Detroit To Be Hammered Meeting CAFE

Posted by: David Kiley on May 23, 2008

International consulting firm Global Insight predicts that new fuel efficiency rules will cost Detroit’s automakers nearly twice what Japanese companies will pay. That’s because the fleets of Toyota, Honda and Nissan are closer to being able to meet the new requirements and are less dependent on trucks and big SUVs today.

The Detroit 3 can expect to pay $30.60 billion in additional costs to meet a fleet-wide standard of 31.6 mpg by 2015, said Rebecca Lindland, a Global Insight auto analyst. Asia’s top three car companies, she says, will pay about $14.85 billion.

General Motors alone, she says, will have to spend $15 billion, she said.

It’s worth noting here that while that sounds like a lot of money, and it is, Detroit has an astonishing talent for frittering away money. The company reported today that the utterly unnecessary and ridiculous strike by the United Auto Workers against GM supplier American Axle will cost GM $1.8 billion in lost earnings. You can’t make up how stupid a chapter in auto industry labor relations this was.

The U.S. Government proposed the rules in April to cut fuel consumption and reduce carbon dioxide emissions. The rule mandates a 40 percent increase in fuel efficiency by 2020, and a 25 percent improvement by 2015.

Among GI’s forecasted changes to cars and trucks to meet the requirement:

• Spark-ignition gasoline engines will be just 36 percent of the market, from 90 percent in 2006.

• Boosted direct-injection spark-ignition engines will be 33 percent, from less than 5 percent.

• Diesel engines will command 19 percent of the market, from less than 5 percent.

• Stop-start hybrids [in which engines shut off at stop lights and idle]will account for 35 percent of all drivetrains, from less than 5 percent.

Global Insight forecasts that total U.S. industry sales volume will languish below 16 million units through 2010. But according to the forecast, changing demographics and pent-up replacement demand will push sales beyond 18 million in 2015.

Reader Comments

JN

May 23, 2008 12:37 PM

Among GI’s forecasted chnages to cars and trucks to meet the requirement

Typo

Anon

May 23, 2008 3:14 PM

American automakers aren't being hammered by CAFE. They're being hammered by their own stupidity and short term thinking. Less then a year ago the GM CEO publicly stated that "the American people don't want cars that get good gas-milage".

The government is forcing them to be globally competitive.

Adam West

May 23, 2008 9:24 PM

They had 40 years to improve fuel economy, but preferred filling the pockets of our politicians to prevent it. Now it's time to pay, as Arnold Schwarzenegger puts it 'The train has left the station'.

The Free Market

May 23, 2008 11:27 PM

"It’s worth noting here that while that sounds like a lot of money, and it is, Detroit has an astonishing talent for frittering away money. The company reported today that the utterly unnecessary and ridiculous strike by the United Auto Workers against GM supplier American Axle will cost GM $1.8 billion in lost earnings. You can’t make up how stupid a chapter in auto industry labor relations this was."

I can't believe that this kind of blatant anti-worker garbage is still being propagated in business publications. Why don't you ask the workers getting their pay halved if the strike was "unnecessary and ridiculous" and "stupid". I bet you if your pay was cut in half, you would be upset too.

Furthermore, this article mentions nothing of the lack of leadership on the federal level or even on the company management level.

I'll give you one hint: it's not the government or the workers doing massive damage to our environment, our working population, our economy, and our industrial base. Nope; it's the unchecked free market.

But hey, at least we can afford to buy cheap Chinese-made goods from Wal-Mart. For now.

dwight

May 24, 2008 12:43 PM

Ford and GM already have access to good and efficient cars in europe and asia. It is not necessary to start from scratch. Whether or not they will avail themselves of a K.I,S.S. approach is another matter.

paull mcgraw

May 24, 2008 11:57 PM

Hey-maybe the gov't didn't have to pass the new CAFE rules. That's because the free market will force the automakers to make fuel efficient cars and trucks. Don't be surprised if the CAFE standards are met with before 2020, thanks to super high gas prices.

Dave

May 27, 2008 10:09 AM

These so called great leaders of America's industry are not forward thinking at all. They deserve to pay more for their short-sightedness. Just one good car that gets over 100 miles to the gallon would be the biggest saler of all time. They just don't get it.

Dave #2

May 27, 2008 11:52 AM

Poor Poor Detroit. They've been milking the SUV cash cow for decades now, at the expense of the environment and our national security. Now they have to catch up with auto makers with real foresight and vision. Thats so terrible!

FrankNJ

June 3, 2008 8:32 AM

Dave #2, you say "real foresight and vision"? Who, the Japanese I assume? It is not the Japanese company who had the vision, but raather their home situtation. I nother words, their home market demands small cars. In the US it is different. Look at the sales volumes in the US for the past 20 years, all biased towards big cars. In fact, the Japanese cars have grown in size to be competetive in the US and Toyota's CAFE have actually decreased as it sells more thirsty Tundra's! And the Prius was a Japanese governemnt financed initiative, not a Toyota push for "foresight and vision", but just another assignment. Id our government were that way, we would be globally competetive as well.

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