"This agreement on fuel standards represents the single most important step we've taken as a nation to reduce our dependence on foreign oil," Obama said.
"These outstanding companies are committing to do a lot more," he said. "By 2025, the average fuel economy of their vehicles will almost double to 55 mpg. This is an incredible commitment that they've made.... They wouldn't be doing it if they didn't think it was good for business and good for America."
The administration said the requirements will save U.S. households $1.7 trillion in fuel costs and result in an average fuel savings of over $8,000 per vehicle by 2025.
The proposal will cut U.S. oil consumption by 12 billion barrels. By 2025, oil consumption would be reduced by 2.2 million barrels a day - or as much as half of the oil imported daily from OPEC, the White House estimates.
The standards will also curb carbon pollution by cutting more than 6 billion metric tons of greenhouse gas over the life of the program. The White House says that is more than the amount of carbon dioxide emitted by the United States last year.
The White House, under pressure from California and environmental groups, originally proposed a fuel economy target of more than 62 mpg by 2025.
The rule "was weakened by auto-industry lobbying," Dan Becker, head of the Washington-based Safe Climate Campaign, told Bloomberg News.
The 54.5 mpg target will translate into a 62 mpg requirement for passenger cars and a 44 mpg target for light trucks by 2025, according to documents issued by the White House Friday.
CAFE requirements are not the same as the fuel economy ratings on a vehicle's sticker price issued by the Environmental Protection Agency. EPA fuel economy ratings are adjusted down by more than 20 percent to represent estimated mileage in real-world driving conditions.
For example, the 2011 Hyundai Elantra with automatic transmission has an EPA rating of 29 mpg in the city, 40 mpg on the highway and a combined 33 mpg rating. The same 2011 Elantra has a CAFE value of 37.7 mpg in the city, 56.5 mpg on the highway and a 44.4 mpg combined CAFE rating.
A path forward
In the past, Detroit and other automakers have vigorously opposed tougher fuel economy rules, claiming consumers would not pay higher prices for the technology required to meet higher standards. They also claimed safety would be compromised.
But the 2009 government-led bailout of GM and Chrysler -- as well as the emergence and growing consumer acceptance of hybrids, electric vehicles, and other technology -- left automakers little choice but to back the plan.
"This proposed rule presents a path forward that greatly improves fuel economy while preserving customer choice and future industry growth," GM said in a statement that was largely shared by other automakers.
Ford said it supported the new rule, in principle, because it protected jobs, will provide customers with a full range of affordable vehicle choices, and benefits the environment.
"This agreement provides the regulatory certainty we need to design and build fuel-efficient vehicles during the next 14 years," Mulally said in a statement.
Volkswagen AG said today it would not endorse the proposal because it places an unfair burden on makers of passenger cars, while allowing special flexibility for manufacturers of heavier light trucks. Mercedes-Benz expressed similar concerns.
"The largest trucks carry almost no burden for the 2017-2020 timeframe, and are granted numerous ways to mathematically meet targets in the outlying years without significant real-world gains," VW said in a statement. "The proposal encourages manufacturers and customers to shift toward larger, less efficient vehicles, defeating the goal of reduced greenhouse gas emissions."
VW also opposes the deal because it does not encourage wider use of diesel engines, which represent more than 20 percent of the automaker's growing U.S. sales.
"If one-third of the vehicles on the road today were clean diesel, the US would save 1.4 million barrels of oil a day," VW said in a statement.
White House officials said today the proposal is designed to encourage the introduction of new alternative-fuel technologies and that diesel engines are already established in the market.
Other automakers, while backing the overall deal, also expressed reservations about portions of the plan.
"The proposed fuel economy standards for 2017-2025 are extremely challenging – especially for smaller companies and those that primarily sell passenger cars, such as Mazda – but we are committed to meeting them," Jim O'Sullivan, CEO of Mazda North American Operations, said in a statement.