CAFE could split Big 3 and imports

UAW's fuel economy proposal favors Detroit automakers

A new CAFE: Fair or foul?
Under a proposal in Washington, manufacturers of the most efficient trucks would have to boost their fuel economy more than the Big 3. If Congress imposed a uniform 25% increase, here's how far each company would have to stretch.
  2000 LIGHT TRUCK AVERAGE, MPG 25% INCREASE, MPG
Honda 25.4 6.4
Kia 23.5 5.9
Suzuki 22.9 5.7
Toyota 21.8 5.5
Mitsubishi 21.5 5.4
DaimlerChrysler 21.3 5.3
Nissan 21.1 5.3
Isuzu 20.9 5.2
Ford 20.9 5.2
General Motors 20.9 5.2
BMW 17.5 4.4
Land Rover (now part of Ford) 17 4.3
Sources: National Highway Traffic Safety Administration and Automotive News

WASHINGTON — The UAW is pushing a plan to raise federal fuel economy standards in a way that would benefit the Big 3 at the expense of import-brand automakers, and a major battle may be brewing inside the industry.

The plan would force each automaker to raise the average fuel economy of its cars and trucks by a certain rate — 10 percent, 15 percent or 25 percent, for example — over a period of years. Traditionally, the government periodically has raised CAFE standards for all manufacturers by a specified number of tenths of a mile per gallon.

The Big 3 officially are neutral toward the plan. But at least one high-ranking executive of an import-brand company says he believes the Big 3 tacitly support the plan and would back it actively if faced with worse options.

“If this breaks loose, if the Big 3 come at us with this, they are going to have a fight on their hands,” said the executive, who insisted on anonymity.

The Senate likely will consider changes in the federal corporate average fuel economy program early next year.

Details of the UAW plan, called uniform percentage increase, are complex, but the underlying issue is not: It would help the Big 3 protect their sizable but tenuous hold on the profitable light-truck market.

The thaw is here

The standards of 27.5 mpg for cars and 20.7 mpg for light trucks have been frozen for more than six years. But the freeze ended Tuesday, Dec. 18, and the Bush administration is preparing to consider increases, possibly effective with the 2005 model year.

In the meantime, some lawmakers say Congress should set new standards or adopt a fuel-saving alternative to CAFE.

Officially, the automobile industry — the Big 3 and the import-brand companies — is united in favor of having the administration, not Congress, deal with CAFE. The Big 3 maintain they are neutral on the UAW plan.

“We’re neither supporting it or opposing it,” said General Motors spokesman Greg Martin, speaking only for GM.

The import-brand companies, which have resisted UAW organizing efforts, know they are the targets of a uniform percentage increase.

“It’s bad math. It’s bad politics. It’s bad business. It’s just bad,” said Tim MacCarthy, president of the Association of International Automobile Manufacturers.

Calls to Alan Reuther, the UAW legislative director, for elaboration on the union plan were not returned last week.

MacCarthy and others representing import-brand companies say the UAW plan’s main flaw is that it would penalize companies that already have done the most to improve fuel economy.

Penalty for achievements

For example, if a uniform 10 percent increase were enacted, a company whose trucks average 24 mpg would have to improve by 2.4 mpg, to 26.4. But a company just meeting the current standard of 20.7 would have to go up only about 2.1, to 22.8.

The Big 3 companies have made it clear they don’t like the traditional method of raising CAFE standards. They argue it puts “full-line manufacturers” at a disadvantage. That is code for companies that have been building lots of trucks, plenty of bigger cars and fewer econoboxes — in other words, the Big 3.

A group of Republican and Democratic senators has been pushing a proposal to require that light trucks meet the same CAFE standard as cars, 27.5 mpg, by 2007. The UAW says a uniform percentage increase in current car and truck standards would be far better.

The UAW, which represents Big 3 employees, could have a willing ear for the uniform percentage increase now that Democrats are back in control of the Senate.

Reuther told a Senate subcommittee in early December that making car and truck CAFE standards the same would “place domestic full-line manufacturers at a strong competitive disadvantage (and would) put at risk the jobs of our members who work in light-truck assembly plants and at associated supplier operations.”

Sen. John Kerry, D-Mass., who is leading the Senate’s consideration of higher CAFE standards or alternatives, said, “We don’t want to put people out of work, obviously.”

Ed Cohen, vice president for government and industry relations for Honda North America Inc., contended a uniform percentage increase and similar approaches would freeze the market share of each manufacturer.

He said, “How ironic it would be to effectively exclude from a new market a manufacturer like Honda that sells some of the most fuel-efficient cars in America.”

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