With Support From At Least Eight Automakers, White House To Unveil 2025 CAFE Proposal Tomorrow

Edward Niedermeyer
by Edward Niedermeyer

After the apocalyptic warning from the industry about a proposed 56.2 MPG 2025 CAFE standard, the auto industry seems to be backing the White House’s latest proposal, which reduces the 2025 target to 54.5 MPG, slows the rate of efficiency improvement for trucks and increases advanced technology credit loopholes. Another key consideration: the White House agreed to a mid-term review of the 2025 standards to ensure they reflect the market. Plus, the DetN points to a previously unheard-of compromise to keep big trucks cheap:

The plan is also carving out special rules for “work trucks” — heavier light duty vehicles used for construction.

As a result of these compromises, the WSJ [sub] reports:

As of Wednesday, Toyota Motor Corp., General Motors Co., Ford Motor Co., Chrysler Group LLC, Honda Motor Co., Hyundai Motor Co., Nissan Motor Co., BMW AG and Volvo had told the administration they would support the plan

With the industry now largely on board, the Obama Administration has a green light to announce its new standard at a ceremony planned for tomorrow. But not everyone is happy with the new proposal…

Toyota and BMW were named as initial detractors of the compromise according to Bloomberg, but after expressing “concerns,” both are now on board with the plan. Daimler, meanwhile, whose Mercedes-Benz brand has been a leading payer of CAFE fines in the past is complaining that its

current understanding of the proposal raises some concern, and we’re continuing to review it

And what might be its problem?

An executive with a European auto maker said the plan is unlikely to motive auto makers to build vehicles capable of running on diesel fuel. Volkswagen AG, Daimler and BMW have heavily invested in advanced diesel engines, arguing that their fuel economy, especially on long journeys, is superior to that of hybrid vehicles.

“It’s clearly inequitable and favors manufacturers of full size trucks,” the executive said. “It could have an adverse effect on real world [gasoline] consumption by driving consumers to trucks.”

To favorable to trucks, not favorable enough to diesel… sounds like Volkswagen and Daimler are going to be the major holdouts here. And while Mercedes’ reputation as a longtime CAFE scofflaw hurts its credibility here, VW’s concern is more interesting: with a raft of new hybrids and EVs complimenting its market-leading diesel options and a goal of selling a million vehicles by 2018, you’d think VW would be heavily invested in the CAFE process. But the German automaker appears to not yet be on board with the plan, despite the following comment from VW of America President and CEO Jonathan Browning [via the DetN]:

We’re really focused on making sure whatever product comes out of those discussions is fair across the industry, is achievable. It should stretch us but it should make sure that’s deliverable in a way that produces the technological results that are still affordable to mainstream America

But the holdouts don’t have much hope of breaking up the new compromise, as their lobbying group, Global Automakers, has endorsed the new proposal. And though some speculate that California may not be satisfied with the agreement, there seems little chance of the state defecting despite the disappointing compromise. Especially because they have the opportunity to defect during the mid-term review:

In order to win the backing of the domestic automakers, the White House agreed to a review midway through the period, to ensure the new requirements are achievable, as well as granting credits that will make it easier for the companies to meet the revised standards.

The automakers pushed to get factors such as the rules’ impact on jobs and auto sales included in the midterm assessment. If the EPA and NHTSA determine that the final rules are too tough, California would be allowed to continue with higher requirements. And automakers will be able to seek a “judicial review.”

That, of course is the nightmare scenario: different standards in different states. The auto industry has argued again and again that any national standard would be better than any two (or more) state standards. But if the credit loopholes are too big and if overall fuel economy is not improved to the promised levels, an outcome that is definitely possible with the credit loophole, California could defect again, leaving the entire process back where it started.

For now though, the idea is to not think about that as tomorrow the industry and government will join hands in a symbolic kumbaya moment. The giant remaining questions: what specifically does the new plan call for, and will this coalition of the willing survive long-term? We’ll find out the answer to the first question tomorrow, but the second question should keep us stocked with years and years worth of drama and news.

Join the conversation
  • Robert.Walter Robert.Walter on Jul 28, 2011

    "GAS CAFE", Oh oh, better bet Maalox...

  • Rob Rob on Jul 28, 2011

    The details of this plan are irrelevant. The White House and automakers will take credit for this agreement now knowing full well that as the deadline approaches and it is obvious that the standards can't be met, some future administration will reduce the mandates in the name of preserving American jobs and automobiles that Americans want and can afford.

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