Under Pressure, Big 3 Support Fuel Mandates

by : Lauren Woods

Automakers decided to endorse a compromise proposal to increase fuel efficiency requirements last Tuesday despite the fact that Detroit's Big Three got a fresh hammering on the Senate floor.

The endorsement is a remarkable departure for the automakers, which have long refuted momentous increases in corporate average fuel economy mandates, known as CAFE. The opposition is mainly because the rules would be expensive to meet and could force them to shun building some popular and profitable product lines simply because they are less efficient.

Automakers believe the compromise proposal offered by Michigan Democrat Sen. Carl Levin is a "stretch," but achievable, although it will still be expensive to meet and breaks with their long-held belief that regulators, not senators, should set new fuel requirements, according to auto executives who spoke on condition of anonymity.

Subsequent to a late-afternoon meeting last Tuesday between automakers and Levin's staff, the nine companies in the Alliance of Automobile Manufacturers, the trade group that represents Detroit's Big Three and the Toyota Motor Corp., decided to endorse Levin's bill. The bill is expected to be released on Wednesday.

Officials from the Association of International Automobile Manufacturers, which represents Toyota, Nissan Motor Co. and Honda Motor Co., also participated in the meeting. But they are undecided whether to support the proposal. The compromise bill is in response to a Democratic energy bill earlier passed by the Senate Commerce Committee. The bill would oblige automakers to average 35 miles per gallon for passenger cars and light trucks combined by 2020, with four percent yearly increases through 2030.

An early draft of Levin's bill would give automakers longer to comply and require a smaller overall increase, 36 mpg for passenger cars by 2022 and 30 mpg for light trucks by 2025. The bill was drafted by Levin and co-sponsor Sen. Christopher Bond, R-Mo. The proponents said that they will try to finalize the language of the draft this Tuesday.

Last week, the CEOs of the General Motors Corp., the Ford Motor Co., and the Chrysler Group were on Capitol Hill to lobby against the Senate Democratic energy bill. However, they did not endorse any measure. The automakers have now decided that they need to support an alternative if they have any hope of beating back the bill. The hot situation needs the breeze of an . This is why the domestic automakers are backing the less stringent and taxing proposal.

"I believe the Big Three will endorse the Levin bill because it has CAFE increases that are economically feasible," said the United Auto Workers' chief lobbyist, Alan Reuther. The UAW has endorsed Levin's proposal.

The Bush administration, on the other hand, after sitting out the debate on fuel economy bills for weeks, repeated its antagonism to formulating specific increases in fuel economy standards and said that it was "strongly opposed" to a provision in the Senate Democratic energy bill that would oblige medium and heavy-duty trucks to comply with fuel economy mandates. At present, the largest work vehicles are exempt.

The automakers' endorsement of Levin's plan came as the Senate began a floor debate on the Democratic energy bill. One by one, lawmakers criticized the Detroit automakers for not doing more to enhance the fuel efficiency of their vehicles.

"It's a sad day for Detroit and I feel bad for an industry that once used to lead the world," said the Senate's No. 2 Democrat, Richard Durbin of Illinois. Domestic auto CEOs "have failed to make the right decision about the products they sell." Durbin offered a similar proposal to increase fuel economy requirements a couple of years ago but was defeated. The ground has shifted radically since then.