Dirty Play: Automakers Seek an End Run around the EPA

Pulling a page from its 1970s playbook, Detroit chooses to whine, dissemble and float doomsday theories rather than meet fuel-economy targets.

byLawrence Ulrich| UPDATED Feb 21, 2017 10:39 AM
Dirty Play: Automakers Seek an End Run around the EPA

Well, now we know what Detroit automakers and President Trump were talking about at the White House. And it wasn’t a bold initiative to take on global warming.

As I’d predicted, the industry backsliding on fuel economy and greenhouse gas emissions has begun in earnest. But almost no one could have predicted how brazen and disingenuous that attempt would be. As Reuters first reported, the chief executives of 18 automakers, including General Motors, Ford, Fiat Chrysler and the U.S. arms of Toyota, Honda, Nissan, Hyundai and Volkswagen, are asking President Trump to “revisit” a decision by the Obama administration to lock in stronger fuel-economy rules through 2025.

Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, said Sunday, automakers are "seeking a restoration of the process -- that's all. This is a reset."

Right. And the Atlanta Falcons would like to “reset” the fourth quarter.

Environmental groups are calling the automakers’ move a slippery slope toward weakened standards. And unless you’ve been huffing tailpipe fumes, that’s exactly what this is. These are the same automakers that stood alongside President Obama in 2011 and declared that new standards, while challenging, were well within their technical reach. The landmark rules are on track to lift average fuel economy to well over 50 mpg by 2025, while aligning greenhouse gas limits, set by the EPA and the California Air Resources Board, with fuel economy standards managed by the National Highway Traffic Safety Administration. The standards, the administration said, would cost global automakers $200 billion over 13 years, but save motorists $1.7 trillion in fuel costs over the life of their cars, and help stem the tide of carbon-dioxide emissions.

In the letter, automakers say they’re miffed that a scheduled “mid-term review,” or MTR, was sped up. The EPA wrapped up its voluminous review more than year ahead of schedule, and determined that the mileage targets for 2022 to 2025 were eminently feasible. If that target sounds too ambitious, let’s be clear that real-world fuel economy would be closer to 39 mpg by 2025, a good 20 percent below the official CAFE standard.

“As recently as late last fall, EPA assured us that the MTR would not result in a final determination before the next administration came into office,” the executives said in the letter. (Emphasis ours). 

Please, spare us the crocodile tears, especially coming from corporate crocodiles. Bottom line, automakers are giddy over the prospect of a more-sympathetic ear from President Donald Trump and his newly minted EPA Administrator Scott Pruitt, who’s made a career out of suing the agency he will now lead, and has vowed to dismantle climate change rules and hobble the agency's very scope and authority. 

Here are Trump own’s words, in a statement from his transition team:

For too long, the Environmental Protection Agency has spent taxpayer dollars on an out-of-control anti-energy agenda that has destroyed millions of jobs, while also undermining our incredible farmers and many other businesses and industries at every turn.

“As my EPA Administrator, Scott Pruitt will reverse this trend and restore the EPA’s essential mission of keeping our air and our water clean and safe.”

Considering such toxic assaults on the nation's pollution watchdog, and the new political climate (excuse the pun), is it any surprise that the Obama administration wanted the rules carved in stone?

The letter from 18 automaker CEO’s asked Trump to reopen the midterm review "without prejudging the outcome.” Yet for companies who don’t want “pre-judgment, “ their letter was as judgmental and apocalyptic as the Old Testament. The missive repeated the outrageous, evidence-free claim, first floated publicly by Mark Fields – the CEO who’s been thumping his chest over Ford's leadership in electric cars and the environment – that being forced to meet the targets could destroy up to 1 million American jobs. That's straight from Detroit's musty, discredited playbook of the Seventies, when automakers insisted that the original Clean Air Act would be their undoing. Ditto for the argument that they’re just giving the people what they want, meaning more pickups and SUVs, and that’s why they can’t deliver higher mileage.

