By on May 20, 2011

While the political battle lines over increasing CAFE standards are being drawn in Washington, with the industry taking on both environmentalists and itself, a line of analysis that’s been around since 2009 is exacerbating the industry’s internal divisions over the impact of CAFE increases. A two-year-old University of Michigan study has been exhumed and expanded upon in a new CitiGroup report which makes a bold claim: CAFE will actually improve both sales and profits for the industry. And with Detroit taking the lead in resisting CAFE increases, one might think that the industry’s “turncoats” like Toyota and Hyundai, who have made marketing-led decisions to support CAFE increases, would be the main beneficiaries of these reports. Not so. According to this battle-line-confounding analysis, the biggest beneficiary of CAFE increases will be… Detroit. Madness you say? You may well be right…

We’ve reported on the work of the UM’s Transportation Research Institute a few times before here at TTAC, most notably the 2009 McManus/Kleinbaum study Fixing Detroit: How Far, How Fast, How Fuel Efficient [PDF here]. That study raised our eyebrows on several occasions, forwarding as it did the counter-intuitive conclusion that Detroit would be a major beneficiary of increased CAFE standards or, as the study puts it “increasing fuel economy standards encourages automakers to create a portfolio of products that is more likely to raise the profits of the Detroit 3 automakers than to lower them”). The study noted:

Our finding that Detroit 3 automakers’ profits would increase under higher fuel economy standards is very robust.  We assessed the sensitivity of our prediction of Detroit 3 automakers’ profits to extreme values of 11 uncertain factors we predict for our model, and found that just three of the factors had extreme values capable of generating a drop in Detroit 3 profits:  an extremely low consumer response to fuel costs relative to vehicle prices (less than one-fourth Sawhill’s (2008) statistically estimated median value), a gasoline price of $1.50 per gallon (an extremely low price not seen since 1999), or direct manufacturing costs (materials and labor) that are 2.2 times the estimates we used (Meszler) and 3 to 4 times the National Research Council (2002) estimates (adjusted for inflation).  While the three factors could result in losses rather than gains in profits, the likelihood of lost profits is low.  There is a 7% chance that profits would be less than zero if CAFE were increased 30% (35 MPG), a 15% chance of a loss if it were 50% (40.4 MPG).

As intuition would suggest, the larger mandate increases the downside risk.  But it also offers greater upside opportunity, as the chance that increased profits could exceed $6 billion is 18% for a 50% increase in fuel economy, but only 6% for a 30% increase.  The total uncertainty attached to the larger increase is greater, which means both more upside and more downside.  Overall, the risk and reward profile of these scenarios is very positive, with only a small chance of losing and a very large probability of gain.

That 2009 finding was, however, put in the context of a domestic auto industry in the midst of crisis and restructuring, and as a result it focuses largely on fuel economy as a factor in a larger turnaround. At the time, GM was still emerging from the wreckage of the SUV/pickup market, still suffering from the kind of self-defeating thinking that McManus and Kleinbaum document:

For example, GM conducted internal research for decades that found customers value fuel economy far more than the company’s financial calculations assumed.  As publicly reported, the company systematically discounted these research results when calculating the benefits of improving fuel economy, often by as much as two-thirds.  In other words, if the research said the sales gain would be 10%, the number used to do financial calculations was 3%.  In fact, the belief that fuel economy was not “worth it” became so ingrained into the culture of the company, and so institutionalized in decision making that the senior people might not even be aware that they have been ignoring their own research.

That example, combined with consumer feedback confirming that lack of fuel economy was keeping them from buying American-brand autos is the fundamental basis for the study’s assumption that significant fuel economy improvements are relatively low-hanging fruit. Or, to borrow a slide from the report:

This argument is quite like the one forwarded by the Union of Concerned Scientists recently, which holds that payback in lowered fuel bills will make consumers more likely to spend more for increased fuel economy. Whether that’s entirely true or not isn’t yet clear, although early sales of Ford’s EcoBoost F-150 seems to indicate that it’s possible. Still, whether paying more upfront for longer-term savings (essentially a front-loading of lifetime costs) will prove attractive to the mass market remains very much to be seen (and the study assumes “consumers respond the same to fuel cost as to retail price”). Moreover, the McManus/Kleinbaum study depends on a return to the previously “normal” sales levels of over 15m annual sales by 2016 and over 17m units by 2020, levels which have not proven to be sustainable over the long term without dangerous levels of subprime credit lending.

