By on June 22, 2009

The Detroit News covers the report by the University of Michigan’s Transportation Research Institute (because TRI texts are behind a password lock). Authors Walter McManus and Ron Kleinbaum write,

Story after story frames the issue of a struggling industry that will not survive tough fuel economy standards. However, there is substantial evidence that the domestic auto industry has ignored customers’ demands for fuel economy, and has consistently undervalued the impact of fuel economy on their profit potential.

Plus,

Our view is that GM is still not prepared to change enough, fast enough to achieve the transformation it needs to make.

Go on . . .

Actually, that’s about it. We don’t get a link to the actual study. Unlike, say, Green Car Congress‘s coverage of a study that says plane travel is less polluting than the Boston Green Line. The assertion is simply that improved fuel economy unlocks new demand for automobiles. Which means “forcing the industry to boost fuel efficiency can help make it more competitive,” to quote the DetN’s paraphrase. To the tune of $3 billion a year in increased gross profits for the “domestic” (did they do well in home ec?) automakers.

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56 Comments on “Is CAFE Good for Detroit?...”


  • avatar
    npbheights

    Wouldn’t it be something if the federal government waived CAFE fines for GM (because it would be crazy to fine themself) and that allowed GM to actually build cars that Americans wanted to buy, which would restore GM’s 50+% market share and repay the federal bailout loans in just a few years. That reverse senerio would show how CAFE destroyed the big three.

  • avatar
    cory02

    I suppose the sales data for trucks and SUVs in the recent past is not among the “substantial evidence that the domestic auto industry has ignored customers’ demands for fuel economy.” It seems to me that customers only demand fuel economy when gas prices are high then go back to ignoring fuel economy when prices drop. There is a Toyota truck plant in San Antonio that says that the “problem” of giving customers what they want (i.e., trucks and SUV’s when gas is cheap) is not limited to the domestic auto makers.

  • avatar

    that allowed GM to actually build cars that Americans wanted to buy

    So the 80% of American car buyers who didn’t purchase a GM vehicle were forced at gunpoint to buy something they didn’t want ?

    Close to 8 million people this year bought a car that was not from GM despite everybody playing by the same CAFE Rules; GM should try to determine why those people shunned the company and build cars to suit.

  • avatar
    golden2husky

    I’d be willing to bet that without CAFE, mileage of domestic cars and trucks would be even lower than they are now, which would put them at an even bigger disadvantage. The vast majority of the D3’s problems are not mileage related at all. No need to relate what is; we are all familiar with them here. However, since fuel is only going to trend upward, mileage could become an issue that could be used to the domestic industry’s advantage.

    EDIT: npbheights, most people that I know that enjoy their SUV’s would be willing to trade off road ability and some power for better mileage, since most use them for mommy mobile duty, not for off roading or towing.

  • avatar
    ruckover

    Could anyone please tell me how America does not want cars that get reasonable milage when the Accord, Civic, Camry, and Corolla are always among the best selling vehicles in America.

  • avatar
    derm81

    Could anyone please tell me how America does not want cars that get reasonable milage when the Accord, Civic, Camry, and Corolla are always among the best selling vehicles in America.

    A lot of Americans hold the view that in order to get great mileage, a vehicle must be a sardine can on wheels. For good or bad…

  • avatar
    beller

    the public will buy fuel efficient vehicles when fuel costs go up. keep fuel costs low and the public will buy bigger less fuel efficient vehicles. stringent CAF standards with cheap fuel will continue to be a recipe for disaster.

  • avatar
    cory02

    the public will buy fuel efficient vehicles when fuel costs go up. keep fuel costs low and the public will buy bigger less fuel efficient vehicles. stringent CAF� standards with cheap fuel will continue to be a recipe for disaster.

    Good luck finding politicians brave enough to increase fuel taxes.

  • avatar
    Dynamic88

    It’s worth remembering that Fit, Yaris, Corolla, Civic, etc. are cars that Americans want to buy.

  • avatar
    npbheights

    The problem with CAFE is that it hamstrung American automakers. It forced the automakers to make cars that got better gas mileage when the buyers were not demanding it because gasoline was cheap. Under the regulations, cars had to get better mileage than trucks. Under those rules, it made the most financial sense to improve the trucks, make them desirable, luxurious. The only reason to build small gas sippers was to raise the average mileage of the fleet. It actually made financial sense to build 4 Cavaliers at break even or at a small loss to sell one large Cadillac at a huge profit and to use the four Cavaliers to bring up the Corporate Average Fuel Economy or CAFE. Do you really want a car that only exists so that better cars can be made? This has been the problem of American small cars. The only way to make consumers want cars that get good mileage is for fuel to be expensive, from either taxes, or scarcity. We saw this phenomenon last summer. The reason why Corollas, Civics, Accords and the like have historically been of high quality and get great mileage is because the place where they are from has high gasoline prices and the consumers in those places DEMAND fuel efficient cars. A Civic has had a totally different mandate than a Cobalt, ie: the Civic has to get great gas mileage because gasoline is expensive and the Cobalt has to get great gas mileage so that other, better cars can be sold. They did well here because they were quality, more than the fact that they got good gas mileage. If a Civic had poor quality and got great gas mileage, American buyers would be lined up none deep.

