The Fuel Economy Debate Will Get Silly Before Its Over

Posted by: David Kiley on June 14, 2007

I know the debate over fuel economy, especially as it relates to the legislation currently being jawboned in Congress, is complicated. But consider a few facts that will illuminate some people and anger others because of how simply I am presenting them.

I will undoubtedly be accused of over-simplifying the debate. But here goes.

Michigan Senators Carl Levin and Debbie Stabenow are trying to get a compromise into the bill going through the U.S. Senate, which they feel is too hard on their constituents at Ford, GM and Chrysler.
Levin wants the Corporate Average Fuel Economy regulation to be 35 miles per gallon for cars and 30 miles per gallon for trucks and SUVs. That means a company’s entire fleet would have to meet that average.

Sound tough?

Consider that Toyota today…TODAY…has a CAFÉ rating for its cars of 36 mpg. So, Levin’s proposal would require GM, Ford and Chrysler to meet Toyota’s current passenger car CAFÉ rating in 13 years. That’s not going to sound like much of a compromise to Levin’s foes.

The complaint: Toyota sells more small cars, Yaris, Corolla, Priuses as a percentage of their total car sales. So what! Isn’t Toyota phenomenally successful with that mix of cars? The company is practically minting money in the basement. Could be that if all car companies developed its product line in a parallel fashion to Toyota, that 35 mpg CAFÉ will look a lot more doable.

30 mpg for pickups and SUVs? The execs tell us they can get there, but that it will cost between $5k and $8k in added technology. And?

Most pickups and SUVs have between $3,000 and $6,000 on incentives on the hood today. It would seem to me that in 13 years you could dial down production of these vehicles to meet natural demand (the trucks and SUVs get rebated because Detroit makes too many of them)and cut out the rebates. If people still want vehicles that big, let them pay the other $3k to $5k it will take. With the quality gains being made today, I would think people could easily drive those vehicles two to three years longer than they have been to make up for the higher initial price. That would make the per year cost of driving the vehicles about what it is today. Sounds logical to me.

Okay…Im being simple. But sometimes we make the questions too hard.

Speaking of asking questions: I came across a survey from last year by Consumer Federation of America. Two thirds of 1,000 people questioned said “the well-publicized financial problems of both Ford and General Motors have resulted from their emphasis on producing and marketing SUVs and pick-up trucks with relatively low miles per gallon.” Just who, may I ask, was buying those SUVs and pickups?

Detroit builds them because people want them. They don’t build them and force buyers to take them.

Reader Comments

Smiley

June 14, 2007 5:06 PM

Buyers may want large SUVs and trucks for reasons that entirely escape me. By my calculations the amount I spend on getting large items delivered on the rare occasion I need to do that is a fraction of the extra costs I would incur by owning such a monstrosity. However, even you admit that Detroit has to offer large rebates and incentives to sell these vehicles, meaning that the public doesn't want them at a price which is profitable for the manufacturer. It's just more evidence of the incredibly bad mgmt at said automakers.

I cannot imagine a more toothless bill than giving American automakers over a decade to reach the current standards of Japanese rivals. After all, this is the same industry that claimed the fuel efficiency of the 70's couldn't be improved upon. If Congress found the spine to require all automakers achieve an average of 40mpg across their entire fleets by 2010, they'd find a way.

The automakers that will win in the long run are the ones who don't wait for government regulation but take an honest look at the future of their industry and develop appropriate strategies. I think we call them the Japanese.

CYLack

June 16, 2007 2:38 AM

Well, it seems that people buy car base on what they want and not what they need or suits them. It nice to have a trendy SUV in their garage, but when they start to realise their fuel guzzling vehicles are taking a huge chunk of their budget, they have second thoughts.

I guess those are the two-thirds mentioned.
http://www.articlesjoy.com/car-maintenance/

solomonrex

June 18, 2007 12:24 PM

I know you guys ignore comments, but here goes:

Let's not be silly, that's a cars-only figure for Toyota, and the cars figure is clearly not what manufacturers are worried about.

In a world without Ford/Chrysler or GM, who will supply trucks to America? Imagine if the price of computers went up overnight instead of down - wouldn't that have an effect on the economy? Aren't light trucks being used in Corporate fleets and contractors' businesses just as vital?

There is only one way to really reduce fuel consumption: gas taxes. It's the only way to reduce people using old/used gas-guzzling cars, SUVs and trucks AND 18-wheelers, which will be the majority of the automobiles on the road at any time. And it will actually change behavior and purchasing patterns across the board. And there are no workarounds, like, let's start making the bodies and have someone else sell the engines! Let's sell Scions and charge extra for turbos and sports mufflers!

It's the only strategy that makes sense for a world with the greenhouse effect. Because people will actually burn less gas, rather than pay more for new cars. A new CAFE standard just favors the Japanese manufacturers short-term and kills new car sales long term.

And the future prices? This is Businessweek, you should know as the US auto makers and Nissan go out of business, the remaining manufacturers will raise prices.

Gas taxes would hurt the economy, too, but in a predictable way that doesn't automatically favor foreigners over Americans. And the manufacturers will still have to make more fuel-efficient cars and trucks.

CAFE was a political cop-out and is still bad policy. Let's do away with it for something sane. Now that global warming has become accepted, the American people will understand.

Wes

June 18, 2007 10:29 PM

"Two thirds of 1,000 people questioned said "the well-publicized financial problems of both Ford and General Motors have resulted from their emphasis on producing and marketing SUVs and pick-up trucks with relatively low miles per gallon." Just who, may I ask, was buying those SUVs and pickups?

Detroit builds them because people want them. They don't build them and force buyers to take them."