Which leads us to a Citigroup/Ceres report based on the McManus/Kleinbaum study, which looks to the 2020 period and beyond for further evidence of the UM team’s basic conclusion. That report uses the same GM price elasticity and cross-price elasticity model that the 2009 report relied upon, and assumes the same $4/gal gas price average for its baseline scenario (itself a questionable assumption, given that gas prices have already risen to $4/gal). Though the Ceres report goes into more detail about the market penetration and cost increases of different fuel-efficient drivetrains, the conclusion remains the same as it was in 2009, namely that

Under the simulation, the Detroit 3 gain relative to the industry due to a number of factors, including 1) Narrowing the historical gap between Detroit 3 fuel economy and competitors; and 2) Light trucks and larger cars, in which the Detroit 3 sport a greater share, have greater potential to add consumer value through fuel economy than do smaller cars and car-based trucks. This is because future fuel economy increases have a greater impact on the fuel economy of these larger vehicles, thereby providing more utility to the consumer, and since full-sized trucks tend to be used for commercial purposes, this is a key factor in the purchase decision. Finally, the prices–and therefore the estimated variable profits– are higher for trucks and large cars.

The question that doesn’t appear to factor into the analysis anywhere: can we really rely on trucks to maintain their volume levels in the face of steadily increasing gas prices? Just as McManus and Kleinbaum question whether fuel economy is optimized in the baseline scenario (in turn leading to the low-hanging fruit for Detroit), I would question whether or not truck demand is “optimized” in the 2020 pre-CAFE senario outlined above. After all, the last time Ford’s full-sized truck sales hit the 670,000 unit level was 2007. In order to gain the unique benefits projected in this series of reports, that volume can not continue to decline as it did in 2008-2009 or settle to just over a half-million units as it did last year. Meanwhile, with the overall truck market settling into a 30-year low, that volume (and the low-hanging-fruit profits that underpin the CAFE-is-good-for-Detroit thesis) can hardly be relied upon.

In short, this line of analysis is truly puzzling. If, as it appears, the 2009 report was intended as a justification for the bailout, the Ceres/Citigroup revisit of the theme is puzzling. After all, the thesis that Detroit stands to gain the most form CAFE increases runs directly counter to the lobbying message coming out of Detroit’s governmental affairs offices as well as the Alliance of Automotive Manufacturers. On the other hand, even accounting for the flawed assumptions of $4/gal gas, strong truck sales and the consumer’s willingness to front-load costs (something the American consumer is famously allergic to), the study still sends Detroit in the right direction. Though I wouldn’t rush to assume that CAFE increases (or even higher fuel prices) will spur marginal profitability or volume gains for the Detroit automakers, steadily rising gas prices will have more of an impact on the market than CAFE. Whether profits improve or not, Detroit has little choice but to correct for its decades of anti-fuel-economy planning as the market changes. And, as Detroit has learned all to well in recent years, profits are nice but survival is the bottom line. Survival, not a groundswell of business success, is what should be motivating the Detroit automakers to stop worrying and learn to love (or at least accept) CAFE increases.

 

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43 Comments on “Why CAFE May Be Good For The Industry (Especially Detroit)...”


  • avatar
    VanillaDude

    CAFE gave us the Malaise Era.

    Are you ready for the 2015 Mustang III? If you loved the Mustang II, you are going to love the Mustang III!

    Liked the Fury II? Take a look at the new Chrysler Fury III!

    The Malaise Era is when experts in one field, assume they are experts in a completely different field, and start mandating specifications and conditions they have determined would benefit you and I, based on the expertise they gained in their credentialled field.

    If you thought Stephen Hawking’s insight on Heaven was awesome, just check out Billy Gragham’s insight on Quantum Physics! You see, they are both experts, right? You have a problem with them using their brilliant insights in another field of study?

