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15 comments on New and (insert adjective here) CAFE Standards

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Ben on August 24, 2005 - 6:40am Permalink | Subthread | Comments top
I think Forbes has a pretty good description:

http://www.forbes.com/business/2005/08/24/autos-fuel-cafe-cz_jf_0824fuel.html

Couple of quotes from the article:

But it was clearly designed to help out the automakers most thirsty for profits, the struggling General Motors and Ford Motor.

U.S. carmakers complain they now have to sell large numbers of money-losing smaller vehicles in order to sell high-profit larger vehicles and meet the overall fuel economy average. With the size-based system, they could sell no smaller vehicles and still meet the standards.
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louGrinzo on August 24, 2005 - 7:09am Permalink | Subthread | Parent | Comments top
The thing I don't get about this "it helps the US automakers" stuff (which I've seen now in a few places) is how exactly it helps.

The US gov't is imposing "new rules" that effectively amount to no change at all.  With gas prices already giving drivers the willies, and surely set to go much higher before 2011, the market will put far more pressure on US automakers to increase MPG than these "new" regulations will.

If anything, the US companies, who collectively appear to be more pig-headed and just plain dumber than any other group of people on the planet, including the Major League Baseball owners, are being left to fend for themselves.  Unless the US automakers suddenly get religion about the energy efficiency of their products (as opposed to their manufacturing processes, where I believe they're competitive), they'll get crushed between the rising price of gasoline and the overseas competition.

If I'm missing something here, I sincerely wish someone would point it out to me.

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Ben on August 24, 2005 - 7:31am Permalink | Subthread | Parent | Comments top
Lou,

I'm sure others have a better handle on this than I, but here's what I see:

For thirty years each automaker has had to meet some kind of "average fleet" fuel economy.  However, the profit margin on the gas guzzlers is much better than the profits on the econobox.  So to sell a bunch of Suburbans, Chevy has to offset the lower fuel economy of the trucks by selling little cars that get better mileage, something I think they've helped do by means of selling to rental car agencies, govt sales, etc.

By splitting the fleet into six (or however many) mini-fleets, they don't have to worry about their sales mix.  They can sell (sticking with Chevy here) nothing but Suburbans and as long as they meet the new gas standard for that size truck (whatever the number is) they are ok.  They don't have to sell any little cars at all, they can stop pushing Saturns, etc.

Now you know and I know that some people are clamoring for higher mileage vehicles as a response to higher gas prices.  But that is only some people, there are still plenty of people who don't mind paying $5,000 a year for gas if it means they can have their power windows and extra legroom and leather seats and big bumpers.  

So we've gone from requiring each automaker to at least offer a balanced fleet of cars to giving them the choice to offer whatever makes them the most profit -- that would be your pickup truck with a nice stereo in it, and your cadillac SUV, etc.  The example in the article was that Chrysler used to have to push the PT cruiser to offset the Dodge Ram with the big Hemi.  Now? Not so much.

What it DOESN'T do is restrict low MPG vehicles in any way; as far as I know we still fully encourage Hummer sales (and the like) by way of tax cuts and lax MPG standards.  

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Dave Cohen on August 24, 2005 - 8:10am Permalink | Subthread | Parent | Comments top
Lou, I agree completely. You are not missing anything at all. Extended "protectionism" for American auto makers is nowhere in accord with reality. The market will take care of this.

Sorting these things out is confusing because we have a government that
  • protects large corporate interests
  • always wants the market to decide
As usual, these two goals are mutually contradictory.
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15 comments on New and (insert adjective here) CAFE Standards

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