Federal Fuel Efficiency Rules Place New Burdens on Domestic Auto IndustryDetails of the Obama administration's 2016 auto fuel economy and tailpipe emissions rules were unveiled this week with a cost to the industry pegged by the government at $60 billion over five years. But there are doubts about whether the ultimate goal or the cost estimates are realistic. The U.S. auto industry has not objected to the rules, which formally require a fleet average of 35.5 miles per gallon by 2016, an increase in efficiency of more than 5 percent per year over current efficiency levels. But two of the domestic manufacturers now owe a total of about $65 billion to the federal government, which owns a majority of the stock in one of the firms, General Motors. It's worth noting that in the first 10 years of the European Union's fuel economy rules, adopted in 1995, fuel consumption declined only 1 percent per year, despite gasoline prices averaging more than $6 per gallon. Advertisement The administration also estimated that the regulations will cost consumers about $1,000 per vehicle for a new car. Writers for Car and Driver called the administration's initial cost estimate of $1,300 per vehicle when the goal was first announced in May "absurd." Other estimates place the cost at several thousand dollars per vehicle. This can't help but depress auto sales, further crippling Detroit's battered automakers.
While a congressional oversight panel has said the government should be prepared to forgo recovery of the loans extended to GM and Chrysler, Congress has not signed off on the idea. Now the automakers will be saddled with additional costs that are likely to be greater than the amount estimated by the government. The government contends that the greater mileage requirements (which will be slightly less than 35.5 miles per gallon when various fudge factors are accounted for) will give consumers thousands of dollars in savings on gasoline. But this assumes energy costs for such operations as refineries don't increase because of pending carbon tax or cap-and-trade legislation. The only bright spot is that the regulations, which still must go through a hearing process, give automakers a single set of national standards on efficiency and emissions to meet, rather than various state standards. The auto industry is about to embark on another experiment in forced technological change — at a time when Detroit carmakers are still financially wobbly. REPRINTED FROM THE DETROIT NEWS DISTRIBUTED BY CREATORS.COM
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