PETER BROWN

The CAFE course is set; we'll see how sales, jobs survive

Peter Brown is publisher and editorial director of Automotive News

The right CAFE number for 2025 may well be 54.5 miles per gallon. Heck, let's go crazy and round up to 55.

A fine number.

The wrong CAFE number is today's. Instead of some pathetic number in the 20s, fuel economy in 2011 should be 40 mpg or higher.

But because for three decades the federal government did absolutely nothing with corporate average fuel economy standards, we are about to embark on a costly and economically dangerous escalation of mandates.

How dangerous? CAFE determines winners and losers. It opens and closes plants. It has unintended consequences.

The creation of CAFE in 1975 required Detroit automakers to more than double their effective mpg to 27.5 in a decade. Japanese automakers, specialists in small cars in their home country, had to change hardly at all.

The result: A generation of hastily developed and lousy front-wheel-drive cars from Detroit competing with nifty, high-quality cars from Japan.

General Motors, always a good citizen, downsized its big cars, only to be crushed when gasoline prices dropped back. The Japanese had room to develop new generations, even new brands, of higher-value, lower-mileage vehicles.

An unintended consequence was the blossoming of "trucks," which were under a lower CAFE standard based on "feasibility," into mainstream passenger vehicles, killing the station wagon/car and burning a lot of gas.

Certainly, CAFE was not the only reason the domestic American automobile companies nearly collapsed three years ago, but it was a contributor.

Doubling fuel economy over time is a good idea. Forcing the doubling in a decade is a bad idea.

Imagine if the original law had called for modest annual increases in CAFE. Yes, it would have taken longer for cars to get to 27.5 mpg. But then the bar would have risen predictably to 28 and 30 and 35 and 40, with very little disruption and dislocation.

What happened instead in the lost decades between the late '80s and late '00s was that tremendous gains in fuel efficiency were poured entirely into performance: The average vehicle gained 1,000 pounds and 100 horsepower while CAFE stagnated.

Of course, a proper energy policy for America would require substantially higher gasoline taxes so consumers have an actual reason to care about fuel economy. But our Congress has never had the nerve to do the right thing there.

For this new standard of 54.5 mpg, the Japanese automakers opposed the Obama administration's sweetheart deal for big pickup trucks. Big pickups will have to improve much less quickly than other vehicles. And big pickups are the domain of Detroit.

I'm sure this isn't payback for what CAFE did to Detroit. But the Detroit 3 are in a more defensible spot today than they were in 1975.

Industry executives who swallowed their objections and stood smiling with the President on Friday to support the new standard have a tough job ahead. Cars will be more expensive. Some high-mileage cars may, like those early-'80s GM X-cars, be less appealing.

Of course, car companies can't really blame the government for flatlining CAFE. They squealed every time the subject came up, and Congress and presidents rolled over.

We as a society have allowed -- even insisted on -- a dysfunctional energy policy and weak command-and-control fuel-economy standards.

Now we'll see how vehicle sales and automotive employment survive a fast doubling.

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