    I was not saying that fuel efficiency is not desirable. It is just more desirable when fuel is expensive. It is not desirable when gas is cheap and the government pulls figures out of the sky that are required to be met or a fine is imposed.

  • avatar
    King Bojack

    Given the option the American typically chooses the biggest/fastest/utility vehicle they can afford w/o too much hassle. There is very little vehicular altruism. People rarely buy a smaller car because it is the “right” thing to do for most people. Few people’s dream car is a Corolla.

  • avatar
    Prado

    If Detroit was smart they would fully embrace CAFE. If every car currently in production became obsolete due to lower than standard fule economy, then the playing field would become immediatly equalized. The score would be reset to 0-0… but my money would be on Hyundai coming out ahead.

  • avatar
    Rob Kleinbaum

    The paper, which I co-authored, is publicly available at
    http://deepblue.lib.umich.edu/bitstream/2027.42/63024/1/102298.pdf

  • avatar
    notapreppie

    Wait, if it’s CAFE that hamstrung the domestic car makers, why didn’t it do the same to the foreign manufacturers? Every auto manufacturer in the US has to meet CAFE requirements or pay the penalties, not just the shrinking 3.

    I don’t see Honda, Hyundai, MB, Toyota, or VW complaining.

    Really, that argument is pure sophistry. If the Japanese, Germans and Koreans can make cars that people want AND get good fuel economy then why the hell can’t Ford, GM and Chrysler? Do they really need special considerations? This isn’t the Special Olympics. This is capitalism. The profitable survive and the nonprofitable get government bailo… oh crap.

  • avatar
    npbheights

    @ not a preppie:

    The Japanese automakers don’t complain about CAFE because their cars get good mileage because the Japanese market demands it and they are quality because the higher price they command requires it. When they were sold here prior to the run up in gasoline, people bought them because they were reliable. Good fuel economy was a bonus. And they sold for more money. The average Civic is more expensive OTD than the comparable American ride.

    The Germans don’t complain, they just pay the fine. http://blogs.edmunds.com/greencaradvisor/2008/01/303-million-fine-gives-cafe-fine-crown-to-mercedes.html
    They would rather pay our stupid CAFE fine then compromise the design of their cars. They neuter US market cars a bit, but not that much. MB, BMW, and Audis are not what average europeans drive for the most part anyway, Just because you live in Germany does not mean that you automatically rock a 7 series around the autobahn. Most europeans putt around in FIATS, Opels, Seats, Fords, and other affordable, fuel efficient models.

    PLUS, since the CAFE fine is the calculated like this: $5.50 for ever .1 MPG under the set rate TIMES THE TOTAL NUMBER OF CARS SOLD by the automaker. When you sell 100,000 cars in the USA, one of many markets you sell in, and you miss the silly US rule by 1 MPG, your fine just $5.5 Million dollars. When you are GM and you sell millions of cars in the US, Lets just say 4,000,000 Cars. If GM missed the CAFE by 1 MPG and they sold 4 million cars (Low estimate) in the US in a year the fine would be 220 Million dollars. And GM’s average sale price is way lower than M-B’s and BMW’s I would guess. That is why GM, Ford and Chrysler took CAFE so seriously.

    The American auto makers tried to follow the rules, and those rules made bigger easier. Bigger was allowed to use more gasoline, and therefore bigger commanded more money because gasoline costs were not important like they are in most of the rest of the world.

    A clear example of how CAFE hurt an American automaker: The 1979 Lincoln line up were old fashioned, huge, gas guzzling dinosaurs. The 1980 Lincoln line up was on a brand new platform, had 50% better fuel economy !?! When was the last time that happened? (They got 15MPG instead of 10MPG) A huge improvement. They were 20 inches shorter, 800lbs lighter, and the body styling was very similar to previous Lincolns. Perfect CAFE cars. Sales of the 1980 models tanked! Completely rejected by the typical Lincoln customer. To this day Lincoln as a brand has never recovered. The model only started turning around when Cadillac shot themselves in the foot with terrible engines and then the overly downsized Caddies in 1985, which made the Lincolns look huge again in comparison, which appealed to the target audience. If Gasoline hit $3.00 a gallon in 1985 like GM was planning for, I bet the tiny 1985 Devilles would have sold like hotcakes.

    CAFE is Jimmy Carter era crap that hurt the free market and it should be abandoned

  • avatar
    NulloModo

    The Japanese cars didn’t have huge sales because of fuel economy, well, at least not fuel economy alone. Over the past decade or two Detroit has offered vehicles with comparable fuel economy to the Japanese imports, but it wasn’t until recently that the fit and finish, reliability, styling, and features also matched.

    The Cavalier, Escort, Taurus, Malibu, Stratus, Neon, etc, were never gas guzzlers, sure maybe one or two mpg off here and there, but never enough of a difference that it swayed buyers when gas was cheap.