    Well hey! – This UM study was created by people who know how to drive a car, right? They are experts in their fields regarding economic studies, right? They studied the auto industry, right? So – so what if they have no experience actually selling cars, building them, and finding a way for your broke Aunt Sally to plop her behind behind the wheel of a Ford?

    You just gotta believe, regardless of any real world experiences we have had previously with CAFE. That is all in the past, right? Nirvana is right around the corner if we all just work togther and make that dream a reality this time, right?

    Puh-leeze.
    Been a grad student, thought that, got kicked in the ass there…
    The only thing that trumps any university study is this little ugly thing called reality. No one can know every variable that impacts CAFE. So, how about listening to the people who actually are responsible for making the, you know, CARS, instead of listening to the people promising a world that has never been acheived before? You see, the guys and gals making cars, are dependant on doing that job well enough to stay employed, while the supposed experts are almost never pulled away from their desks and asked why their previous brilliant ideas caused utter catastrophes. We assume the geniuses meant well, and we assume that the business people are just greedy soul-less half-wits, so who would you rather believe?

    Listen to the experts – they would be the ones in the business, whose life depends upon their expertise.

    Consider this report a nice dream written by experts who want desperately to find a path to Nirvana and believe there really could be a pony under the mountain of manure in the room, since the manure could come from a life form similar to a pony. They believe in the road towards success, not success itself. No one is going to hunt them down and fire them for being wrong when everyone falls for their dream report and goes bankrupt. That is why it is more profitable to teach, than actually, you know, DO.

    • 0 avatar
      bumpy ii

      “CAFE gave us the Malaise Era.”

      The Malaise era was in full swing before CAFE was even whispered about.

    • 0 avatar
      Jimal

      And the experts, particularly in the automotive industry, have a track record of doing the absolute bare minimum to get by, since shareholder wealth is and always be the number one goal.

      Several things gave us the malaise era; higher insurance premiums, which killed the muscle car, the first OPEC crisis and the introduction of the catalytic converter all pre-date CAFE standards. All presented auto manufacturers with technical challenges that some were able to meet rather quickly (mainly the Japanese) while for others it took years and many bloody noses (the Big 3).

      Meanwhile cars today make more power while burning less fuel and producing fewer emissions than cars built pre-malaise. They handle better too and are safer in a crash than those cars. I don’t think that any of this would be true today if it weren’t for more stringent standards across the board, including CAFE.

      • 0 avatar
        geozinger

        @Jimal: a couple of things you neglected to mention, one of which is that the EPA also compelled the fuel companies to sell unleaded gasoline. This too affected the way autos ran. It wasn’t until recently that the EPA started on the oil companies to change motor fuels again, primarily by adding ethanol. And what’s happening again? Drivability issues? Poor mileage? Where have I seen this before?

        Secondly, the Japanese weren’t that successful with drivability during the carbureted days. I’d worked on early Accord carburetors, they weren’t that much further ahead than anyone else’s carbs, especially when their 10,000 vacuum hoses started to dry rot. It was HUGE fun figuring out that mess. It seems to me the Mitsubishi carbs were pretty bad, too. Although the early Bosch J- and K-Jetronic injection systems had a lot of issues, but I wonder if it was because few people could service them well. Once we got to port fuel injection as a standard item we really saw mileage, power and drivability increase.

      • 0 avatar
        Jimal

        @geozinger, unleaded gas wasn’t the cause of the driveability issues of the malaise era. All lead does is lubricate and cool valves, valve seats and to a lesser extent the top of the piston. Sure compression ratios had to be lowered in order to run unleaded fuel, but that in and of itself won’t cause poor driveability, just low power. Running unleaded fuel in an engine not designed for it will eventually damage valves and valve seats but it won’t cause instant driveability problems. The driveability problems of the malaise era were caused by to major factors; half-baked emissions equipment and tailpipe emissions tests.

        Between 1973 and 1975, PCV systems, EGR valves, AIR injection (which was mandatory in California much earlier) and vapor recovery systems (to name a few) were rushed into production before they were fully developed. Until the widespread adoption of electronic fuel injection in the mid 1980’s, manufacturers did what they could to make carburetors as clean as possible.

