WASHINGTON -- Sharply higher fuel economy standards for cars and trucks need not be bad for business, a new report says.
The report by Citigroup, the New York financial services company, says some companies will benefit from the demand for fuel-saving vehicle technologies. It cites BorgWarner Inc., Johnson Controls Inc. and Tenneco Inc. as leading examples.
Citigroup plans to present details of its findings at a meeting of more than 100 industry analysts and institutional investors on Wednesday, Oct. 31, the company said today.
The report says other suppliers will not fare so well. It notes that American Axle & Manufacturing Holdings Inc. derives much of its revenue from supplying parts for large pickups and SUVs built by General Motors and Chrysler LLC.
Among automakers, the report says that in the near term GM would benefit from higher standards, but Chrysler would not. Even Toyota would slip financially, Citigroup says.
Brands that focus on performance and have lower fuel economy for smaller vehicles, such as BMW and Mercedes, may be somewhat challenged, the report says.
The report assumes that Congress will raise the combined car-truck fuel economy standard to 35 mpg by 2020 about 40 percent higher than today.
Most of the industry has been lobbying for a milder alternative. Industry representatives say the 35 mpg standard would be difficult to meet by 2020 and would create financial hardships.
But the Citigroup report says the 2020 target is tough but attainable, requiring aggregate improvements of 2.5 percent per year, and surprisingly generating growth in variable profits for most automakers.
A shift of consumer demand to smaller and more fuel-efficient vehicles would help the industry meet higher standards, the report says.
The report also assumes that regulators will be able to set different standards for cars of different sizes. Such an attribute-based system is being phased in for light trucks during the 2008-11 model years.
Citigroup collaborated on the report with outside organizations, some of which are long-time advocates of higher standards. They include Ceres, a coalition of investor and environmental groups; Planning Edge, a planning and marketing company; the Natural Resources Defense Council, a nonprofit advocacy group; and the University of Michigan Transportation Research Institute.