    Personally, I hate the idea of CAFE. In an open market, if consumers want fuel efficiency, an automaker will see that need, make efficient vehicles, and reap the rewards. If no one wants it, it is just government meddling and nanny-state mentality that leads to things like seat belt and helmet laws that only serve to piss off those who are fine taking their life into their own hands in the first place. Everyone knows that riding a motorcycle without a helmet inceases your chances of death by a huge amount, that wearing a seatbelt all the time is more important to your chances of surviving a crash than any other safety feature, that smoking will dramatically increase your chances of developing cancer, and that trans-fats will clog your arteries, but for the love of God stop spending millions of dollars ramming that down our throats all day.

    If anything CAFE should mandate that each automaker offer a fuel efficient vehicle in each class, so that consumers have a choice, but should not penalize automakers if customers decide they’d rather have the 250hp V6 or 400hp V8 instead of the 100hp 3 cylinder.

  • avatar
    ruckover

    Just a thought about the evils of Jimmy Carter and the sanctity of the free market: presidents have to worry about the nation as a whole and what is best for it. It is easy to lambast the market manipulation caused by CAFE, but these regulations were set up in an attempt to get America free from dependence on foreign oil producers.

    Americans might like huge vehicles (I will take that as a given for this post), but the thirst of those vehicles made/makes the US dependent on some countries that do not like our policies very much. It is true that we do get much of our oil from friendly nations, but we also have to get it from countries that would like to see the US stumble. I remember well the long lines caused by the OPEC oil embargo of 1973-4. this was a direct result of the US support of Israel during the Yom Kippur war.

    The free market cannot be counted on to help political leaders when it comes to slowing consumer use of energy. As has been argued, the markets only reward energy efficient vehicles when the cost of energy is high. Since no politician is willing to get him/herself voted out of office by increasing taxes on energy, CAFE standards must do the work of those taxes.

    Had Jimmy Carter’s vision of energy independence been realized, the US might not have to deal, as much, with some questionable foreign powers. When Carter had solar collectors placed on the WH roof, he stated that these would either be museum pieces or the start of a revolution in American energy independence. The collectors are now in a museum.

    Carter was not a good president, though he sure seems to be a good man, but his goal was to make the US strategically stronger by limiting our dependence on fickle foreign powers. The free market does not have a mechanism for such planning.

  • avatar
    George B

    CAFE is not good for Detroit because it blocks sales of larger, generally more desirable and profitable cars. The first time I saw the Chrysler 300 at an auto show, it had a small crowd around the hood drooling over the hemi V8. The crowd didn’t surround the whole car, just the engine compartment. CAFE just about killed off full size RWD V8 powered American sedans to the point that the Hemi V8 was an interesting exception. Thanks to CAFE, the formerly iconic Chevrolet Impala rides on the GM W platform powered by a Flex-Fuel V6, not the GM Zeta platform. Thanks to CAFE RWD and V8 engines have become luxury car features and “Merc” now means Mercedes, not Mercury.

  • avatar
    reclusive_in_nature

    The vehicles Americans REALLY want all cost more than they can afford. I guarantee if two vehicles with the same interiors, body styles, and features were both sold for $15,000 with one vehicle getting 40mpg and the other getting a 0-60 of 4 seconds the faster car is going to get the nod at LEAST 70% of the time. The problem with fast/large vehicles is that there’s usually a $30,000 price tag to go along with the price of keeping it fueled AND insured. Not to mention the depreciation.

  • avatar
    ruckover

    Ronnie, not to go through all your points, but do you think that, perhaps, the 1953 CIA led coup that toppled the reformist leader of Iran might have more to do with the ’79 revolution than Carter not backing the Shah. The shah was a dictator and the author of his own demise. He might have been put in power by our intelligence community, but that does not mean he was actually worthy of our support. What is a shame is that moderate reform did not take place in the fifties, so radical Islamist revolution took place in the 70s.

    And what sort of man would accept a Nobel Prize? Clearly he should have turned that honor down.

  • avatar
    Kurt.

    To quote Dynamic88 but not aimed at…

    “It’s worth remembering that Fit, Yaris, Corolla, Civic, etc. are cars that Americans want to buy”

    I disagree whole heartedly. Those are the cars that Americans can afford that will reliably get them from A to B. Americans WANT Porsches, Hummers, Astons, Ferraris, and Big Block Pickups with 42 inch tires. Just look towards the movie/music industry as it is a good example of overnight success. What is the first thing the new star buys? A Prius? I don’t think so. First comes “the ride”, then comes “the crib”. If you could afford to drive 6 MPG, you would. With success you improve your options for nicer, faster, more to your tastes and less to your needs vehicles and that is what you buy.

    CAFE in itself is not bad. What IS bad is that the GM and Chryslers do not compete in external markets like the imports. Toyotas and VW’s are sold in every country in the world (just about). There are only a hand full of GM dealers in Europe (not counting Opel). Dito Chrysler. Actually I do see more Chrysler’s lately. I never saw a GM or Chrysler in Asia.

  • avatar
    KixStart

    Kurt,

    Dynamic88 had it right… His list was cars that people want to buy. Part and parcel of the car is the price. Few people are willing to buy a Porsche. They want to own and drive one but they do not want to buy it.

