Automakers seek a new relationship with U.S. government

WASHINGTON -- Automakers are seizing on what they see as a fresh opportunity to recast the industry's relationship with the federal government.

Within a day of Donald Trump's surprise victory last week, the Alliance of Automobile Manufacturers was handing the president-elect's transition team its wish list of policy priorities and calling for "a new paradigm for vehicle regulation." If those wishes come true, it could recast how autos are regulated by the federal government and provide relief from regulatory friction that the group says drives up vehicle costs.

The alliance says the industry's policy agenda hasn't changed. But its prospects for advancing that agenda have, and the response could come quickly. For the first time in a decade, a Republican president will be working with a GOP Congress -- fractured as it may be -- a clear runway that may not be available in two years.

The potential for regulatory relief goes beyond agencies such as the EPA and the National Highway Traffic Safety Administration. In its letter, the alliance cites the full complement of agencies with roles that touch on the auto sector -- from the Federal Trade Commission to the Department of Homeland Security -- in its bold call for a presidential advisory panel that would coordinate directives from all of them.

The opportunity arises at a time when the industry least expected it.

One government-affairs executive told Automotive News that auto executives here broadly expected a Hillary Clinton victory and bet that the next administration would presumably hew close to the direction set by President Obama on big-ticket issues such as fuel economy and greenhouse-gas standards and autonomous-vehicle policy.

The prospect of a President Trump, the executive said, "was always kind of laughed off."

But now, the executive said, "it's time to kind of re-gather our thoughts on these things that the Democratic administration has been pushing the industry towards and that the industry was reluctantly moving towards."

One major example of that rethink surrounds the administration's approach to the fuel economy and greenhouse-gas regulations. On the eve of the election, an alliance memo to its membership on the implications of potential outcomes said "all bets are off" if Trump were to win.

Under one scenario outlined by the alliance, Trump could follow through with his campaign rhetoric about hobbling the EPA -- which oversees the corporate average fuel economy program with NHTSA -- and "blow up the agreement entirely," the pre-election memo said.

Another scenario, the one preferred by the industry, would be for the Trump administration to work with automakers and Congress to "adjust the program" in light of lower gasoline prices, the alliance said in the memo.

The dueling scenarios illustrate the high degree of uncertainty surrounding what to expect from Trump's administration. His campaign was built around his business experience but also included populist themes and promises to sweep out the influence of special interests while making better deals on behalf of the nation.

How that will translate into policy choices is anyone's guess.

"If in fact he translates that campaign rhetoric to policy, he offers those who don't support the regulations some opportunities," a second industry government-affairs executive said.

The alliance is diving into those opportunities. It wants a full review of all regulatory and policy actions by the Obama administration since Sept. 1 and more attention to the economic impact of regulations on the health of automakers.

"We live at a moment where technology and change are swamping the regulatory capacity to manage our emerging reality," alliance CEO Mitch Bainwol said in the letter, obtained by Automotive News. "Reform is imperative."

The unfurling political landscape is in a sense the inverse of what the industry faced in 2009, when Obama came to office with a Democratic Congress at his back. At that time, the industry was close to drowning, and the administration had the only life preservers.

Naturally, there were strings attached. A strong advocate for climate-change action, Obama built into his auto industry reform agenda the most significant increase to fuel economy standards in years and later, the first-ever greenhouse-gas limits imposed on autos, a major victory for environmentalists and climate-change policy advocates.

Now, under a GOP-controlled Congress and a presumably business-minded administration, market forces and economic impacts will take on greater weight as the fuel economy standards undergo a midterm evaluation. That could lead to a more workable program for the industry, which has struggled to reconcile the push for higher fleetwide fuel efficiency with consumer preferences for large vehicles.

But a wholesale rollback of the program would be difficult. The process behind it requires that outcome of the midterm review be based on rigorous analysis of data and science. In addition, NHTSA is bound by law to set CAFE standards at the maximum feasible level.

Any change in the standards -- to toughen or weaken them -- must withstand a challenge in court from either the industry or environmental lobby.

Luke Tonachel, director of the Clean Vehicles and Fuels Project at the Natural Resources Defense Council, wrote in an email that "if the Trump administration seeks to roll back fuel efficiency standards, which are highly popular with the American people and even have been supported by the auto industry, it will find us standing in the way."

Michael Brune, executive director of the Sierra Club, signaled a harder line, pledging to give "President Trump the hardest fight of his life every step of the way."

A weakened national standard also would pose major risks for the industry. California regulators agreed to align their greenhouse-gas rules with the federal program in 2011, a major reason why the pact drew strong support from the auto industry. A weakened federal policy could prompt the state's powerful Air Resources Board to go rogue and institute even tougher standards for the nation's largest auto market to compensate for a relaxation of standards at the federal level.

To head that off, one industry insider here suggested, automakers could rally behind the 2025 standards to ensure that the industry at least has a consistent, national program.

"Even if you can do it," the insider said of diluting the 2025 standards, "should you do it?"