        Tuning one of those malaise era engines for driveability, while passing a tailpipe test was (and continues to be) next to impossible. It is easy to tune an engine for driveability and performance if you don’t have to worry about pollution standards; just ask any racing engine builder. In the early catalytic converter era the solution was to lean the carb out as much as you could, which led to even lower power, pinging and cars that smelled like rotten eggs. The manufacturers’ solution to prevent this was to make the idle circuits on their carburetors non-adjustable. Eventually simple electronic control systems and computer controlled carburetors were developed, but they too were stop-gaps. A carburetor is a fundamentally dirty device. It wasn’t until affordable electronic controls and fuel injection were developed and introduced that driveability returned.

        It took manufacturers a good long time to work with CAFE and other government standards, but they have and they will with whatever they come up with in the future.

      • 0 avatar
        aspade

        If government mandates are the major cause of improved automotive product then the generally stricter government mandates in, say, most of Europe should have made their cars more improved product.

        The reality is that affordable European cars are tiny underpowered shitboxes you couldn’t give away here.

        That’s what Malaise II looks like. A 70 horse Peugot. No thanks.

      • 0 avatar
        geozinger

        @Jimal: I re read my post, and it sounds like I’m defending leaded gasoline, which I am not. However, it WAS another variable in the mix. The hardware requirements, like EGRs and AIR pumps had been required since the late 60′s. Part of the reason why the cars were so leaned out, is to achieve fuel economy numbers, that in combination with freeway gears in the final drives were what caused many drivability issues. Also, if you’re getting rotten egg smell from a 70′s catalytic converter car, it’s because it’s running too rich, not leaned out.

        Racing engines are rather efficient and clean, being tuned for power necessarily means they are not leaving much fuel unburned. Lowering compression has the opposite effect, but because electronic fuel injection (and the processing power to run it) was hideously expensive or unavailable, it wasn’t going to happen on factory produced vehicles.

        Fuel injection (and cheap microprocessors) saved the automobile as we know it.

      • 0 avatar
        Jimal

        @geozinger, You are correct on the rotten egg smell. It comes up so infrequently now with the electronic controls that I forgot it was a rich condition that caused the smell, not lean.

        With a few exceptions most cars were running numerically low final drive ratios well before CAFE standards. I’d have to go back and check my information, but I know things like air pumps, EGR valves and the like were introduced in California years before they were required nationally. I remember swapped a non-EGR manifold onto my ’75 Camaro to get rid of that particular device. I pretty much removed all the emissions equipment once it was no longer required to pass a tailpipe test.

      • 0 avatar
        geozinger

        Yes, I had a similar experience with an EGR valve on my 403 Olds. I can remember when my brother brought home his (used) 69 Z/28, the first thing we ripped off was the air pump. I see now that these pumps are worth real money on the restoration market.

    • 0 avatar
      John Horner

      Had the US kept working on energy efficiency and alternative energy instead of giving up in the 1980s, things would be a lot different today. The “morning in America” era wasn’t all good, and the “malaise era” wasn’t all bad.

      The “malaise era” birthed Intel, Apple and Microsoft, saw the US not at war with anyone for the first and last time in modern history and was a time when California’s schools were considered some of the best in the world. Yeah, lots to make fun of there.

    • 0 avatar
      jpcavanaugh

      VanillaDude – you nailed it. Those of us old enough to remember the 70s surely remember the steady downward trajectory of cars from, say, 1968 (when the first significant federal safety and emission requirements hit) to maybe 1985 recall a steady downward spiral in basic drivability.

      When gasoline fails to go to and stay at $6/gal, these “experts” will do a lot of backtracking. The only time CAFE appears to work is when gas prices are going up. And this is coincidence. When gas prices come back down, manufacturers are required to sell what nobody wants to buy. Then we will be back to the modern equivalent of the Cavalier and the Escort so that the manufacturers can lose the smallest amount possible while shoveling the most high-mileage cars out the door to keep the averages up.

      • 0 avatar
        geozinger

        @jp: “Then we will be back to the modern equivalent of the Cavalier and the Escort so that the manufacturers can lose the smallest amount possible while shoveling the most high-mileage cars out the door to keep the averages up.”

