Discord over mpg rules creates 'difficult time' for carmakers in DC

Keith Laing
The Detroit News

Washington — Conventional wisdom in Washington says automakers should be united before approaching President Donald Trump or Congress with requests for policies that will benefit their industry.

But with General Motors Co. and Fiat Chrysler Automobiles lined up with the president in a fight over gas-mileage rules with California — and Ford Motor Co. siding with the Golden State — automakers are forgoing commonality on a key issue at a time when they are pleading for regulatory certainty.

The split came sharply into focus Friday when California and 22 other states, including Michigan, sued the U.S. Environmental Protection Agency over its effort to revoke California's right to set higher car emissions rules than the federal government currently mandates. 

U.S. Rep. Debbie Dingell, D-Dearborn, said the industry division on fuel economy rules has  sown confusion among lawmakers in Washington. 

"It's a very difficult time for the industry," Dingell said. "People are viewing each company differently. People are asking why they are doing things, but it depends on who is doing the asking and what it is they are asking about." 

Carmakers had asked the Trump administration to take another look at fuel-economy rules for the 2022-25 model years. Those Obama-era standards would have required automakers to increase fleetwide fuel economy by about 5% annually toward a goal of 54.5 miles per gallon by 2025. The Obama administration moved to finalize the rules ahead of schedule after Trump's 2016 victory, setting off a chain of events that has led to today's dispute.

Ford is on one side of the fuel-economy dispute between California and the White House, and GM and Fiat Chrysler are on the other, as carmakers plead for regulatory certainty.

Trump went beyond what most automakers were seeking by proposing a freeze that would lock in mpg rates until 2026 at 2020 levels, when carmakers would be required to produce fleets that average about 39 miles per gallon.

California, which helped craft the Obama-era rules, sued over the rollback and has promised to also sue over the revocation of its right to set its own more-stringent mpg requirements. The nation's largest state accounts for 12% of the U.S. auto market. Thirteen states and Washington, D.C., have adopted California’s gas mileage rules.

Ford angered the White House in July when it reached an agreement with California to voluntarily increase the average fuel economy of their fleets from 2021 levels by 3.7% per year, reaching an average of nearly 50 mpg by 2026. Volkswagen, Honda and BMW were also part of that agreement. The U.S. Department of Justice launched an antitrust investigation.

A division within the industry opened in October when GM, Fiat Chrysler, Toyota and the Association of Global Automakers sided with the White House in the legal action between California and the federal government. They argue in favor of the White House's position that Washington should create one set of gas mileage rules for all the nation's cars. 

Adding to the confusion, the Trump administration could be backing off the proposed freeze somewhat. Instead, the administration is now considering pushing for a 1.5% annual mpg increase, according to a person familiar with negotiations between the administration and congressional leaders. The new proposal, first reported by the Wall Street Journal, still would be a far cry from the 5% hikes enacted by the Obama administration.

The EPA did not respond to a request for comment, and the White House and U.S. Department of Transportation declined to comment. 

Industry discord can put groups that lobby for carmakers in Washington in awkward positions. Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, which represents domestic and foreign-owned manufacturers, said, "For any industry, it's a good goal to be united. It shows whatever differences between the company, we have a common goal we're striving for."

Bergquist said the mileage debate is an issue that depends a lot on what carmakers produce. Detroit manufacturers in particular have hitched their wagons to pickups and SUVs, which usually burn more gas.

"The companies are in different places," she said. "I expect they're going to be together on a lot of other issues," she added, noting the auto industry has been lockstep on trade matters that have cropped up during the Trump era.  

The U.S. auto industry achieved a record average of 24.9 miles-per-gallon in the 2017 model year in "real world" testing, short of the Obama-era requirement that they achieve a fleetwide average of 29.3 miles-per-gallon, according to the U.S. Environmental Protection Agency. Preliminary data shows automakers are likely to have hit an industry-wide average of only 25.4 miles per-gallon for 2018, which would fall short of the 30.6 miles-per-gallon milepost for that year. 

Ford, GM and Fiat Chrysler ranked 11th, 12th and 13th respectively among 13 manufacturers who were measured in 2017. Ford and GM fleets averaged 22.9 miles per gallon, while Fiat Chrysler averaged 21.2. 

Honda Motor Corp. led all automakers for 2017 with an average of 29.4 miles per gallon for its fleet, followed by Mazda Motor Corp. with 29 mpg and Hyundai Motor Co. with 28.6 mpg.

Brett Smith, director of propulsion technologies and energy infrastructure for the Center for Automotive Research, attributes some of the discord to GM's smaller profile in the industry in recent years, especially post-2009 federal bailout. 

"The industry always used to follow in lockstep with General Motors, but over the '80s and '90s, that went away," he said. "It was important that GM took the lead because they were big enough to take the hit.

"Toyota kind of became the leader, but that did not go well for Toyota," Smith continued. "They're relying increasingly on the alliances, the lobbying organizations, but that gets harder and harder as they have diverse business positions and goals."

When the president can move markets with a single tweet, Smith said, "It's hard to decipher when they are trying to protect themselves from political blowback versus when they are trying to protect themselves from regulations they think are too onerous." 

Automakers are more effective in Washington when they are united, said Miranda Margowsky, communications principal at Precision Strategies, a Democratic consulting firm and a former aide to U.S. Sen. Debbie Stabenow, D-Lansing.

"It's important for the companies to remember that in order to have effective champions on the Hill, they need to be clear in what they are asking for," she said.

"It's a difficult environment with Trump, whose tweets can change a news cycle," she said. "But the companies have to remember he's not their only audience. If they work closely with the Hill, the industry will end up getting more done than they will just with Trump." 



Twitter: @Keith_Laing