  • avatar
    NulloModo

    Kurt – To take your point one step further, it isn’t just Americans who lust after the HiPo and super=lux vehicles. Whether it is the US fascination with big SUVs, pickups, and muscle cars, Britain’s love of Land Rover and Jaguar, Italy’s lust for Ferarri and Lamborghini, or Germany’s fetish for AMG, Dinan, and Brabus versions of BMWs and Mercedes, everyone the world over has their own iconic dream car, and it is rarely a Prius. The big difference is that due to gas prices more Americans can actually afford to operate their dream cars than can many Europeans.

  • avatar
    jpcavanaugh

    CAFE is the biggest reason that Detroit is in its current condition. Every country that imports cars into this country has fuel prices that are significantly higher than ours. Therefore, most of the cars sold in those countries are tailor-made for CAFE when they come over here. The US industry had to completely re-engineer its fleet beginning in the late 70s, spending billions that foreign competitors did not need to spend.

    For a case study, look at Chrysler in the 80s. With its L body Omni/Horizon and the K body Aries/Reliant, Chrysler made cars with great mileage. Plus, after killing the large rear drive platforms (New Yorker, St. Regis, Cordoba & Mirada)after 1983, they had the highest CAFE in the industry. What happened? Gas prices went back down. Cadillac sold every rear drive Brougham it could build. Ditto Chevy Caprice. Ditto Town Car, Crown Vic, Grand Marquis. Chrysler had nothing but K-derived front drives, and got hammered in the market until the LX arrived in the 90s. If not for the minivan, they may not have made it to the 90s.

    Here’s the problem with CAFE. When fuel prices are high, it does nothing because people want small cars anyway. When fuel prices go down, it forces manufacturers to produce and sell small cars at a loss in order to hit CAFE targets. This is because with low fuel prices, small car demand in the USA is limited. The only time CAFE ever helped was by accident, when there were some small cars in the mix when fuel prices went up unexpectedly a few years ago. It is also responsible for the explosion in trucks and SUVs. Detroit could not make a large car with a big V8 because of CAFE. But because truck fleets are calculated separately and less stringently from car fleets, the family that bought Country Squires in the 60s and 70s now bought Suburbans in the 90s.

    Now, instead of pulling the plug, the current administration has doubled down on CAFE. Any student of the industry from 1975-1990 can see that there is disaster ahead for the US auto industry.

  • avatar
    johnny ro

    I don’t understand why so many of the best and brightest dont acknowledge good cars can get good MPG. The choice is not between land barges on the one hand, and penalty boxes on the other hand. You don’t have to make a tiny penalty box to get good mileage. You just have design the car right.

    Sure, if you want a rorty 1/4 mile experience, you get bad MPG.

    But my 2002 Audi A4 is a large heavy solid car with Quattro. Loaded with more gizmos and electronic stuff than I want. It has honest to god suspension, unlike so many cars, I like to follow people on bumpy pavement and watch them jump sideways on the rubble we have for roads while I track smoothly along.

    It does everything very well. It is lasting a long time, now at 7 years old its just beginning to show some age. Its electronically limited to 130 mph. It caries ten foot lumber inside with trunk closed. Its fun and refined. It costs a little above average to buy.

    Its parent company is doing well, right now.

    I get a little over 30 mpg long term, mixed highway and city. I am not aggressive driver, if I were it would probably drop to 27 overall.

    Its not factory approved to tow a motor home. I could I am sure rig it up to tow if I really wanted to.

    If everybody were forced to drive an Audi A4 in america, well, this would turn off a few gas taps in Saudi Arabia, for a little while anyway.

    If GM wanted to, they would have been making better cars than this all along. They did not want to, it did not fit their business model of high cost- low quality which drove them out of business.

  • avatar
    marman

    Wow. I have never seen so many apologists for Detroit. While i do think CAFE should be banished…let the market decide, all automakers have to play by the same rules.

    It is very clear, no way anyone can argue, the market has spoken, and Detroit has lost. Toyota makes more cars and trucks than GM and Chrysler, yet somehow they live under CAFE. The Germans make it by with CAFE. Why can they make a premium off their models and GM and Chysler have to practically pay people to drive their cars off the lot? Hint : it’s all about the product.

    Detroit makes crap product on the whole. That is why no one is buying them. Japan, Korea and Germany make cars people want, which is why they are selling. Very simple.

  • avatar
    heiferdust

    The reason we have CAFE (and a lot of other overly complicated government rules) is that it allows the politicians something to “give” away. A simple fuel tax increase would have a better effect on fleet mileage but would offer nothing for our Reps and Senators to trade for campaign contributions and consulting positions after they leave office.

  • avatar
    NulloModo

    Raising the price of fuel via taxes, while it would most likely drive people towards more fuel efficient vehicles, is just manipulating the market in the same way as placing extra tariffs on imported cars (although most likely to differing results in overall fleet economy).

    If enough Americans care about the unsavory nations from which some of our oil comes to downsize and help us become free of foreign influence, then they will do so. Raising taxes on fuel hurts everyone.

  • avatar
    Kurt.

