Next time the leaders of General Motors, Ford and Fiat Chrysler meet President Donald Trump, they should add an item to his agenda to promote American automaking and jobs: Retain the high fuel economy standards the industry and Obama administration agreed to in 2012.
Backing away from the standards risks tying the industry’s jobs and profits to sudden shifts in oil prices, as they were from the 1970s to 2000s. American automakers’ fortunes were on a roller coaster for more than 30 years: Profits and employment rose when gas prices fell; factories closed, jobs disappeared and automakers lost billions when oil prices rose.
Detroit got off that stomach churning ride by adopting new technologies in recent years. For the first time in decades, the Detroit Three automakers’ engineering is geared to compete with vehicles built around the world. After decades at a disadvantage to foreign automakers, American engineers and brands are playing on an even playing field, thanks in part to the standards. Erasing the emissions and fuel economy standards automakers and regulators worked together to reach risks that hard earned victory.
Up to 2025
The regulations that set fuel economy and emissions standards out to 2025 could stand some tweaks, but they’ve served the American economy and auto industry well. Left in place, they’ll continue to do that.
“Eliminating those standards would hurt American automakers’ long-term competitiveness if fuel prices rise,” Navigant Research senior analyst Sam Abuelsamid said. “They may ask for more time to reach the goals, but not a substantial rollback.”
Through the auto industry’s history, one thing is clear: Oil and gasoline prices go up over time. There are dips, but the rising trend line is irrefutable.
Short-term price drops repeatedly led the Detroit Three into decisions that did long-term damage. Less emphasis on fuel economy might boost profits for a couple of years, but the inevitable price spikes decimated vehicle sales, devastated the bottom line and led to job losses and manufacturing decline.
This didn’t happen in other automaking super powers like Japan and Germany because their energy and environmental policies forced automakers to continue to invest in fuel efficiency. When oil prices fell, their customers saved money; when prices spiked, the companies remained competitive and gained sales — often at American automakers’ expense.
“American automakers have made significant investments to meet the upcoming fuel economy standards,” said John Voelcker, editor of Green Car Reports. “The technologies needed to meet fuel economy standards in 2012 have already been developed, maybe ordered. Automakers have huge costs and long product cycles: Predictability is very important.”
That’s part of the reason automakers signed on to the challenging set of standards all the way out to 2025: It set clear goals and gave time to meet them.
“It’s a mistake to make long-term engineering decisions based on short-term fuel prices,” Society of Automotive Engineers publications director Bill Visnic said.
The regulations set different fuel economy targets for vehicles of varying size, but the commonly cited figure is a 54.5 mpg average in a set of tests that are roughly equivalent to a current window-sticker fuel economy number of 40 mpg in combined city and highway driving.
“In more than a dozen public opinion polls over the past decade, we have consistently found that about three-quarters of Americans support strong fuel economy standards,” said Mark Cooper, director of research for the Consumer Federation of America, which lobbies for fuel-efficient vehicles and other issues. “It’s a no-brainer; making cars more efficient means more money in consumers’ pocketbooks.”
Lax fuel economy standards would also make Ford, GM and Fiat Chrysler less competitive in the rest of the world, where they sell millions of vehicles.
“The United States can do what it likes, but Europe, China and Japan will continue to work to reduce emissions and fuel consumption,” Voelcker said.
GM, Ford and Fiat Chrysler will have to match global automakers’ efficiency and fuel economy to sell vehicles globally. A different set of rules at home would essentially force them to develop two diverging sets of technologies for the US and the rest of the world, a waste of resources no other automaker faces.
“American automakers’ have to compete around the world. That requires world-class fuel economy and efficiency,” Autoline This Week host John McElroy said.
So, Dear Mr. President: Keep fuel economy standards high. You’re not doing American manufacturing or workers a favor if you reduce them.