Howes: Revived fuel-economy review acknowledges reality
Let’s get straight what President Donald Trump didn’t do Wednesday on his swing through Michigan, the nation’s automotive capital.
He didn’t “roll back” the tough federal fuel economy targets established by the Obama administration when the Detroit-based industry was still too financially weak and politically exposed to resist. He didn’t take the first step toward eliminating emissions standards for the cars, trucks and SUVs sold in the United States.
And, no, he didn’t abolish CAFE. Those are the Corporate Average Fuel Economy rules credited with making the auto industry greener and more environmentally responsible than the rubes running it would ever contemplate on their own.
What the president did do is revive his predecessor’s agreement to hold a “mid-cycle review” of standards that would require automakers to achieve 54.5 mpg by 2025. That process now is more likely to be grounded in the hard data of engineering, consumer demand and job creation than the wishful thinking of the past eight years.
Can’t have that, judging by the apocalyptic press releases lamenting Trump’s move at the alleged behest of the automakers. Can’t actually base standards on the real-world conditions of market behavior and technological acceptance when the blunt forces of politics and perpetually looming environmental calamity can be so effective.
Trump’s reversal of Obama’s decision on the mid-cycle review effectively gives the industry an opportunity to re-litigate the standards for model years 2022 through 2025. Armed with reams of data, the automakers likely will get the chance to tie the rules more closely to the market and technology as they are, not as politically minded bureaucrats think they should be.
The automakers officially say they are not seeking any relaxation of the fuel-economy rules, chiefly because global macro-trends of electrification and emissions-free driving are unmistakable. And the mobility space of ride-sharing and autonomous vehicles, a potentially multi-trillion new industry, requires leadership in both.
Additionally, policymakers in China and the European Union, to name two of the world’s largest markets, are requiring the industry to go green and electric irrespective of Team Trump’s incipient war on regulations or the deepening American love for pickups and SUVs.
Times are changing in the United States. Five years after the industry and Team Obama reached agreement on the tough new standards, conditions have changed far more than anticipated, making the 2025 target increasingly difficult to achieve.
U.S. consumers are abandoning the most fuel-efficient end of the market, not embracing it. Electric vehicles account for roughly 3 percent of sales in the United States, hardly the market rush assumed by the former administration and the environmental lobby. Oil prices are sharply lower, pegging a gallon of gas at closer to $2 than $4, a trend expected to continue.
Sales of traditional cars, particularly in the compact and subcompact segments, are sliding — so much so that Fiat Chrysler Automobiles NV exited the compact segment and is in the process of killing car production altogether in the United States. Ford Motor Co. is shipping production of compacts to Mexico even as General Motors Co. cuts shifts to reduce its glut of slow-selling cars.
Building politically correct cars fewer want just to meet a government mandate is as indefensible as paying union members not to work. Automakers likely would get punished as much for the former as they were for the latter during congressional beatdowns in the run-up to bailouts.
None of these realities is acceptable in the Church of Federal Fuel-Economy Rules, of course. Because the industry keeps booking record profits in North America and because sales are running at historic highs, the logic goes, the industry can “afford” to keep lightweighting its materials, downsizing its engines and electrifying its fleet.
In some ways, that’s absolutely true. And I’d be among the first to say this isn’t a binary, either/or choice. It’s both — a fact a ranking industry executive reiterated. GM and Ford, to name two, are betting “big” on electrification and “those investments are not changing.”
Neither is the expectation that the biggest, most successful players need to pursue “all of the above” strategies. On the traditional vehicle business; on improved environmental and fuel-economy performance; on electrification and all the permutations of mobility, from ride- and car-sharing to “talking” vehicles and self-driving cars.
What is changing is official Washington’s posture on manufacturing in general and the auto industry in particular. Trump called for an “American” economic model that is biased toward investing and creating jobs in the United States, a message with undisputed crossover appeal among industrial heartland voters who helped deliver him to the White House.
“Buy American and hire American,” the president said near Willow Run’s new American Center for Mobility in Ypsilanti Township. “It’s not just a motto. It’s a pledge to the people of the United States. The assault on the American auto industry is over.”
Maybe. It’s still very early in a new administration — and the promises of tax cuts, regulatory reform and business-friendly policies remain just that: promises. Now it’s time to start delivering.
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.