        You nailed it.

  • avatar
    SunnyvaleCA

    CAFE in the 80s and 90s promoted light trucks by having tougher requirements for cars. The Big 3 figured out how to make and market light trucks for mainstream use and profited big-time. Maybe this time around the Big 3 will figure out how to market medium-duity trucks for mainstream use and will again make huge profits while circumventing the intent of fuel economy requirements. More likely, though, higher fuel prices will hurt medium-duty and light-duty trucks and the Big 3 are going to have to sell more cars instead, where the CAFE standards will bite into profits and sales.

  • avatar
    Robert Schwartz

    I say balderdash. There is not enough money in fuel economy to justify dramatically higher car prices.

    Let’s say that like the average American, you drive 1000 mi/mo. If your car makes a kind of average 25 mpg, you are buying 40 gal./mo. costing these days $160. To save $100/mo. you will need a car that gets 67 mpg. That is a better than 3x improvement. How much more could you pay for your car?

    A $100/mo. payment on a five year loan at 6% will pay for $5,173 of principle. For that kind of money, do not expect a lot of carbon fiber in the body, or much titanium in the motor.

    Of course, if your whip gets worse mileage than that average, you will have more money to throw around, but you get the picture.

    Bottom Line. Savings from fuel economy are capped, but the prices of cars can go as high as the makers want. There is not a huge pot of value in fuel economy.

    • 0 avatar
      zenith

      My two vehicles-paid for- each average 22 mpg and 11K miles a year.
      Each dollar a gallon increases my costs $1000 per year.
      If I go into debt to buy 2 new vehicles that get 33mpg and gas stays $4 a gallon, I’ll save $1334 in annual gas. But what 2 cars can I buy for under $1334 in total yearly payments?

  • avatar
    John Horner

    The majority of individual car and truck purchasing decisions are not rational, spreadsheet driven behaviors. People do what they feel like they want-to/should do. They are motivated by what makes them feel smart, dominant, trendy, etc.

    Few people bought loaded SUVs because it was the rational thing to do back when those were all the rage.

    Today, many people are annoyed and upset every time they buy gas. Many of them will go for one of the highest fuel economy vehicles they can swing next time around simply because they will not then be constantly annoyed at the gas pump. I know one woman who announces at every club meeting she attends what the fuel economy was at her most recent fill up for her Jetta TDI Diesel. She is not spending any time at all cranking the numbers between the Diesel she bought, a lower cost gas version of that same car or for just keeping whatever she used to drive. She gets a huge thrill out of her Diesel Jetta. It is doing what she really bought it for: Making her feel good and smart.

    Conversely, some people take pride in not caring how much it costs to fuel their vehicle. To them, it is a way of showing off by seeming to not have to care at all about something as trivial and beneath them as the cost of fueling a car or truck. Only the “little people” have such worries.

    My point is: Focusing on the math and using it to prove or disprove that people will or will not pay xyz more money for abc improvements in fuel economy largely misses the point. Those who do sales and marketing for a living already know this :). Very few individual buyers actually do this math, and those who do are rarely new car customers at all, so they don’t matter to a car maker.

  • avatar
    mykeliam

    Ok. Okay. I heard and kinda understand what you guys are saying about government intervention as far as cars in general are concerned. But, can you tell me why, with current economic predictions Ford, General motors, and Chrysler can’t figure out that first gas is going to get more expensive because it isn’t an infinite resource, second, there are going to be more people in the world every day and they want to get around, and third that there is going to be some replacement for oil so what to do about it?
    They knew this in the sixties, the seventies, and the eighties, and in the oughts for that matter. Why did it take government intervention to make them move out of the way of the relative punch to the face?

