Carmakers eye favorable regulations under Trump

Keith Laing
Detroit News Washington Bureau

Washington — Stock prices for U.S. automakers rose sharply Thursday amid signs that fuel economy standards could be weakened under the administration of President Donald Trump.

A noted climate-change skeptic is seen as a likely choice to lead the Environmental Protection Agency under Trump. And an industry group on Thursday already was urging the president-elect to roll back mandates that automakers achieve a fleet-wide average of 54.5 miles-per-gallon for cars and light-duty trucks by 2025. Those requirement were put in place by President Barack Obama’s administration.

On the day of Trump’s first visit to Washington, D.C., as president-elect, General Motors Co. stock rose 5.7 percent to $32.73 per share. Ford stock closed up 3.1 percent to $11.94. And shares of Fiat Chrysler Automobiles NV — which has the largest proportion of pickups and SUVs, and the fewest resources to invest in fuel-saving technology — rocketed up 9.7 percent to close at $7.69.

The Alliance of Automobile Manufacturers, which lobbies for U.S. automakers in Washington, said in a Thursday memo to Trump’s transition team that Trump should move quickly to “harmonize and adjust” the stringent gas mileage rules because they “pose a substantial challenge to the auto sector due to the steeper compliance requirements for model years 2017-2025.”

The group said Trump should roll back mileage rules, which are beginning to take effect with model-year 2017 vehicles that are already in showrooms, because reports on the emission standards that have been released by federal regulators “over-projects technology efficiencies and inadequately accounts for consumer acceptance and marketplace realities.”

The auto alliance wrote, “The combination of low gas prices and the existing fuel-efficiency gains from the early years of the program 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.”

The group represents Fiat Chrysler, Ford, GM, BMW Group, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche, Toyota, Volkswagen Group of America and Volvo Car USA.

Trump is likely to appoint an EPA administrator who is a lot more skeptical of the need to fight climate change than the Obama administration has been. Myron Ebell, director of the Center for Energy and Environment at the conservative think tank Competitive Enterprise Institute, leads Trump’s EPA transition team. Ebell is now seen as a likely choice to lead the EPA.

Jack Nerad, executive market analyst for Kelley Blue Book, said automakers are probably right to expect more favorable regulations than they have received from the outgoing Obama administration.

“One can expect that the Trump administration and the Republican-controlled Congress will take a new look at regulations that affect the auto industry and industry in general,” he said. “One obvious candidate are the current CAFE (Corporate Average Fuel Economy) regulations. In light of lower fuel prices and increased supplies of domestically produced fuel, we are likely to see a relaxation of the CAFE regulations.”

The gas-mileage rules that were put in place by the Obama administration are beginning to take effect with the 2017 model year. The rules, which are locked in for the model years between 2017 and 2021, call for ramping up from the current fleet-wide average of about 34 mpg for cars and trucks that were required in 2016, to the eventual goal of more than 50 mpg by 2025. Automakers have a chance to argue for reductions for the model years between 2022 and 2025 during a review that is set to take place April 2018.

Auto companies that do not meet the higher emission standards will be fined $5.50 for each one-tenth of a mile-per-gallon their average fuel economy falls short of the standard for a model year, multiplied by the total volume of vehicles that are in the fleet that fail to meet the new requirements. They will be allowed to purchase credits from other auto companies that have come in under the mileage requirements.

The push to get Trump to roll back the mpg rules follows a projection from federal regulators, which stated automakers may only be able to achieve a fleet-wide average of between 50 and 52.6 mpg by the deadline. Auto companies have seized upon the projection to argue that federal regulators should consider scaling back the stringent mileage rules when they come up for a mid-term review in 2018.

UAW President Dennis Williams told reporters Thursday in Detroit that while he had not reviewed the alliance’s letter, the union has raised concerns with the EPA and others about how fast the mileage standards come.

“Corporations have got to be very careful in the auto industry. There is a public out there that purchases and that public is very conscious of the environment and they’re very focused, especially millennials and others, they’re very focused on what the future of this country’s environment is,” Williams said. “I’d be very careful if I was them about not investing in futures. We’ve seen what happened when GM, Ford and Chrysler didn’t do that before. I would caution auto companies from repeating sins of the past.”

Andrew Linhardt, the Sierra Club’s associate director for federal advocacy, said it is not surprising that automakers are trying to convince Trump to ease the gas mileage rules.

“This is nothing new. They’ve been pushing this for the last year,” he said, although he acknowledged carmakers will likely have a more friendly ear in Trump.

“Trump pretty much ran on tearing down President Obama’s climate legacy, and this is a pretty big part of it.”

Staff writer Melissa Burden contributed.