Congress Is Giving Carmakers a Free Ride


By Laura Cohn Here's the scene: Congress is edging toward making cars and light trucks more fuel-efficient as a way to reduce U.S. pollution and dependence on Mideast oil, while also increasing the nation's global competitiveness. But Detroit doesn't see it that way. A top auto exec warns lawmakers that enacting tough fuel-economy standards will "restrict the [auto] industry to producing subcompact-size cars."

Sound familiar? It should. Anyone who has been following the fuel-economy debate on Capitol Hill in recent weeks has heard the same thing countless times from the auto makers. But the scene mentioned above actually occurred in 1974, when Chrysler exec Alan Loofburrow testified before Congress. Industry has been making the same false claims about the dangers of strict fuel-economy requirements for nearly three decades. Listening to the debate in Washington these days is like being in a time warp.

Consider how far off Loofburrow's dire prediction turned out to be. After lawmakers ignored his warning and established the Corporate Average Fuel Economy (CAFE) program in 1975, the U.S. auto industry did not halt production of big cars. Instead, innovation took off. Manufacturers used new structural technologies such as front-wheel drive and lighter materials to build large cars with better gas mileage.

MISSED OPPORTUNITIES. The Senate missed a major opportunity on Mar. 13, when it approved a measure that gives the industry-friendly Transportation Dept. the authority to change CAFE standards instead of leaving it up to Congress. Now, the department has two years to consider raising fuel-efficiency standards and force the nation's biggest energy consumer -- the transportation sector -- to use less gasoline.

A hike in standards could have a big effect: Existing CAFE rules have cut U.S. gasoline consumption by one-third over the past quarter-century, according to the National Academy of Sciences. Even so, U.S. use of foreign oil has soared. According to the Energy Dept., the country imports 51% of its oil, up from 31% in the 1970s. The percentage is expected to leap to 64% by 2020.

Stricter CAFE standards not only would have helped curb oil imports they also would have reduced hydrocarbon emissions -- a big source of smog -- and curbed greenhouse gases, as well. "The Senate ignored a chance to make real progress in reducing our oil dependence, saving consumers money, and cutting global-warming pollution," says Carl Pope, executive director of the Sierra Club.

SPECIAL INTERESTS FIRST. Unfortunately, an intense lobbying effort by the auto industry and the United Auto Workers union persuaded a majority of Senators to kick the issue back to Transportation. David M. Nemtzow, president of the Alliance to Save Energy, a broad-based Washington group that promotes energy efficiency, contends that "a majority of senators put special interests over national interests."

Adds Senator John Kerry (D-Mass.), who authored an amendment that would have jacked up CAFE standards to 36 miles-per-gallon by 2015: "Few industries can match the auto companies when it comes to fighting to kill even modest energy, consumer, environmental, and safety protections." The mileage of the fleet of vehicles a carmaker sells now must average at least 20.7 mpg for trucks and 27.5 mpg for cars.

In geopolitical terms, the auto industry's timing couldn't be much worse. That's because the nation's thirst for imported oil is making it ever more reliant on supplies from the volatile Persian Gulf region, where disruptions are always a distinct possibility. At the moment, the U.S. imports about 25% of its oil from the Gulf. By 2020, that figure is expected to hit 41%. Passing Kerry's Senate amendment would have saved 2 million barrels of oil a day by 2020, according to an analysis by the Natural Resources Defense Council.

STILL TIME. Luckily, the Senate's move on Mar. 13 isn't set in stone. Championed by Democratic Senator Carl Levin of Michigan and Republican Senator Kit Bond of Missouri, the amendment could still be changed as the Senate debates the energy bill over the next few weeks. In addition, the provision will have to be reconciled with a measure passed by the House last summer before it becomes law.

Otherwise, the best hope for change will be if new lawmakers come into power in the November elections and choose a different path. One can only hope they will. America's energy security depends on it. Cohn covers energy policy from BusinessWeek's Washington bureau


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