    @NulloModo and KickStart,

    You made my point. Nobody (almost) wakes up and says “Wow I really want a Renault Clio!” However everyone buys the MAX car they can afford. In Europe, its usually a Peugeot 206, Fiat, Fiesta, etc. In America, with cheap gas, its Pickups, SUV’s and (sudo) muscle cars. yet, if gas was even cheaper (or if they made more money) they would upgrade from the Tahoe to the Hummer or Escalade, they’d ditch the Sky and buy the Boxter.

    CAFE is fair to evey one “selling cars in America”. My point was that American car manufacturers do not compete in Europe (except as mentioned Ford and Opel) and that is where CAFE is hurting them. The Japonese and the Europeans all have other markets to share the pain in.

    Now I agree with everyone that CAFE sucks, should never have been implemented, that gas taxes are the answer, etc. My disagreement is that the Big 3 are in trouble because of them. At any point, they could have said “screw this” and paid the fine like the Germans did. No, they bitched and whined and went down like martyrs “Oh its not our fault. Its the banks, the economy, CAFE, the transplants, Pelosi and the Unions…everybody except their own failure at running a buisness and adjusting to market trends.

    And to johnny ro,

    Good cars can get good gas mileage. It’s just your definition of good that’s in question. A 911 turbo makes excellent gas mileage – per HP – per pound. A modern Lotus 7 (equivelent) makes excellent mileage for it’s almost 300 hp. A 2.4 Toyota diesel pickup get great mileage even with 2 dirtbikes in the back. The most effecient modern engine gets over 750 hp – an F1 engine yet only gets about 1.5 MPG. It’s all in the perspective.

  • avatar
    notapreppie

    @marman

    Exactly!

    If other manufacturers can make affordable and/or desirable cars in the CAFE world, why can’t GM and Chrysler?

  • avatar
    hazard

    I think it has a lot to do with the general mindset…I think you will find that even in the bigger engine classes, the Japanese & Europeans are more efficient than their American counterparts. Or more hp/per L of engine displacement (same thing, really).

    The US was from the beginning a large, almost-empty territory with plentiful land and resources. The Europeans and Japanese on the other hand had to get used to limited resources and limited space a long time ago. Since GM is stuck back in the 1950s or 60s on many issues, well…you get the point.

    Also, someone said how the Germans just pay the fine…well, that fine is paid by their customers, effectively. I’m sure they don’t lose money on it, otherwise why would they sell cars in the US? If GM was so sure customers wanted bad mileage vehicles, they would’ve paid the fine and raised the price accordingly, since according to that theory people would pay a premium for what they want.

    Also, witness the lack of forward-thinking: Toyota debuted the Prius in 1997 (2000 in the US). Oil back then was in the neighbourhood of $20/barrel. What was GM doing back then? Oh, right, it was repossesing EV-1s and crushing them.

  • avatar
    jpcavanaugh

    johnny ro:

    I am happy for you that you are enjoying your Audi A4. It drives well, gets good mileage and can move a few pieces of wood. And it cost $30-35k when new. And if it is like every other Audi I have ever heard of, it costs a LOT of money to maintain and repair.

    I have a wife and 3 teenagers (2 of them well over 6 ft tall). If I were going to spend $30K+ on a car, it would not be an A4. There are lots of people like me who need more room at lower initial cost and lower maintenance costs. I happen to prefer large V8 powered rear drive vehicles. I liked my E150 Club Wagon A LOT. Sute, not very good mileage, but it is a bargain (particularly used) and they are very spacious and durable.

    My point is that not everyone would buy what you would or what I would. But if the industry is allowed to go where the buyers want it to go, then they are successful. CAFE has never done this except by accident. And the idea that it will somehow benefit the industry is absurd.

  • avatar
    psarhjinian

    The problem with CAFE is that it hamstrung American automakers. It forced the automakers to make cars that got better gas mileage when the buyers were not demanding it because gasoline was cheap.

    Well, yes and no. It would have done that were it not for the huge, gaping loophole known as the Light Truck Exemption. Considered from the point of view of the LTE and and it’s resulting boost to truck sales at a time when forieng brands had little or nothing in this space, you could say CAFE was good for Detroit.

    That Detroit failed to do anything strategic with the results of the CAFE LTE free-for-all isn’t CAFE’s fault.

  • avatar
    jkumpire

    Folks,

    There is one other major component that no one has talked about:

    The reason we have such a problem that CAFE is supposedly needed is the government has shut off the flow and production of oil in the US.

    The enviro losers and the bureaucrats in DC have made oil prices artificially high, and forced us to rely on imported oil. With Waxman-Markley on the horizon, even the gas sippers will become so expensive we will be riding bikes like China circa 1980. It all started with Carter and his windfall profits tax in the 1970’s, and is only getting worse.

  • avatar
    marman

    @jkumpire

    you are wrong on everything you said. The USA has some of the lowest oil prices of _any_ power. Want to see expensive gas? go to Europe or Japan.

    When did the government shut off the flow of oil? You want to see a recession…no oil would turn the USA into a third world nation.

    The enviro losers and the bureaucrats in DC have made oil prices artificially high, and forced us to rely on imported oil.

