U.S. automakers push for deal on fuel efficiency rules

[January 16, 2019]   By David Shepardson

DETROIT (Reuters) - Executives at the major U.S. automakers are pressing the Trump administration and California to agree on standards for fuel efficiency and carbon emissions through 2025, as risks increase that a deadline for setting national standards will pass without a deal.

Automakers are already entering the time frame when decisions should be made about what engines and fuel-saving technology, such as hybrids or fully electric cars, will be in use in 2021 and beyond, executives said.

In August, the Trump administration proposed freezing fuel efficiency requirements at 2020 levels through 2025 and stripping California of the ability to impose stricter rules. The administration may also eliminate compliance credits that automakers get for making electric vehicles.

Trump’s proposed freeze would result in 500,000 barrels per day more oil consumption by the 2030s. The administration says it would reduce regulatory costs for automakers by more than $300 billion over the next decade.

A group of about 20 U.S. states, led by California, has challenged the administration proposal as unlawful and promised to sue if federal regulators move forward with the freeze.

The administration is supposed to finalize the new rules by the end of March in order for the softer requirements to take effect by the 2021 model year, but some automakers and officials question if it will meet that deadline in the wake of the partial government shutdown.

Most automakers oppose freezing the requirements, but also want relief from Obama-era standards that called for a roughly 5 percent annual reduction in carbon emissions - targets that translate to fuel efficiency requirements for various classes of vehicles.

"Pick the middle. Pick 2.5 percent and get on with life," Jim Lentz, chief executive officer of Toyota Motor Corp's North America subsidiary, told Reuters at the Detroit auto show this week.

Lentz told Reuters last month he was concerned that automakers are stuck between California and the White House.

"I kind of feel like this is the OK Corral and we're the settlers walking across the middle," Lentz said.

Automobile traffic backs-up as it travels north from San Diego to Los Angeles along Interstate Highway 5 in California December 10, 2013. REUTERS/Mike Blake

Ford Motor Co, which floated a compromise proposal last year to other automakers, is still pushing for a deal, Executive Chairman Bill Ford Jr. told Reuters.

"We’ve been very clear and very open that we want one national standard, we want California at the table," Ford said. "We’re not asking for a rollback, but we’ve got to get everybody at the table, especially California."

Detroit automakers have the most at stake. General Motors Co, Ford and Fiat Chrysler Automobiles NV generate the bulk of their global profits from sales of fuel-thirsty large pickup trucks and sport utility vehicles in the United States.

Big trucks are front and center at the Detroit auto show, where Fiat Chrysler's Ram brand is displaying a gleaming Ram "Power Wagon" heavy duty truck on a pedestal at its show exhibit, and GM's GMC brand is featuring its newly redesigned Sierra Denali luxury pickup line.

Fiat Chrysler, Ford and GM have all discontinued or planned to drop small and medium-sized sedans from their lineups to focus on trucks and SUVs.
 

But Asian automakers that have more efficient fleets are also seeking a middle ground.

Henio Arcangeli, a senior vice president at the U.S. unit of Honda Motor Co Ltd, said without a national deal "the consumer's going to lose."

Mitch Bainwol, who heads the Alliance of Automobile Manufacturers, a trade group representing major automakers, said a deal makes the most sense but "time is running out. It has always been true that the biggest impediment to a deal is politics ... A successful negotiation is a win for everyone – more carbon reduction for California, a stronger and pro-job economic context for the administration and common sense certainty for our industry."

(Reporting by David Shepardson in Detroit. Additional reporting by Joseph White and Ben Klayman; Editing by Tom Brown)

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