True, then true. However, GM and Ford have spent a disproportionate amount of effort and money into their profitable vehicles (trucks and SUVs). I suspect that if GM and Ford had a relevent product lineup that wasn't biased towards a single segment, any of this discussion point would be moot. But this also goes with the earlier in the decade fad of 'bigger is always better' which is now reversing, thankfully.

paul mcgraw

June 19, 2007 8:20 PM

I know gas is expensive but I still drive a relatively large car--a minivan. I do it because I choose to. People should be left to choose whatever kind of car they want to buy, not have the gov't dictate what they SHOULD buy. It's ridiculous. The price of gas is high now, so naturally consumers will look for more fuel efficient ways of getting around. By the way, I have a family and I don't feel safe driving around in a small vehicle. My life is worth alot more than $4 a gallon.

Mike Bock

June 21, 2007 8:14 AM

Toyota and Nissan are guilty of building gas hog SUV's as well as GMFORDCHRYSLER.

From Kiley: I agree. They were just later to the party.

MA4T

June 21, 2007 8:26 AM

Rentals and delivery charges are very reasonable. Paying a bit extra for delivery once or twice a year is a LOT cheaper than paying extra all year to have that truck "just in case."

Rich

June 21, 2007 2:49 PM

David, your statement "Detroit builds [pickups and SUVs] because people want them" is at odds with your statement "most pickups and SUVs have between $3,000 and $6,000 on incentives on the hood today."

From Kiley: Not at odds. Detroit, and the Japanese, build these vehicles because people want them. But the issue we have today is that they are building many more than the market wants to absorb.

David

June 21, 2007 3:51 PM

Whenever I see a survey that says "66% of people said this", especially about a complex topic like Social Security, immigration, or the financial woes of major American car companies, I always like to keep in mind that 50% of the people in this world have double-digit IQs. Why are we asking them?

Martin

June 29, 2007 3:13 PM

40 MPG in 2 years? Come on, this is uninformed ranting, like saying we should visit Mars next year. Before dismissing the 35 MPG standard as toothless, consider that only a handful of cars currently get that level of mileage today, and they are all very small. NO SUVs, no trucks, no wagons or minivans, no sports cars, no luxury cars, none. We are basically asking the auto industry to reinvent themselves in 10 years. In an industry that takes 3 years to deploy a new vehicle (yes, even Toyota). What is even worse, if this bill passes, and in 5 years the reality sets in that we'll ALL be driving Yaris-sized vehicles, the bill will be softened, which will leave the industry high and dry in the middle of their own manhattan project. Nice use of Government to destroy a core industry.

Like it or not, this is not Europe, where public transportation is extensive, and distances are shorter. And the lack of fueling stations for flex is also ignored. Dumping this entire problem on one slice of the cause is a poor way to solve this issue.

How about a little higher gas price, a little better mileage, and incentives to switch away from internal combustion engines? Come on Congress, show some political spine! Raise the Gas tax!

Probably asking way too much...

Donald MacDONALD

July 8, 2007 8:46 AM

the IC piston engine is far from finished. The economy of vehicles and their engines/transmissions is far from being fully realised - but demanding too much too soon will be impossible to fulfil. Progression by encouragement over 8 year min 10 years better - and 12 years certain. There seems no advantage in hybrids even with Lithium-ion batteries with gasoline S.I. engines even with turbochargers and direct fuel injection into the combustion chamber - better will be two-turbo diesels with some battery-electric regenerating assistance and wheel motor-generator - retarders. PSA Peugeot-Citroen is well on the way to do so except for the wheel motors. Its car diesels have always been good and now are excellent. Ford produced the money for the new V6 and V8 modular car diesels and Peugeot-Citroen produced the talent. Great credit to Ford for doing so. Its excellent European products do not receive the recognition that on merit they deserve perhaps because of the badge. Henry Ford 1 said "A Ford will get you anywhere except into society". The US can do it as aviation shows - but migration from Michigan is needed - from persecution as the Mormons went to Utah. The persecution in this case is not religion, but unions - who seem to have learnt little and are oblivious to the danger of killing the host animal on which they have fed - only too well for too long. In addition to huge pay and benefits, and other rules that keep factories going when they should slow down or even temporarily close - how hard is it to enforce quality build controls even on good designs.
Recall the English car and motorcycle works.

Wes

July 10, 2007 10:36 PM

"Rentals and delivery charges are very reasonable. Paying a bit extra for delivery once or twice a year is a LOT cheaper than paying extra all year to have that truck "just in case." "

You're not kidding. Doesn't make any sense for people to do the 'jic' scenario, but it doesn't matter how many times your show someone the numbers, people are sold on the 'one size fits all' approach when that approach never fits anyone well. Those people who do have a legitimate need for a SUV or pickup for work must now compete with the people buying them for status symbols, and as such, the dealers only stock top of the line models.

I'm hoping for $5/gallon gas to finally put an end to this insanity.

contractor

August 8, 2007 8:05 PM

Just thought I would add something, I am a land surveyor and my friends are construction workers all of us drive trucks or cargo vans. All of us would like to see better fuel economy. But so far the only way to get it and meet our needs to put the bacon on the table is to buy a diesel 3/4 ton pickup. My current cargo van has aprox. 3000lbs in it mon-sun, and most days I need most of the stuff in it. Toyota has a half ton truck out now and the fuel economy is no better than the american trucks, worse than chevy actually. Also despite being worried about fuel economy the cost of fuel at my company is simply passed on to the client, currently about 50dollars a day in gas, and up to 40000+ miles a year on the truck. The fact is the people that put the most miles on per year due to buisness also get the worst fuel economy, and in the 7 years I have been doing this the vehicles offered to the public that can handle the load required for the job, have not significantly if at all improved in fuel mileage when loaded down.

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