    Huh? The USA relies on imported oil because we have a tiny amount. Demand is far greater than native supply.

    http://en.wikipedia.org/wiki/Oil_reserves#Estimated_reserves_by_country

    It all started with Carter and his windfall profits tax in the 1970’s, and is only getting worse.

    I find it hard to believe you are this misinformed about how the US government works, you must be trolling.

  • avatar
    Edward Niedermeyer

    Thanks for the link, Dr Kleinbaum!

  • avatar
    jdonor

    Anti-CAFE people: please explain how non-US automakers have been able to sell zillions of smaller cars profitably to Americans!! Your insistence that larger gas guzzlers are somehow more desirable or “better” is getting very tired.

  • avatar
    fincar1

    hazard, “The US was from the beginning a large, almost-empty territory with plentiful land and resources.”

    I’d mention that the US is still a large, almost-empty country with plentiful land and resources. For all the environmentalists’ complaining about “sprawl” and all the urban congestion it is still the case that something like 95 percent of the country is open land.

    “The enviro losers and the bureaucrats in DC have made oil prices artificially high” by using NIMBY tactics to insure that no new refineries have been built in the United States in at least 25 years, and by making sure that our offshore and North Slope oil deposits cannot be developed and used, and by allowing various states and localities to require “boutique” blends of gasoline, thus complicating and making more expensive its production and sale, and by requiring in many states the addition of ethanol or other oxygenated compounds to gasoline.

  • avatar
    Stein X Leikanger

    Is this something new here, politics and cars?

    If we are to stick to cars and energy. Wouldn’t it have been great to have a president who was a nuclear engineer and who really understood the challenges of energy conservation for effect?

    Too bad he turned out to be an impractically idealistic one. If he had nuked something in Iran, the US would probably be energy independent today, instead he got tossed out and the US isn’t.

    At any rate – I find it humorous to read the contortions of people trying to find excuses for the ridiculous failure of Detroit’s finest as automakers. The market spoke, the products didn’t address the market’s needs.
    It’s that simple.

    No one kept Detroit from building what Americans wanted, but Detroit didn’t.

  • avatar
    npbheights

    The kicker about CAFE is that it hurts automakers that sell lots of average priced cars, (like american cars) more than it hurts automakers that sell a few high priced cars (like the germans) if the target is missed

  • avatar
    NVHGuru

    First of all I would like to state that I agree with the sentiment behind the analysis, from improved fuel efficiency to firing senior management at the bankrupt automakers. However, I don’t think that this report does anything for the arguments except gain its authors publicity. Having better fuel economy than Toyota is not going to make people rush back to their local Chevy showrooms!

    CAFE is not the right way to go about persuading customers as it does not directly affect their buying decisions in the way that a gas tax would do. Also, if the D3 focus purely on improving fuel efficiency to meet CAFE, they are going to fail because they still need to invest in improving craftsmanship and the dealer experience if they want to bring buyers back.

    As Dr Kleinbaum is watching the site, I have a few questions I would be interested in understanding the answers to:

    In the full document, the average fuel economy is rated as 26.9mpg with several statements that the D3 are worse than the J3. What are the actual numbers you used for each of the manufacturers so we can understand how much worse the D3 really are?

    As I understand it, you used several other people’s assumptions and predictions (cost of new technology, vehicle builds, etc.) and then added you own assumptions and predictions on top of it. Over the past two or three years, every prediction of the vehicle market has completely failed to predict the market we have today. How can you be confident that any of your predictions are correct? I know you used sensitivity analysis of your own assumptions, but this does nothing to confirm that the underlying predictions are correct.

    You also assume that consumers look at a car’s value based on the purchase price and the fuel cost per year. I don’t think many people look at it this way. How does perceived quality and customer preference fit in to the data? This is especially important if you try to compare current sales of one make to another in justification of your fuel economy comparisons.

  • avatar
    Kurt.

    @marman and jkumpire,

    The US has the lowest oil price “to the consumer” but costs to get it out of the ground ($15 per barrel) are 3 times what it costs in the middle east ($5 per barrel) to remove it.

    What I believe jkumpire was trying to say is that oil prices have risen in the US because of diminished “production”. That is partly due to environmental concerns (for new refineries) as well as destruction of facilities in the wake of Hurricane Katrina.

  • avatar

    If enough Americans care about the unsavory nations from which some of our oil comes to downsize and help us become free of foreign influence, then they will do so.

    But they don’t, most people only care about how much things cost. People still buy non-organic food, despite the overuse of pesticides and intensive factory farming, because it costs less. People still buy non-FreeTrade coffee, despite the fact that poor farmers starve in central America while multinational corporations make billions, because it costs less. People don’t necessarily want a V8 SUV, they want the most they can get for their money; when a new Ford Focus can cost $20k and a new Ford Explorer can cost $25k why would anyone buy the Focus while the difference in running costs are so negligible.

    My point was that American car manufacturers do not compete in Europe (except as mentioned Ford and Opel) and that is where CAFE is hurting them. The Japonese and the Europeans all have other markets to share the pain in.

