Chrysler, Ford join Toyota in opposing Mexico's fuel economy, emissions proposal

Mexico's first fuel economy standard, nearly three years in the making, is stalled because of challenges from Toyota Motor Corp., Ford Motor Co., Chrysler Group and other automakers.

Nom-163, aligned with the U.S. corporate average fuel economy standard, would raise Mexico's required fleet fuel economy average for new cars and light trucks to 35 mpg by 2016. It also would align Mexico's emission standard for new light vehicles with that of Canada, harmonizing regulations in North America.

The automakers oppose certain rules in the proposal, which they say lacks incentives and credits for new technology such as hybrids and wider use of alternative fuels. Automakers also claim the proposal does not take into account Mexico's altitude, topography and road conditions, which "require design modifications" that have to be "more robust," government documents show.

They also have concerns about the timing and implementation of the standard.

But environmental groups complain that automakers are fighting a proposed regulation in Mexico that is comparable to those that the companies already support in the United States.

In September, Toyota obtained an injunction to stop government work on the standard and Ford filed a legal challenge. But a federal court lifted Toyota's injunction late last week, Mexican officials said.

Chrysler was granted a similar injunction in late October. The company said in a statement that it would support a Mexican fuel economy standard that is aligned with those in Canada and the United States. But it says that the proposed Mexican regulation differs from that in the United States because it would not give miles-per-gallon credits for production of alternative fuel vehicles and would not allow use of credits earned in previous years.

Toyota sought an injunction "because we could not have a dialogue with the government," Toyota spokeswoman Ana Maria Vallarino told Reuters in late October. "Toyota is not against the rule but wants an efficient regulation that benefits the Mexican consumer."

A Ford spokeswoman said the company strongly supports "new energy efficiency regulation that helps reduce emissions and allows a more efficient use of fuels," but added, "despite the consultation meetings, the draft does not reflect the presented recommendations from the affected parties."

Mexico's local automakers association, AMIA, sought an injunction in addition to the legal challenges from other automakers, AMIA President Eduardo Solis said. He declined to identify the other companies.

Three Mexican agencies that oversee economic, energy and environmental policy began work on the standard in March 2010 with Solis in attendance. In July, the government proposed the standard and a 60-day comment period for automakers opened.

Besides AMIA, the five automakers that submitted comments were Toyota, Chrysler, General Motors, Ford and Land Rover, said Leonora Rojas Bracho, director of urban and regional pollution at Mexico's National Institute of Ecology.

Land Rover took no legal action, a spokesman said last week.

GM declined to say whether it took legal action, but added "you can be sure that if we decide to take a legal action or we took any legal action in the past against this regulation, it will be to improve the current regulation proposal …," Mauricio Kuri Curiel, a spokesman for GM Mexico, wrote in an e-mail.

After comments were collected, the government planned to evaluate them and publish its responses and the standard to make it official. Because of the injunctions, work on the rule has been stopped before responses were published.

The Mexican government estimates the standard would conserve 18 billion gallons of fuel and reduce greenhouse gases by 170 million tons by 2030.

Mexico is the third-largest light-vehicle market in North America, well behind the United States, and about two-thirds the size of Canada's market. In 2011, light-vehicle sales in Mexico totaled 905,799 units, and volume has climbed 11 percent this year through September to 701,901.

The automakers say the proposed standards would raise vehicle prices and reduce sales. But the Mexican government believes the companies are challenging the standards so they can sell cars in Mexico that they are prohibited from selling in countries with tougher regulations.

Among the automakers' desires:

• More lead time to develop models in time for the 2014 model year and later.

• A more flexible rule than CAFE because Mexico's high altitude makes higher fuel efficiency harder to achieve.

• Some of the credits and incentives for new technology and flexible fuel use contained in U.S. regulations.

But Kate Blumberg, global research program director at the International Council on Clean Transportation, a U.S.-based organization that advises environmental regulators, said that most of the complaints are not valid.

She said the companies' most relevant concern is lead time, but that AMIA has been included in the planning for more than two years.

"By suing at this stage in the development of the regulation -- before giving the government the opportunity to respond to the comments submitted -- it appears that automakers are trying to run out the clock on the current administration," Blumberg said.

The standard has been a top priority of Mexico President Felipe Calderón. His six-year term ends Dec. 1 when President-elect Enrique Peña Nieto will take office.

But some officials in Calderón's administration worry that Peña Nieto will let the standard fall to the wayside.

Peña Nieto's likely head of Mexico's version of the EPA is the former president of the Association of Heavy Duty Vehicles, Rojas Bracho said.

Rojas Bracho said she is not optimistic that Peña Nieto will make the standard a priority.

The standard is supported by environmental groups worldwide, which are frustrated by the setbacks.

"It's truly unfortunate and ironic that auto companies that are easily complying with the U.S. fuel economy standards are quietly doing everything they can to stop progress on comparable fuel economy steps south of our border," said Rich Kassel, a consultant to the National Resource Defense Council.

CEMDA, a Mexican environmental group, agrees.

"This is a win-win regulation. More jobs, clear signs to the industry for manufacturing and developing more efficient technology, taking care of the environment, and having a more competitive national auto industry," said Leticia Pineda, a CEMDA policy analyst., who said injunctions are rarely granted in the proposal stage. "The auto industry is very strong."

Steven Downer, Reuters contributed to this report