UAW President Endorses Proposed U.S. Rules to Boost Mileage
January 25, 2012, 2:56 AM ESTBy Keith Naughton
(Updates with dealer comment in fourth paragraph.)
Jan. 17 (Bloomberg) -- United Auto Workers President Bob King today endorsed proposed rules calling for automakers selling passenger vehicles in the U.S. to double average fuel economy by 2025 while a representative of an auto-dealers group objected.
“The proposed rules are sensible, achievable and needed,” King testified at a U.S. hearing in Detroit. “They are good for the auto industry and its workers, good for the broader economy, good for the environment and good for our national security.”
The U.S. National Highway Traffic Safety Administration and the Environmental Protection Agency in November released proposed rules to set fuel-economy standards for 2017 to 2025. The rules, which the agencies say they will finalize this year, would require automakers selling passenger vehicles in the U.S. to raise average fuel economy to 54.5 miles per gallon by 2025.
“Before rushing headlong into a new set of mandates doubling today’s fuel economy standards, we need to know better what the ramifications will be,” testified Don Chalmers, a dealer in Rio Rancho, New Mexico, for Ford Motor Co.’s namesake brand, who represented the National Automobile Dealers Association. “If the customers don’t want to buy these products, we all lose.”
The rules may cost as much as $157 billion, the two agencies said in the draft. The standards would add an average of $2,000 to the price of each new passenger vehicle sold by 2025, the agencies said. Benefits of $419 billion to $515 billion in fuel savings would offset the costs, they estimated.
King’s View
Drivers will save an estimated $4,000 in fuel costs over the life of their vehicle, more than the costs added by the rules, King said.
“Consumers may pay a little bit more for their vehicles, but what they will save over the life of their vehicle is $4,000,” King said in a press conference following his testimony.
Building more fuel-efficient vehicles that consumers demand will lead to more auto jobs, not fewer, King said.
“The more middle-class jobs we create, the more people there are who can purchase these vehicles,” King said. “For consumers, a major issue today is fuel efficiency. I’m sure this is adding a lot to our members’ job security.”
Lower-income buyers and those with weak credit may not be able to qualify for a loan for the higher-priced, fuel-efficient vehicles, said Chalmers, the NADA representative.
Dealer Dissent
The price premium is actually $3,200 when the fuel rules for 2016 are combined with those that would go into effect between 2017 and 2025, Chalmers said. A forthcoming NADA study will show the price of cars and trucks will actually rise by as much as $5,000 if the new rules are approved, he said.
“Our concern is for the customers and the prices they will face.” Chalmers said. The $3,200 premium “would raise payments between $60 and $70 a month on a car loan.”
The proposed rules require annual fuel-economy increases of 5 percent for cars. Pickups and sport-utility vehicles can raise fuel economy at 3.5 percent for the first five years the rule will be in effect. Then, unless regulators decide differently in a midterm review, light trucks also would have to boost fuel economy by 5 percent a year.
General Motors Co. and Toyota Motor Corp. were among automakers that agreed in July to the proposal. Volkswagen AG and Daimler AG didn’t sign on.
The proposed rules provide “a regulatory framework that enables manufacturers to plan and invest for the future with confidence,” Sue Cischke, a Ford group vice president, said in prepared testimony. “The key is to ensure that the proposed targets do not outpace consumer demand, or the affordability of the technologies needed for compliance.”
Different Technologies
Consumers should decide which fuel-efficient technologies they want to adopt, testified Mitch Bainwol, president of the Alliance of Automobile Manufacturers, a Washington, D.C.-based lobbying group for major automakers, including GM, Ford, Toyota, Chrysler Group LLC and Bayerische Motoren Werke AG.
“We don’t want the government to pick the solution,” Bainwol told reporters following his testimony. “Nobody has a crystal ball to say which powertrains will win.”
Beginning this year, automakers must meet higher fuel- economy standards under a rule that applies through 2016 and requires about 4 percent improvement a year.
That rule, issued in 2009, requires automakers to increase average fuel economy to 35.5 mpg by 2016.
--With assistance from Angela Greiling Keane in Washington. Editors: Bill Koenig, Jamie Butters
To contact the reporter on this story: Keith Naughton in Detroit at knaughton3@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
