Automakers seek to use Trump summit to avert war with California

May 11, 2018 01:00 AM

Ryan Beene and John Lippert

REUTERS

Donald Trump, flanked by Ford CEO James Hackett and White House chief economic adviser Larry Kudlow, meets with chief executives of major U.S. and foreign automakers at the White House in Washington.

WASHINGTON -- American automakers faced a tough mission when they visited the White House on Friday.

They wanted to persuade President Donald Trump to cooperate with Jerry Brown, the Democratic governor of California, who invoked biblical references when calling the Trump administration’s proposal to roll back auto efficiency regulations “profoundly dangerous.”

Trump is open to accelerated talks with California over revisions to vehicle fuel economy and carbon dioxide emissions rules now looming, an auto industry trade association said in a statement.

The Alliance of Automobile Manufacturers, following the meeting at the White House between Trump and industry executives, said they appreciated Trump’s passion for the sector.

The administration is readying a proposal to ease fuel efficiency standards, and the industry is concerned that it be negotiated with California’s regulators to preserve nationwide efficiency targets.

“We also appreciate the president’s openness to a discussion with California on an expedited basis,” the alliance said in a statement. The alliance represents a dozen carmakers including General Motors Co., Toyota Motor Corp., and Daimler AG.

Two people familiar with the discussions, who spoke on the condition of anonymity because they weren’t authorized to comment publicly, said the White House expressed an openness to extending the efficiency standards until 2030 -- a key demand of California. The state has its own tailpipe rules that are aligned with federal targets through 2025. A rollback at the federal level without California following suit would split the U.S. car market into two.

At one point during the meeting, Trump told his agency heads to try and make a deal with California, according to two people.

The executives emphasized their support for easing the Obama-era standards, but not so much that it triggers a conflict with California and results in a split market of environmental regulations set by Washington and Sacramento.

“We are not asking the administration for a rollback,” Ford Executive Chairman Bill Ford said Thursday during the automaker’s annual meeting. “We want California at the table and we want one national standard.”

The White House said in a statement on Thursday that the president looked forward to a productive discussion with the automobile executives, and would listen to their comments on the effect of regulations on their industry and what they are doing to help establish a national standard.

The meeting comes against a background of occasionally bumpy relations between Trump and an industry that he championed on the campaign trail.

As a candidate, he repeatedly attacked Ford over its decision to build an automobile plant in Mexico. Three days before Trump’s inauguration, Ford announced that it would abandon the plant -- even though construction was underway. The president-elect responded with tweets of praise.

Reuters

Ford CEO Jim Hackett and several top industry executives were pictured on their way to the White House on Friday morning.

NAFTA concerns

Trump aimed more attacks at GM and Toyota over manufacturing plans for Mexico, and both responded by announcing billions of dollars in already planned investments in American plants.

Automakers, parts suppliers and dealers have been wary about the administration’s renegotiation of the North American Free Trade Agreement, warning that higher local content requirements could be unworkable and raise vehicle prices.

Trade-related tirades also have been a routine issue for the likes of Volkswagen AG, Daimler AG and BMW AG, with Trump blasting Europe’s auto trade imbalance with the U.S. and threatening to tax German car imports.

The Friday morning summit, which included, among others, GM CEO Mary Barra, FCA CEO Sergio Marchionne and Ford CEO Jim Hackett, is a key milestone in the industry’s effort to win relief from the rules that began in the first days of Trump’s presidency. Carmakers and their Washington trade groups lobbied the administration to reconsider mileage standards locked in by the Environmental Protection Agency during the final days of Barack Obama’s presidency.

Trump granted automakers their wish in March 2017 while laying out an explicit quid pro quo: a promise to cut them a break on environmental regulations in exchange for more hiring in the U.S. Within days, two of the industry’s major trade groups published a full-page newspaper advertisement thanking Trump for reinstating a review of the rules.

The EPA completed that review last month and found that fuel-efficiency regulations for cars and light trucks are too stringent and must be revised. Yet a draft that recommended freezing the standards in 2020 showed the administration had something far more aggressive in mind than what carmakers expected, or wanted.

Political dilemma

It also contained a legal case for denying California the ability to set tougher standards than the national ones -- something that sparked a sharp retort from Brown and other state officials.

Now, blowback from environmental groups and the prospect of a costly legal battle with California have put carmakers in the position of trying to find a middle ground while not coming off as unsupportive of Trump.

“We support standards that increase year over year that also are consistent with marketplace realities,” Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, told a House panel on Tuesday.

In the meeting at the White House, the executives plan to say they’d support standards that grew tougher each year through 2025, not a freeze that the administration is considering.

“Automakers wasted no time rushing to Washington with their deregulatory wish list after Trump’s election,” Madeline Page, campaign coordinator for Public Citizen, a consumer advocacy group, said in a statement. “Now they’re rushing to Washington, D.C., again, this time to try to distance themselves from the administration’s deeply unpopular clean cars rollback.”

Public Citizen activists plan to drive a 2006 Ford Focus rigged with an ersatz smog plume hovering over the car’s roof around Washington on Friday.

'Collision course'

“The automakers are on a collision course that they charted,” Page said.

But, in a letter to Trump on Thursday, three members of his presidential transition team urged him to dismiss the automakers’ concerns about legal battles with California and proceed with a rollback.

The current rules will make cars more expensive, limit consumer choice and give California an outsize role in national policy making, wrote Thomas Pyle, president of the Institute for Energy Research; Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute; and former Virginia Secretary of Transportation Shirley Ybarra.

“If there is to be one national standard, it makes more sense for that standard to be set by the federal government and not by one state government,” they said in the letter. “But that is what is likely to happen if you change direction now.”