    And here we have what I think will finally kill the American manufacturers; a single minded focus on the American market. While the Europeans and Asians make world cars, amortizing the costs across all markets, the Americans build for a single market which isn’t even the world’s biggest any more. If GM had designed the Cobalt to be sold worldwide then it truly would have been a Civic competitor, it would have cost less and even helped the US balance of trade. Instead they gave us a half-assed penalty box, which when it failed to sell (outside of rental companies) allowed GM to use the excuse “Americans don’t like small cars, we made one .. it didn’t sell” as a self-reinforcing argument.

  • avatar
    JTParts

    Today we have about 100 functioning nuclear plants in the US. They provide about 20% of our electricity. If we built 400 new pebble bed type reactors. We could decommission all those old nukes, AND all the oil burners too. Why don’t we have a CAFE for energy production?

  • avatar

    Why don’t we have a CAFE for energy production?

    It was called Kyoto. The US is largely self-sufficient in coal for power stations, not so for Uranium.

  • avatar
    geeber

    [email protected]: People don’t necessarily want a V8 SUV, they want the most they can get for their money; when a new Ford Focus can cost $20k and a new Ford Explorer can cost $25k why would anyone buy the Focus while the difference in running costs are so negligible.

    The Explorer drives differently, offers a completely different comfort level and has different capabilities as compared to a Focus. You are treating them as interchangeable, except for price, and that is just not true in the real world.

    Everyone I know who has an SUV wanted one; whether they will still be able to afford them with higher gas prices and a collapsing housing market (no equity to withdraw to buy a new vehicle) is another matter.

    And note that, even with discounts, a well-equipped, brand-new Explorer is considerably more expensive than $25,000.

  • avatar
    M1EK

    That Detroit failed to do anything strategic with the results of the CAFE LTE free-for-all isn’t CAFE’s fault.

    This. Maybe instead of enriching themselves and their cronies, GM could have spent some of those arguably-ill-gotten SUV profits on actual product development like, you know, Toyota and Honda do with their profits.

    GM, Chrysler, and to a lesser extent Ford, chose to retreat into the SUV market because they didn’t want to compete on cars. Because the Japanese weren’t in that market and only entered gradually and grudgingly; because we were the only non-trivial market in the world stupid enough to subsidize those monsters.

  • avatar
    sfdennis1

    Without CAFE, flawed as it is, Detroit would have doubled down on the SUV gravy train and be even more scr*wed than they are now in the international marketplace…if that’s possible. Detroit has repeatedly shown that without intervention, it is incapable of doing anything else other than chasing after “planned obsolecense” short-term profits, and persuing lowest common denominator engineering. Ford, under Mullaly, has shown some promise…but still not enough.

    I would support CAFE revisions that are more model specific, and/or reducing CAFE fines combined with a doubling or tripling of the gas guzzler tax, along with closing loopholes for Hummers, Suburbans, etc. Want to drive a gas guzzler, fine (freedom of choice, etc.) but be prepared to pony up for a multi-thousand dollar “GG” tax.

  • avatar
    geeber

    Toyota entered the light-truck market enthusiastically, going to the trouble of building a whole new plant in Texas to supply the North American market with a true full-size pickup. It also built plenty of SUVs – until the recent upheaval, it was selling more large cars and light trucks than small cars (even if Scions are counted in the totals for small cars).

    Honda also was quite happy to build SUVs – note that the CR-V is still Honda’s third-biggest seller (behind the Accord and Civic).

    And SUV sales enabled the domestics to subsidize the manufacture of smaller cars in this country.

  • avatar
    M1EK

    Geeber:

    Compare/contrast Toyota’s attention to its car lineup over the last ten years with GM’s (or Chrysler’s). The “large car” distinction is meaningless and invented by you in order to score a cheap point; a Camry is a small vehicle in comparison to the entire US market of (small cars through SUVs).

  • avatar
    geeber

    M1EK: Compare/contrast Toyota’s attention to its car lineup over the last ten years with GM’s (or Chrysler’s).

    Most of Toyota’s sales growth in sales over the past decade – until the recent downturn – has occurred in light trucks.

    M1EK: The “large car” distinction is meaningless and invented by you in order to score a cheap point; a Camry is a small vehicle in comparison to the entire US market of (small cars through SUVs).

    We’ve been through this before; the Camry is NOT a small car by any standard. It is a mid-sized car. Based on your standard (i.e., the “entire U.S. market”), a Lincoln MKS or Cadillac CTS are small cars, which, of course, is not true.

    The simple fact is that the Camry and the Accord are no longer small cars by any stretch of the imagination. That’s not a “cheap point,” it’s a fact. If you doubt that, visit your local Toyota or Honda dealer and actually view one of these cars in real life. They are anything but small.

  • avatar
    KixStart

    Geeber writes, “It (Toyota) also built plenty of SUVs – until the recent upheaval, it was selling more large cars and light trucks than small cars (even if Scions are counted in the totals for small cars).”

    Hardly.