  • avatar
    Jimal

    Instead of the perpetual “government sucks” diatribes that CAFE discussions always generate, let’s take this conversation in another direction. What technologies, existing or future, will the manufacturers develop to meet these increasingly tough fuel economy standards? Will some of the features currently used on some of the hybrid models find their way into “regular” cars? Will there be a greater separation between light trucks and heavier duty trucks? Will the half ton truck be supplanted by car based light pickups? What are the opportunities out there for the manufacturers

    • 0 avatar
      mazder3

      I’d love to see a half-ton rated pickup manufacturer make their trucks partial hybrid across the line, in that if the trucks wheels aren’t turning or the heat or A/C isn’t on and there isn’t a major draw on the battery, the engine would be off. There should be a 10 second delay on the shutdown, though.
      The half ton truck will never be supplanted by a car based pickup but if a manufacturer could find a way to profit off a car based pickup, they’ll produce and market them like crazy. There is definitely an market for them. Not everyone wants a truck that they have to climb into. If a well worn Subaru Baja with +100K miles can go for over $10K, there is a market. If so many Japanese mini-trucks get sold that NHTSA sits up and takes notice, there is a market.
      I’ll end with this: I dare a manufacturer to make a car based hybrid pickup, in both regular and quad cab forms. Four or six foot bed, midgate optional. Front or all wheel drive. Four, turbo four or six cylinder engine. Market heavily in New England and farm country. PROFIT!!!

      • 0 avatar
        JustPassinThru

        Are you an engineer? Go ahead and design such a truck!

        If not…well, wishing for something isn’t quite the same as being able to make something. Flying carpets would be pretty nifty; and if all it takes to knit flying carpets is a directive from the EPA and DOE…let’s do it!

        This, as others have noted, is where we wind up when we remove the designing and specification of cars from the people who have to design them build them, and market them – for a price people will pay; to people who may be hostile (as they were in the 1980s) to the resultant design.

      • 0 avatar
        mazder3

        I don’t need to be an engineer…

        Subaru Baja 2.0 please!

        Sure it sold like cold cakes in 1.0 form but with gas hovering around $4.00 a gallon a new one with the features I stated above it might actually sell. If used-up ones in that nasty bright school bus yellow can command top dollar, a new one on the next Outback platform should be able to sell.

      • 0 avatar
        rpn453

        I’d love to see a half-ton rated pickup manufacturer make their trucks partial hybrid across the line, in that if the trucks wheels aren’t turning or the heat or A/C isn’t on and there isn’t a major draw on the battery, the engine would be off.

        So that would be a hybrid between a running truck and a non-running truck, but only partially because the truck is able to run if we want it to for other HVAC purposes? I guess it works, but I think it sounds too similar to a term we already use for a completely different type of vehicle: a gasoline-electric hybrid.

  • avatar
    CJinSD

    Opportunity is becoming a real watchword when on the lookout for scheming liars. Opportunity is now the word used by progressives when what they mean is they have a policy that will price you out of having the options that you have today. Manufacturers will have the opportunity to build vehicles we don’t want today for any price! Travelers will have the opportunity to stay home, unable to pay the taxes required to use the roads they’ve already paid for twice! Israel has the opportunity to be destroyed, no longer burdened by having a single ally in the world! Lets talk about all the wonderful new opportunities!

    • 0 avatar
      mazder3

      Just like the other side with all of their talk of freedom. If you want to enslave people tell them you going to give them total freedom.

      • 0 avatar
        CJinSD

        Do you have anything to support your rhetoric? You don’t mix with an analytical bunch, do you?

      • 0 avatar
        Jimal

        @CJinSD, I don’t think I would accuse you of being overly analytical, based on your original comments above. Partisan? Probably. Cynical? Definitely. Negative? That is a matter of opinion.

        It used to be that America was the Land of Opportunity. Opportunity is what drove our country and made it great. Opportunity is what makes capitalism work. “Build a better mousetrap and the world with beat a path to your door.” as they used to say. It is why we are one of the few countries in the world that people are desperate to get into, legally or otherwise. I didn’t realize that “opportunity” had become a code word for Socialism.

      • 0 avatar
        CJinSD

        It wasn’t my choice to revise the meaning of the word opportunity. I don’t have to sell Obama’s policies to people who might revolt if names matched forms. Federal Transportation Taxation and Monitoring act doesn’t sound as nice as Transportation Opportunities Act. Do you think I had anything to do with Obama looking at Orwell’s 1984 as a how-to manual? You doing the same thing in describing the impact of another standard of living crushing energy policy shows exactly what sort of person you are. Don’t bother trying to invoke the past meaning and context of opportunity. You’ve buried it already.

