The rules have changed.
Ever since President Barack Obama’s auto task force used taxpayer money in 2009 to engineer the rescue of the Detroit automakers, the political preferences of Washington steered many of the industry’s priorities. Being the lender of last resort has its privileges.
Didn’t matter that fuel prices affected consumer demand in ways ideologues did not anticipate. Didn’t matter that sales of trucks and SUVs, not small cars, showed enduring appeal with the buying public. Didn’t matter whether technology could — or could not — satisfy those preferences, including new federal fuel economy rules the industry was too weak and too beholden to fight.
A lot of that could change with the stunning election of Republican Donald Trump. His antipathy for politically induced regulations, shared by many Republicans in Congress, is exceeded only by his condemnation of trade agreements that have shaped the auto industry, its sourcing and its investments for more than a generation.
Seven years after bailouts and the bankruptcies of General Motors Corp. and Chrysler Group LLC essentially saved Detroit from itself, Team Obama’s automotive regulatory regime is imperiled. Not because it will be entirely dismantled, because it won’t.
But because the industry already is seeing signals that the would-be administration is likely to be more sympathetic to market-based business considerations — save, that is, building in Mexico vehicles intended for sale in the United States — and less interested in using government regulation to essentially dictate the shape of product portfolios, long-term capital investment and what the public drives.
From the campaign to deliver 54.5 mpg by 2025 and an emerging consensus on mobility standards to trade deals influencing where and how much automakers invest their capital — all of it is likely to be reshaped in the wake of Trump’s improbable win and continued GOP control of both houses of Congress.
One reason: despite billions in investment by the industry, plug-in hybrids and fully electric vehicles accounted for just 0.66 percent of total industry vehicle sales last year, according to the Washington-based Alliance of Automobile Manufacturers, and hybrid electrics delivered 2.18 percent of sales. Booming market demand it’s not, considering that many of those sales are subsidized with government tax incentives.
No wonder there’s angst among the environmental left and tech-driven Silicon Valley. Their intertwined world view shaped the Obama administration’s regulatory direction and its willingness to subordinate legitimate business considerations to achieve preferred political ends, whatever the cost in jobs, for shareholders or both.
The arrival of an apparently more business-friendly administration could scarcely come at a better time for the industry and the United Auto Workers. They’re now facing a plateau in sales growth that already is claiming shifts at some plants, as well as cautions that the booming profits of the past few years are likely to moderate as soon as next year — proving once again that elections have consequences for industry, too.
Trump’s surprising defeat of Hillary Clinton also comes as the industry faces two almost contradictory crossroads: first, the so-called “mid-cycle review” of aggressive fuel-economy rules that the industry says it will be difficult to achieve in the 2018-25 window.
“The combination of low gas prices and the existing fuel-efficiency gains from the early years of the program,” the Alliance wrote in a memo last week, “is undercutting consumer willingness to buy the vehicles with more expensive alternative powertrains that are necessary for the sector to comply with the more stringent standards in out-years.”
Given its druthers, the industry certainly would prefer fuel-economy targets that better reflect the market realities of what are expected to be lower long-term fuel prices and the consumer embrace of the trucks and SUVs they want to buy, not the smaller cars bureaucrats think they should buy.
And, second, automakers and Silicon Valley are hurtling toward the brave new world of mobility. It’s an estimated $10 trillion-a-year industry that federal regulators — and the industry itself — recognize could revolutionize the auto industry as surely as Henry Ford’s Model T revolutionized everyday American life a century ago.
The concern: that a Trump administration and its Republican allies in Congress will be predisposed to slowing the federal regulatory push toward a single set of rules governing the development and deployment of self-driving vehicles. Instead, state rules that typically govern traffic and licensing could be extended to cover technology, safety and emissions, a potentially costly and confusing direction.
It doesn’t have to be that way. Trump spent months bashing Ford Motor Co. for its plans to move small-car production to Mexico, all of it allegedly done in the spirit of defending the “forgotten” men and women who helped him win much of the industrial Midwest.
He’ll soon get a chance to prove it. If Trump’s team and its allies in the GOP-controlled Congress want to help a cornerstone industry, they could start by understanding where the feds can help, where their meddling can hurt — and why.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.