International regulations may offset U.S. mpg rollback

Keith Laing
Detroit News Washington Bureau

Carmakers who are presenting products at the North American International Auto Show are looking for President-elect Donald Trump to roll back stringent gas-mileage rules that require automakers to produce car and truck fleets averaging more than 50 miles per gallon by 2025.

But the U.S. doesn’t exist alone in the global market, and electrification and other developments are being led by Western Europe and China.

Car companies executives in Detroit for the auto show admitted that any changes Trump makes to U.S. mileage standards may be offset by emission rules in other countries they also hope to sell vehicles in.

“Let’s not forget that this is a global issue, and we develop engines for the global market,” Nissan CEO Carlos Ghosn said.

“That means we have to develop for the U.S. but also for something that will serve us in Europe, will serve us in China, will serve us in Japan. So what is really driving alternative energy is a global trend, a global trend independent of what happens locally in big markets. Global trend is driving higher levels of fuel efficiency no matter what happens in the U.S.”

Speculation that Trump will roll back the Corporate Average Fuel Economy (CAFE) and greenhouse gas emissions standards that were issued jointly by the U.S. Environmental Protection Agency and the U.S. Department of Transportation has prompted President Barack Obama’s administration to move to lock the mileage rules in place before the new president takes office. The EPA announced on Friday it is finalizing the mpg rules a week before Trump takes office, over the objection of automakers.

The emissions standards were supposed to be reviewed in April 2018. But EPA Administrator Gina McCarthy proposed after the election in November that agency should finalize its portions of the regulations after a short comment period that lasted until Dec. 30, 2016.

Car executives at the auto show said the Trump administration should at least reinstate the mid-term review in 2018 that the EPA is attempting to gut before President Obama leaves office.

“We had a deal,” said Ford CEO Mark Fields in an interview at the Detroit auto show, echoing the Alliance of Automobile Manufacturers, which has pushed back against the rule.

Fields says that after the EPA forced 54.5 mpg-by-2025 on the industry while the government was financing GM and Chrysler bankruptcies in 2009, the government and industry agreed that there would be a review of those standards in 2018 to see if they were still feasible.

Ford is concerned that with demand for electric vehicles stagnant at less than 3 percent of the market, that there is no consumer demand for EVs that are crucial to meeting the EPA mandate.

“You can’t meet these goals without consumer participation,” Fields said.

General Motors Co. Chairman and CEO Mary Barra told reporters last week in Detroit she would like to have more certainty about the U.S. fuel economy regulations. She said the possibility of Trump rolling back the mileage rules has not impacted her company’s efforts to reduce emissions and move to electrification, however.

“From a portfolio perspective, when you look at the Bolt EV and along with the other hybrid vehicles that we have, the investment in fuel cells, we see the Bolt EV and building on the learnings of the Volt to be the platform that we’re going to launch off of to have a much broader electrification portfolio as we move forward,” she said.

“And that’s very important as we look at what’s required from a China perspective, from a European perspective, but we also think from a U.S. perspective,” Barra continued. “We still remained committed to being environmental stewards. And if you look at all the work we’ve done to improve the efficiency to improve the internal combustion engine, the light electrification, so we’re going to continue on that path. When you talk about regulations, one of the things that would be very helpful would be to streamline and get one national policy so we can most efficiently meet and improve the environment around not burdening from a customer affordability perspective.”

Michelle Krebs, senior analyst for Autotrader, said automakers are likely to still have to comply with international mileage rules, even as they push for Trump to make adjustments to the U.S. emission regulations. States like California might also seek to impose their rules to reduce auto pollution if Trump puts the brakes on the federal mileage standards, she added.

“The 2025 fuel economy standards surely are being discussed by members of the Trump administration and automakers,” Krebs said in an email.

“Even if they are rolled back or extended, automakers will still have to develop more fuel-efficient, lower-emissions vehicles,” she said. “California has made clear it is not backing off its even more stringent standards. Foreign countries, notably China, also are demanding lower emissions, and automakers are now global. If they want to participate in those markets, they have to play by their rules. The danger is if they develop these vehicles and the economies of scale are lessened.”

Scott Keogh, president of Audi of America, said automakers are looking for certainty about the mileage rules and other regulations from the incoming Trump administration.

“If you look at what businesses want and particularly what the automotive (industry) wants, it wants stability, without a doubt,” Keogh said in an interview with The Detroit News. “I think the industry fundamentally is working and I think what we’re all looking for is clear stability so we can keep executing our plans.”

Keogh added that the auto industry has thrived in recent years, despite the controversy over mileage rules and other regulations.

“If you look at big picture. the automotive business in America, you had a record year of sales. The automotive companies, the manufacturers, had some of their best years, domestic or import or whatever,” he said.

“I think it’s worth stating the business model in general is working for all parties right now, and I don’t know it needs to be completely disrupted,” Keogh added. “Everything in the history of the world can be improved. I’m just not so certain it needs to be turned over, and nor has anyone told me it is going to get turned over.”

Staff Writers Melissa Burden and Henry Payne contributed.