      • 0 avatar
        mazder3

        @CJinSD:

        May I ask: Why are you so angry? Everything you have posted for the last week has been negative. Can we help you in any way?

        Just a kindly query.

      • 0 avatar
        Jimal

        @CJinSD, answer your own question; do you have anything to support your rhetoric? Rather than recite conservative dogma I’m asking how lemonade can be made out of lemons. You’re attacking a word.

    • 0 avatar
      JustPassinThru

      “It wasn’t my choice to revise the meaning of the word opportunity. I don’t have to sell Obama’s policies to people who might revolt if names matched forms. Federal Transportation Taxation and Monitoring act doesn’t sound as nice as Transportation Opportunities Act. Do you think I had anything to do with Obama looking at Orwell’s 1984 as a how-to manual? You doing the same thing in describing the impact of another standard of living crushing energy policy shows exactly what sort of person you are. Don’t bother trying to invoke the past meaning and context of opportunity. You’ve buried it already.”

      Man, if that ain’t the truth.

      The sad part of this is, we have to repeat exactly the same mistakes made with the first CAFE standards…only now, more Draconian and with an auto industry teetering in the first place. Here, due to government dictats, automakers are going to scramble to design cars that will provide fuel mileage that at this point seems impossible.

      Perhaps some companies will make the standards. Probably some weaker companies will just disappear…as AMC did; as Studebaker chose to do when faced with the first round of safety requirements.

      But in the end…what’s going to come out of it is going to be marketedynot to the government bureaucrats who demanded them, but to a buying public hostile to tiny tinfoil deathtraps and to those government standards.

      And, if we go full circle, we’ll find out in a few years – again, as we did in 1982 – that the single biggest reason for cost and scarcity of oil and fuel in general, was ONEROUS GOVERNMENT REGULATIONS!! So the regulations are removed, and the cost comes down…but the auto specifications stay in place, partly because the car companies WANT them…having invested huge amounts to satisfy the government.

      Last time around, the SUV became the get-around on those regs. This time…I can see a black market for Chinese-manufactured reverse-engineered clones of Jeeps and Suburbans and Excursions…smuggled in, either en masse or only to the politically connected. But people WILL
      REJECT those goofy government-cars; and the automakers will again lose huge amounts having tooled up to make unsaleable cars.

      Insanity is doing the same thing over and over and expecting different results…

  • avatar
    mazder3

    Ouch. I was just trying to balance out your rhetoric, CJinSD. The second part of what I wrote came from a “prophet”. He subsequently went on to create his own church and made millions of dollars off of seemingly intelligent people. I’d say who the “prophet” was but the church has a history of suing people who disagree with their methods. Also note that I did not say you were wrong.

    This was meant to be a reply but the site went buggy.

    • 0 avatar
      Jimal

      Partisan people want to be partisan. There can be no apolitical conversations with them.

      • 0 avatar
        JustPassinThru

        “Partisan people want to be partisan. There can be no apolitical conversations with them.”

        This whole subject is pure, naked power-politics – and that’s why it’s getting such a strong reaction.

        The concept of CAFE is simply government using FORCE to REMOVE non-politically-correct choices from the marketplace. And any attempt to cloak it as anything else is an insult to our intelligence – and calls the posters’ own into question.

  • avatar
    DenverMike

    Jimal mentioned it but not enough blame was placed on the low numeric axle ratios of the malaise era. Had a ’79 5.0 Mustang and it’d go zero to 60 in the 10 second range. Always had it floored and that probably gummed up or coked up the carb, EGR and cat. It had a factory 2.42 open diff so my friendly trans builder put a 4.10 posi in it. After that, not only would it lay waste to every sports cars I encountered back in the mid ’80s, it also ran better.

    • 0 avatar
      MoppyMop

      The axle ratios were a symptom, the oil crisis and CAFE were the cause. Low axle ratios were basically the manufacturers’ first, crude foray into gaming the EPA mileage test.

