For more than three decades Detroit's Big Three and their allies have successfully blocked or limited changes to the nation's fuel-economy rules. However, with General Motors and Chrysler LLC facing bankruptcy, the carmakers are making what could be one last stand, and this one they may well lose.
Currently fuel-economy standards are set by the Environmental Protection Agency. But President Obama, moving to fulfill one of his campaign promises to the state of California, has asked the EPA to consider revising Bush-era rulings so California can impose its own limits on greenhouse-gas emissions from motor vehicles. On Thursday, the EPA held public hearings on a possible revision, and it will accept written comments until April 6 with a decision, hopefully, soon to follow. But the EPA has already indicated its discomfort with the original decision made several years ago to deny California the right. Environmentalists, take heart. (See TIME's portraits of American autoworkers.)
Automakers argue that the state's greenhouse-gas emission standards amount to new fuel-economy rules because about the only way to meet the California standard is to limit the use of fuel burned in the engine: Cars and trucks would have to get 43 miles per gallon on average by 2016, which is far higher than the 35 miles per gallon by 2020 target currently approved by Congress in the Energy Act of 2007. Such a leap would require sweeping changes in the vehicles American drive.
California's quest to control greenhouse gases goes back a few years. It originally applied for a waiver from EPA's national jurisdiction on December 21, 2005. The request was denied by then EPA Administrator Stephen Johnson on March 6, 2008. At the urging of President Obama, the EPA is now reconsidering that original waiver request.
If California is granted a waiver, it would have far-reaching consequences as thirteen other states have already adopted California's standards and could quickly implement them. Several other states, among them Florida, Utah, Colorado, Iowa and Minnesota are considering adopting the California standard. Even Illinois, in the heart of the industrial Midwest, is considering legislation modeled on California, says David Doniger from the Natural Resources Defense Council, an advocate for the California rules. Bottom line: It could be a green stampede.
Carmakers, including foreign nameplates such as Toyota, Nissan, Volkswagen and BMW, argue that the goals embedded in the California regulations are basically unattainable under current conditions, which include a severe shortage of cash for innovation and research. "This is the worst auto market since World War II," says Julie Becker of the Alliance For Automobile Manufacturers, representing both foreign and domestic nameplates. Adds Eric Fedewa, vice president at CSM Worldwide, a forecasting firm based in Northville, Mi.: "Our analysis suggests that allowing California and other states to regulate CO2 emissions, and thus fuel economy, will further damage companies that are struggling, like GM, Ford and Chrysler, and much of their supply base, and potentially destabilize relatively healthy companies like Toyota and Nissan." Asian and European carmakers typically enjoy better fuel economy than the Big Three, but they fear the California rules will impede sales of luxury sedans, trucks and SUVs, which are much more profitable than small cars and hybrids.
However, Jim Kliesch, senior engineer with the Union of Concerned Scientists, argues that the industry can meet California standards with relatively modest improvements to the traditional internal combustion engines, especially if the automobile fleet continues to absorb more hybrid and electric vehicles. Bob Kruse, executive director of GM's Chevrolet Volt, said this week that the Volt hasn't gotten an EPA rating yet. But under current test procedures it could get a rating of better than 100 miles per gallon because it uses electricity rather than gasoline to propel the vehicle. The gasoline only would be used to power the on-board generator.
Consumers will get an immediate payback from better fuel economy since motorists now live in a world where high gasoline prices are the norm and downward spikes in price, such as the one caused by the recession this winter, are likely the exception. "Even General Motors believes fuel prices will go up," says Kliesch.
GM and Chrysler, given the need for federal assistance, have kept a low profile in the fight over the California rules, and are still hoping that the Obama Administration won't grant California the waiver. In a show of Detroit's political savvy, the Big Three have also outsourced much of the current fight over the California rules to the National Automobile Dealers Association, long-time critics of legislation. Dealers say they would wind up enforcing a "patchwork quilt" of state regulations, and that the California approach would force automakers to ration certain popular large models. Dolinger says the patchwork argument is nonsense because the rules imposed by the different states are exact copies of the California's regulations. "There is only one standard," he says. He adds that the regulations are also flexible enough to account for consumer preferences.
Environmentalists are insisting that one of the conditions of continuing federal assistance to the automakers is that they withdraw their support for the federal lawsuit filed by the Alliance for Automobile Manufactures in California, which up until now has been supported by both domestic and foreign carmakers.
So far the automakers haven't killed the lawsuit. But they are supporting the Obama Administration's "cap and trade" initiative, which is designed to curb both the use of energy and greenhouse-gas emissions across the entire economy. For carmakers, such legislation would be mostly neutral because they earn credit for making electric vehicles and could spend it on cars that emit too much CO2. GM now notes that one-third of the Cadillac Escalades it sell are hybrids, so it would have plenty of currency. Of course, at this point Detroit is hoping for anything that doesn't have California's fingerprints all over it.