Certainly, affordable gasoline makes it harder to sell consumers on fuel-efficient cars. But the rules already take that into account. The Detroit Three, which all sell high proportions of light trucks, are given significant leeway in the form of sales-weighted rules based on the size and footprint of their models. The point is that every class of vehicle, from dinky subcompacts to full-size pickups, are pushed to boost efficiency by roughly the same percentage – in precisely the compromise automakers sought. What could be more fair? 

But instead of buckling down to pass the test, the automakers are like whiny students asking Mr. Trump for a do-over and an easy "A." The “destroying automotive jobs” part is particularly rich, seeing how it was the U.S. government that was forced to rescue Detroit, and hundreds of thousands of actual jobs, after GM and Chrysler drove themselves into the ditch -- in part through their over-reliance on fuel-thirsty pickups and SUV's. The bailout that created the "new" GM, and gave Chrysler a lifeline in Fiat, was in part conditional on these companies diversifying and cleaning up their act. In a rational regulatory world, the President and EPA chief would be rolling on the office carpet, laughing at the sheer chutzpah of GM and Chrysler: Back again, hat in hand, only now the government is the enemy. Or is GM offering to pay back the $11 billion loss taxpayers took on their investment? The letter sure didn't mention it. 

If the Trump administration isn’t versed on the infamous history of the American auto industry, let’s spell it out: Detroit needs tough love, and always has. When they’re given carte blanche, their response is to party like there’s no tomorrow.

You know what destroys automotive jobs? Several decades of serial mismanagement and refusal to compete with Japan on small and fuel-efficient cars. Then, putting every industry egg into SUVs and pickups. (Cash for Clunkers, anyone)? Finally, acting all surprised and blaming external forces—anyone but themselves—whenever fuel-price spikes left them on the brink of disaster, which was too many times to count. Make no mistake: Only when the Detroit Three is dragged, kicking and screaming, to make the tough calls and smart long-term business decisions, does success invariably follow.

It would be one thing if automakers were falling woefully short of the targets. But automakers aren’t just meeting these greenhouse standards, but outperforming them. By Detroit’s own logic, they should be hemorrhaging jobs and bleeding money. Oops: They’re selling unprecedented numbers of cars, banking record profits and adding jobs in America. Consider that theory debunked, debased and unworthy of further debate. 

Fact is, meeting the standards can create jobs and profits, not destroy them. According to the Natural Resources Defense Council, 48 states are already supplying parts for advanced, alternative-fuel vehicles to companies in American and around the world. Automakers are making solid progress, from the Chevrolet Bolt and Chrysler Pacifica plug-in hybrid to Ford’s $4.5 billion electrification plan. The same goes for the Ford Fusion and Hyundai Sonata hybrid; and models from 650-horsepower Corvettes to Mercedes' latest bi-turbo V8 AMG's, that manage to combine ever-higher performance with improved efficiency.  Every one of those cars, including newly hybridized McLarens and Ferrarris, owes its existence to technical challenges presented by government regulation. None would exist without the government offering carrots – including consumer tax breaks for electrified cars – while wielding a big stick of fuel-economy targets. Wiser executives, pointing to all that progress,  are insisting that the industry keep its momentum and not go backwards.  

Fortunately, legal experts say it may be difficult for the Trump administration to unwind the EPA rules now that they’re locked in. Automakers and suppliers themselves may well see there's no going back to the Bad Old Days, when cities like Los Angeles were valley-deep in nasty smog. As an executive of one foreign automaker told me, every company faces strict demands to reduce greenhouse-gas emissions in Europe, not just America. Most companies are determined to save resources by building global cars that meet emissions and safety rules around the world. Pruitt may soon learn that California, as the nation's largest car market, carries far more clout with automakers, consumers and regulators than his native Oklahoma. Forward-looking companies also see a tipping point coming on electric cars – with Tesla providing the writing on the wall – and they don’t want to be on the wrong end of the seesaw.

“You can’t not sell cars in California. And you don’t want to be the company that misses the next wave of technology, where other companies are eating your lunch,” the executive said.

Well said. How about putting that in the next letter to the President?