry, the individual/business consumer, economy, and tax revenues). And … if the market expands … there is the opportunity for more domestic auto industry jobs (possibly 1 to 6 million new jobs).
Just in case there is any question that these vehicles exist, please see the more than 110 (130 with Chrysler/Fiat) machines (MY 2008/2009) that Detroit and their European partners (Mazda, Volvo, Saab, Vauxhall/Opel) already have that are rated 53~77 mpg(Imperial) combined cycle [approximately equivalent to 44~64 mpg(US) combined average] in the UK at
http://www.vcacarfueldata.org.uk/search/fuelConSearch.asp
and for specific vehicle characteristics
http://www.autocar.co.uk/SpecsPrices/SpecsAndPrices.aspx
Fortunately, it appears that the Chrysler/Fiat arrangement offers a path to this fuel economy range reducing concern about future Chrysler viability which added about 22 more vehicles to the list of possibilities!
NOTE: It is true that a significant portion of the current 44 plus mpg vehicles are diesel. Have you considered that Detroit has, on average, been selling between 0.3 and 1 million non Tier 2 Bin 5 compliant diesel “light vehicles” (averaging about 17 mpg) annually for more than 8 years? However, apparently Audi, BMW, Mercedes, and VW FUEL FRUGAL turbo diesels have already successfully achieved California emissions compliance and above 40 mpg, and greater, combined average with Honda, Hyundai, Kia, Nissan and other not far behind!
Time to “STOP Pushing the Rope” … Let’s Try “Giving it a Pull” for a Change!
46 mpg combined average March 2009??
Addendums:
• It is estimated that the economic stimulus value to the US auto industry (and US economy) for the 24 month import restrictions waiver could easily be between $20 and $120 billion over the 36 month period following the waiver execution. The actual cost of this stimulus package is self funded by consumers purchasing these fuel frugal (44 and higher mpg combined average) vehicles.
• The selection of 44 mpg(US) combined average as the lower limit is based on a minimum fuel economy improvement objective of 50% reduction, OR BETTER, in fuel consumption rate compared to the 2008 average US light vehicle fleet fuel economy using 2008 EPA methodology (NOT CAFE ). Chrysler(Fiat)/Ford/GM have more than 130 vehicles (MY 2008/2009) that currently satisfy this 44 to 63 mpg(US) combined cycle criteria available in Europe.
http://www.vcacarfueldata.org.uk/search/fuelConSearch.asp
Wow, quite an agenda and some very salient points. I expect opposition on several fronts, from California, ironically, because of the Bin V issue — failing to meet the latest generation of standards for diesel particulates. Not sure if Pres. Obama would want to get into a battle with Pelosi, Schwarzenegger, et al, over that.
The bigger question is whether there’s any interest, at least for now, in the type of vehicles you propose importing. The current sales stats suggest not. Small car and hybrid vehicle sales have collapsed, since fuel prices tumbled, and I am not sure what will bring them back, short of another massive run-up in fuel prices (which could, for now, cripple an economic recovery).
There’s also the exchange rate issue. Just look at the Saturn Astra, the American take on the Opel of the same name. Very, very few changes, mostly minor things like bumpers and lights, to meet U.S. standards. Even eliminating those changes would still not save enough to make the Saturn Astra particularly competitive. And the same would be the case with other Euro imports, I’m afraid.
A solid concept, but I question, more than anything, the timing, as various factors are working against such imports.
Paul A. Eisenstein
Bureau Chief, TheDetroitBureau.com
Regarding the Bin V issue, the “24 month waiver” is only temporary and upon expiration Bin V becomes the Rule. It is reasonable to assume that less than 2 million “non compliant” vehicles would be purchased within the 24 month waiver.
However, if this is really an issue … then what about the approximately 0.5 to 1.5 million light vehicles diesels, getting less than 20 mpg, that are not Bin V by exclusion/exemption … but will still be sold domestically by Chrysler, Ford, and GM during the same period?
Second, fuel prices have increased almost 30% since mid December 2008. And … the price spread between diesel/gasoline has reduced to between 10% and 20%. The diesel/gas spread is down to 13% in my area. Do you really believe in the long run fuel prices will go down and the diesel/gas price spread will increase?
Your concern about the level of consumer interest is only slightly valid. First, “domestic small vehicle offerings” are generally “traditional evolutionary designs” (with a very few exceptions)… AND … do NOT provide radically LOWER fuel consumption. So what is really “NEW” and what is any domestically offered vehicle worth to the consumer?
Your case of the Astra is interesting. The current domestic Astra is priced between $USD 16 and 18.5k. The incremental price increase for the 47 mpg(US) combined cycle E/U turbo diesel with DPF is LESS THAN $USD 1,500. Would I consider the Astra for 47 mpg? I would certainly consider it VERY CAREFULLY!
The waiver would require very little cost and risk since the waivered machines would require NO alterations (grandfathered after expiration of the waiver). IF … volumes were high enough to justify domestic manufacture after the waiver ended, only then does the cost of safety and emissions compliance comes into play.
My contention is that this could be just enough to generate interest in those consumers with financial resources but are uncomfortable with the auto market direction. This might be just enough to “prime” Detroit’s pump!
Well, it is a constructive idea … maybe someone out there can figure out how to make it better!!!
GOOD LUCK to US ALL!!