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Obama to Detroit: Build more fuel-efficient vehicles

David Shepardson
Detroit News Washington Bureau

Washington — Despite rising sales of profitable SUVs and pickups, President Barack Obama has some advice for Detroit's Big Three automakers: Build more fuel-efficient vehicles.

President Barack Obama

"Detroit needs to be focused on capturing, you know, the lion's share of the market for fuel-efficient cars. And you know, they worked with us to double fuel-efficiency standards. And I understand that American consumers sometimes are resistant. We like big cars and we like driving long ways and we like cheap gas," Obama told the Wall Street Journal Monday. "I'm also confident that over the course of 10 or 15 or 20 years that the American auto industry can continue to thrive. But what we've learned is that the American auto industry does not thrive when it tries to avoid the future. It thrives when it seizes the future. And that's true of our economy generally."

U.S. automakers — like the industry in general — have seen small car sales decline this year in the face of low gas prices. U.S. automakers are running pickup and SUV factories overtime to try to meet soaring demand for bigger vehicles. And U.S. automakers make significantly higher profits on larger vehicles than smaller ones.

In the first three months of 2015, car sales are down under 1 percent, while pickup and SUV sales are up 11 percent. Automakers agreed in 2011 to double fuel efficiency standards to 54.5 mpg — a mandate that will cost the industry about $200 billion through 2025.

Ford Motor Co. announced last week it was laying off 700 at its Michigan Assembly plant — a plant Obama visited in January — because of lagging sales. But in perhaps a sign of why small cars don't have as much cache, Obama sat in a new Ford Mustang during his visit — a bigger more powerful vehicle that isn't built at the Wayne Assembly plant.

Obama told The Detroit News in January that cheap gas wouldn't last and warned Americans not to shift buying habits.

"I would strongly advise American consumers to continue to think about how you save money at the pump because it is good for the environment, it's good for family pocketbooks and if you go back to old habits and suddenly gas is back at $3.50, you are going to not be real happy," he told The News.

Obama is facing intense opposition from U.S. automakers and the United Auto Workers union over "fast track" trade authority to get an up or down vote without amendments in order to reach a final Asia Pacific trade deal with 11 other countries, including Japan, that account for 40 percent of the world's economy. The automakers sought to include enforceable currency provisions that would prevent foreign central banks from intervening to reduce their value of their currency.

Obama says he is confident he will be able to convince automakers that the deal makes sense "whether I can convince some who are, you know, more comfortable with the status quo, you know, that's an open question," Obama said. " When we are bold and we, you know, take a look at where we're going to be 10, 15, 20 years from now, we plan for it, we invest for it, we go after it, we succeed — nobody can beat us. And when we hunker down and we're defensive and scared of the future, that's when we get our clock cleaned."

White House spokesman Josh Earnest said in January that the administration would not agree to a trade deal that was not in the "best interests of American industry, including the American auto industry."

For more than seven years, the U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free-trade zone comprising 40 percent of the world's economy; Japan joined the talks in 2013. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the negotiations.

The pact eventually would end America's 25 percent tariffs on imported light trucks and 2.5 percent tariffs on cars and auto parts. The tariff has been in place for more than 50 years. Those tariffs, especially the truck tax, have forced foreign automakers to build truck and SUV plants in the United States and helped keep some would-be competitors out of the truck market that is dominated by Detroit's Big Three.

Japanese automakers want the 2.5 percent tariff on auto parts dropped immediately — but no deal is expected this week while Prime Minister Shinzo Abe is in Washington for a State visit. He has said agriculture is the biggest issue for Japan and autos for the United States.

"Japanese farmers are tough. Japanese automakers want certain things. And so I don't expect that we will complete all negotiations here. I'm not going to be sitting across the table from him trying to finalize a deal," Obama told the Journal.

Obama wants the free-trade deal as a cornerstone of his administration's economic legacy, and a way to boost exports of U.S.-made products. His administration also seeks a deal with Japan as crucial, since the world's third largest economy is a critical ally in a region where China is expanding its influence.