    Here’s Toyota’s sales from last year through April (Lexus would be about 10% of these):

    CAMRY 147,018
    COROLLA 99,482
    PRIUS 64,664
    YARIS 41,811
    AVALON 17,004
    SCION xB 15,890
    SCION tC 14,409
    SCION xD 8,816
    SCION xA 31
    Total Cars 409,126

    TACOMA 55,363
    TUNDRA 54,134
    RAV 47,002
    SIENNA 45,514
    HIGHLANDER 43,676
    4RUNNER 19,996
    FJ CRUISER 12,557
    SEQUOIA 10,525
    LAND CRUISER 1,690
    Total Trucks 290,457

    Toyota’s nearly 60/40 cars to trucks. How was GM fixed at that time? Or just Chevrolet? The last time I bothered to look at GM’s numbers they were 40/60 or worse (and that was after I moved the HHR back to cars, where it belongs). GM even ran away from the minivan business.

    And what is a ‘large car,’ an Avalon? It weighs 54lbs more than a Malibu with a 4-banger weighs (specs from Edmunds).

    In May, of course, Prius sales took off, which would have skewed Toyota further towards smaller cars. $4/gallon gas does that for Prius sales. People stop cruising GM lots looking for bargain-priced SUVs and head for the Toyota dealer. People think Toyota was lucky to have the Prius available but luck had nothing to do with it.

    If we look at ‘trucks,’ the Rav4, Highlander (both operate satisfactorily with 4-cylinder base engines) and the Sienna are all unibodies and actually outsell Toyotas pickups and almost as well as the 6 other trucks put together.

    Toyota is not heavily dependent on big SUV sales. They might like to make the same mistakes on the same scale as GM but, so far… no.

    Geeber also writes, “Honda also was quite happy to build SUVs – note that the CR-V is still Honda’s third-biggest seller (behind the Accord and Civic).”

    The Vue is probably 500 lbs heavier than a CR-V and the CR-V doesn’t even have a V6 option. Honda does not build large volumes of large vehicles.

  • avatar
    KixStart

    Geeber: “The simple fact is that the Camry and the Accord are no longer small cars…”

    The Camry and Accord are significantly lighter than the Malibu.

    So, what’s the Malibu? A large car with cramped interior room?

  • avatar
    geeber

    KixStart:

    I totalled Toyota’s figures from before the slump (it is on another discussion thread from about a year ago), and Toyota was selling more larger cars (cars bigger than a Corolla), trucks and SUVs than small cars (even when Scions were added to the total of small cars).

    That is why I qualified my statement by limiting it to Toyota’s sales before the recent slump.

    Things have certainly changed now, but that the original point of contention was that Toyota only “grudgingly” entered these other market segments, and that is hardly accurate.

    Kixstart: And what is a ‘large car,’ an Avalon? It weighs 54lbs more than a Malibu with a 4-banger weighs (specs from Edmunds).

    Yes, it is a large car. It may not weigh much more than a Malibu, but it is clearly designed and marketed to people who want a larger, cushier sedan in the tradition of the Buick LeSabre or Lucerne.

    Also note that recent new GM vehicles have been been packing on the pounds, as GM has sought to control noise, vibration and harshness while simultaneously improving crash ratings.

    Just because a Toyota or Honda is lighter than a comparable GM product does not make it a small car.

    KixStart: If we look at ‘trucks,’ the Rav4, Highlander (both operate satisfactorily with 4-cylinder base engines) and the Sienna are all unibodies and actually outsell Toyotas pickups and almost as well as the 6 other trucks put together.

    They are still crossovers or minivans and are not “small cars.”

    KixStart: The Vue is probably 500 lbs heavier than a CR-V and the CR-V doesn’t even have a V6 option. Honda does not build large volumes of large vehicles.

    As I have noted, the Vue has gained weigh with its recent redesign – as have other GM vehicles. The CR-V is still hardly small, and please note that the third and fourth best-selling Hondas are the CR-V and the Odyssey, respectively.

    KixStart: So, what’s the Malibu? A large car with cramped interior room?

    It is noticeably narrower than many of its competitors. That doesn’t make it a small car – just a mid-size car that is pretty hefty for its size and interior room. Again, GM has been adding pounds to new models in its quest for more refinement and safety.

    The Malibu, Accord, Camry, Altima and Fusion are the descendants of the 1960s Chevelle/Malibu, Fairlane/Torino, Comet/Montego, Belvedere/Satellite, Coronet, F-85/Cutlass, Tempest/LeMans, Special/Skylark and Rebel.

    Not too small, not too big.

    They are not designed or marketed as small cars. They are designed to be fuel-efficient for their size and comfort levels, which is a good thing, but that is not synonomous with “small.”

  • avatar
    KixStart

    Geeber,

    The only way that all means anything is, “In comparison to what?” I’d be delighted to see how Chevy stacks up on your breakdown of small/not small cars. Do they actually offer any? Any that are worth buying?

  • avatar
    geeber

    KixStart: I’d be delighted to see how Chevy stacks up on your breakdown of small/not small cars. Do they actually offer any? Any that are worth buying?

    The Malibu and Impala are mid-sized cars. They certainly are not small cars. The Cobalt and Aveo are small cars. Whether the Aveo and Cobalt are worth buying is another matter entirely.

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