    • 0 avatar
      Jimal

      A 4.10 ring and pinion will wake just about anything up with a Mustang size tire on it,but it didn’t help that the 5.0 in your ’79 Mustang had what? 140 horsepower? Fast forward to the 1985 and that same motor with some improvements in breathing and internal friction was making about 200 with a 4-barrel carb (Motorcraft or Holley, I can’t remember now) and a year or two later with fuel injection the 302 Windsor in the Mustang was making 225 HP and was a rocketship for the day. Even then I believe the base rear gear was a 2.73. If you were lucky (or you ordered one from the factory) you could find one with a 3.08.

      The low numeric axle ratios existed before the malaise era. The difference is the “fun” ratios (mid 3′s and higher) that appeared mainly in the muscle cars disappeared with the muscle car era. 4.10′s are fun going stoplight to stoplight or on a drag strip, but they suck on the highway.

      • 0 avatar
        DenverMike

        @Jimal

        One hundred and forty horses doesn’t sound like much but it was still a 302 with lots of low end grunt and was a kick to drive even after settling on 3.45s.
        Replaced the 3.08s in my ’88 Mustang GT with 3.73s and it became a monster. Didn’t lose any MPGs because of its huge overdrive. That car should’ve left the factory with 3.73s no doubt about it. It was perfect all around and seemed to be designed for it.

      • 0 avatar
        Jimal

        Did your car have a 2 bbl or 4 bbl motor? The original Fox Mustangs were light so 140 horsepower (I don’t remember the torque numbers) was okay, but nothing compared to a few years in the future.

        3.73′s are a nice middle ground for that era Mustang.

        Trace the performance history of the Mustang from 1964 to present and you will see what CAFE, emissions and crash standards have done to performance and how a manufacturer has met the challenge. Better yet, do the same thing with the Corvette.

      • 0 avatar
        geozinger

        @Jimal: The 79-81 (and the 82 GT) all had 2BBL carbs. I had a 1980 Mercury Capri RS Turbo which was quicker than the contemporary V8 cars, although it may have had a lower rear end ratio. (I’d have to look it up). My wife had a 1985 Mercury Capri RS with the 4 bbl, 4 speed and the 2.73′s, she could easily outrun my 1986 Mercury Capri 5.0 Sport Coupe (see a pattern here?) with the first year fuel injection, but automatic, with 3.00 rear end. That car didn’t wake up until we started working on the intake system and throttle body. I sold it before I got around to fooling with the 8.8.

        BTW, low rear end ratios were quite common in the older hardware, especially anytime before the 1960′s. My father bragged about his 1957 Fairlane 500 with 312 Thunderbird V8 and 4.10 rear end. Other neighbors who hot rodded in the 50′s had all of their cars set up with low gears, because that was the way they came from the factory. They could really accelerate off the line, but would run out of steam at the top end with those old flatheads and early small block Chevys.

      • 0 avatar
        Jimal

        @geozinger, my memory is a bit fuzzy on that vintage Mustang, but now that you mention it I don’t remember a 4 bbl much before 1984. Perhaps that is why they chose the 2.3 Turbo for the Indy pace car in 1979.

      • 0 avatar
        CJinSD

        A nicely equipped 1965 Corvette reviewed by Car and Driver had an as-tested price of $5,276. That’s $36,800 in today’s bumwipe. A 2011 Corvette starts at $50,000. The base price was much lower than $5,276 in 1965, but I can’t find the exact figure and the car in the review didn’t have technical features missing on the new one. So basically government regulations have added about a third to the price of a Corvette. Good example.

  • avatar
    chaparral

    It’s not just the government regulations that have pushed up the price of a new Corvette!

    The old one won’t do a hundred and ninety like the new one will. The old one won’t get thirty miles to the gallon like the new one will. The old one won’t reel off 250,000 trouble-free miles like a C5 will. You’re paying for advanced materials, superior build quality and durability, and forty-five years of technical advancement.

    Now, all cars have improved, but back in the day that $5276 certainly didn’t get you a basically-loaded car. I remember a 1965 Road and Track where they had a loaded 327/300 Corvette priced at $6800 or so – we complain about options prices now but they used to be worse. Check that Car and Driver review again and see if that Vette even had an air conditioner.


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