Meet Us in the Middle: Automakers Plead for Peace, Compromise Between White House and California

Matt Posky
by Matt Posky

The automotive industry is in turmoil. There’s an industrywide push toward electrification that has yet to prove itself as truly profitable, volume seems to be tapering off in the developed world, and emissions regulations aimed at improving air quality are operating counter to existing consumer tastes. As a result, automakers are scrambling to find the best path forward.

In 2017, that path involved encouraging the new U.S. president to roll back Obama-era fuel economy mandates, thus providing some breathing room and staving off fines as automakers began to realize they wouldn’t be able to meet tightening targets. The administration listened, leading to a proposal that would effectively freeze mileage standards at about 37 miles per gallon — rather than the previously decided 54.5 mpg — by 2025.

However, California and a coalition of supportive states claim they won’t be going along for the ride. This group says it will maintain the old standards, regardless of what the White House says. The staredown has automakers worried; they’ve now banded together to issue a letter asking both sides to calm down and keep talking.

According to The New York Times, a letter signed by 17 manufacturers requests that President Trump return to the negotiating table and attempt to find some common ground. California also received a copy on Thursday, with automotive firms suggesting that a midpoint between the old standards and the proposed rollback could be best option for peace.

The letter purportedly warns of industrial upheaval and economic instability stemming from an American market fractured by disparate fueling rules.”We strongly believe the best path to preserve good auto jobs and keep new vehicles affordable for more Americans is a final rule supported by all parties — including California,” the letter states.

Not every major automaker signed the document. While most of the big names are there, notably absent was Fiat Chrysler. As for the receptiveness of governmental groups, neither side appears to be particularly interested in working with the other. While negotiations took place in the past, the California Air Resources Board (CARB) previously claimed it was having trouble making any headway. The White House similarly said that California seemed unwilling to compromise and pulled out of negotiations, along with the Environmental Protection Agency and Transportation Department, in February. Their responses to the letter appears to be more of the same.

From The New York Times:

A White House spokesman, Judd Deere, in an email put the blame on California, saying the state “failed to put forward a productive alternative.”

[California Governor Gavin] Newsom said he is not interested in a “midway” deal requiring California to loosen its rules. “A rollback of auto emissions standards is bad for the climate and bad for the economy,” he wrote in an email. “I applaud the automakers for saying as much in their letter today to the President. We should keep working towards one national standard — one that doesn’t backtrack on the progress states like California have made.”

The letters are the latest twist in Mr. Trump’s effort to roll back regulations on auto manufacturing, an industry he has vowed to support. Some industry chief executives and lobbyists have been privately telling the White House for months that the president’s efforts may do more harm than good, but Thursday’s action represents a particularly strong pushback.

We’re skeptical about forecasting the economic impact of either course. Forcing elevated economy mandates on automakers that now seem incapable of reaching them will result in massive fines or money-losing, low-volume electrics plunked into a unready market. However, rolling back targets could discourage manufacturers from seeking out new technologies and innovations, while effectively forcing environmental groups sound their war horns. Yet it’s hard to feel bad for an industry that got itself into this mess by promoting the rollback, after claiming they could manage, it in the first place.

Automakers cling to the hope that California and the White House can still agree on one national standard, preferably one that splits the difference. That way, they’re not forced to cater to two domestic markets and can still enjoy some of the benefits of deregulation. That scenario doesn’t appear incredibly likely, as California is readying itself for battle. Xavier Becerra, the state’s attorney general, said recently that the region intends to sue over the automotive rules.

California’s fighting for its right to self-governance, something the most recent draft of the rollback would change — at least in regard to automobiles. But it’s also fighting for the right to set national automotive trends. Regardless of California’s intent, automakers would have to cater to it and its member states in a divided market.

The can of worms that concept would open is immense. Would California residents be able to cross state lines to purchase gas guzzlers? Would automakers have different lineups for different states? What happens if manufacturers fail to meet California’s guidelines? Couldn’t they just try to adhere to the more rigid economy laws they previously agreed to, regardless of whatever the government decides, and call it a day?

The White House previously called on the industry to choose a side. The EPA has basically said that the existing fuel economy targets are unsustainable ( something the Golden State disagrees with) and the current administration says it can’t work with California. With all options seemingly exhausted, the federal government wants manufacturers to plant their flags somewhere so it can decide how to proceed. And yet the industry’s fence-riding hasn’t come to an end.

As litigation seems inevitable at this point, we’re not even sure why automakers bothered to issue the letter. Perhaps companies realized a long, drawn out legal battle inside the government was less appetizing than the difficult process of boosting fuel efficiency. Perhaps they just want to look impartial after setting this conflict’s wheels in motion. Regardless, it still seems too little, too late. Unless the White House simply drops the issue or California blinks under the pressure, this will only get uglier.

[Image: Nithid Memanee/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Jeff S Jeff S on Jun 10, 2019

    Well the Earth itself will survive climate change but our species might not. I think there is a happy medium between not believing humans contribute to climate change and pollution and those who believe that we should regulate climate change and pollution out of existence. There are ways of addressing climate change and pollution without taking extreme positions.

    • See 2 previous
    • ToddAtlasF1 ToddAtlasF1 on Jun 10, 2019

      @philipwitak Find a new lie to lay down your life for. I don't know how the sheep can still fall for AGW. It's so 1989. It's one thing to be smart because you remember that AGW was what the apocalypse cult came up with after their 'new ice age' narrative couldn't stand into the '80s, but we've now had thirty years of a false crisis for even imbeciles to come to their senses. The only explanation at this point is that believers who aren't being compensated by avaricious plutocrats are comprehensively brainwashed. #walkaway

  • PandaBear PandaBear on Jun 10, 2019

    I like the way things are right now: CARB states do their own things so they can have less pollution as they want, and non-CARB states can roll coal if they want. Are you saying you want the non-CARB states to sell CARB vehicles because they want one standard? or are you saying that you want CARB states to ban certain kind of vehicles so they don't have enough volumes to be made, and you never get to buy them? Just let it be, if you have seen how bad the air can be without emission control (i.e. smog that brown up the air on spare the air day), you would want some sort of regulation too. One standard in the middle doesn't do much good. I don't care if mid-west wants to roll coal in their own backyard, and I am sure they don't care if CARB wants to have some more expensive vehicles that they don't force you to buy anyways.

  • Zipper69 Current radio ads blare "your local Chrysler, Dodge, Jeep, Ram dealer" and the facias read the same. Is the honeymoon with FIAT over now the 500 and big 500 have stopped selling?
  • Kjhkjlhkjhkljh kljhjkhjklhkjh hmmm get rid of the garbage engine in my chevy, and the garbage under class action lawsuit transmission? sounds good to me
  • ToolGuy Personally I have no idea what anyone in this video is talking about, perhaps someone can explain it to me.
  • ToolGuy Friendly reminder of two indisputable facts: A) Winners buy new vehicles (only losers buy used), and B) New vehicle buyers are geniuses (their vehicle choices prove it):
  • Groza George Stellantis live off the back of cheap V8 cars with old technology and suffers from lack of new product development. Now that regulations killed this market, they have to ditch the outdated overhead.They are not ready to face the tsunami of cheap Chinese EVs or ready to even go hybrid and will be left in the dust. I expect most of their US offerings to be made in Mexico in the future for good tariff protection and lower costs of labor instead of overpriced and inflexible union labor.