Trump vs. California: Automakers take sides

The decision last week by a group of automakers, led by General Motors and Toyota, to side with the Trump administration and against California on fuel-efficiency standards shouldn't come as a surprise.

After all, a smaller group of manufacturers, led by Honda and Ford, sided with California in July in signing a deal that would bring annual improvements in fuel efficiency and emissions in the Golden State until 2026.

While the industry appears divided into two camps based on ability to hit those targets, analysts suggest there are other concerns among manufacturers navigating the Trump era. Those include threats to free trade at a time when the administration is mulling tariffs on imported autos and parts. For some automakers, those tariffs could cause more immediate pain than gradually increasing mpg standards. But there's also a cost to siding with Trump.

Take Toyota. Not only is it the best-selling brand in California, which is the biggest auto market in the U.S., but its hybrid vehicles have long established the automaker's green credentials among consumers.

Some of those consumers took to social media to express their outrage that Toyota — and earth-friendly Subaru — had favored Trump in a legal battle that could strip California of its right to set its own standards, as it has done for decades.

Toyota, which is finishing construction on a pickup factory in Mexico, makes a lot of its vehicles in the U.S. but also imports a lot of them, particularly those from its luxury Lexus division. Toyota has been vocal in its opposition to an import tariff as high as 25 percent that Trump has threatened from time to time.

"Because Toyota has that broader product line — and Lexus is the perfect example of that — they are more involved in importing than Honda," said Alan Baum, principal at Baum and Associates, an auto consultancy. "That puts Toyota in a more exposed position in terms of free trade."

If Toyota and other automakers in the group were seeking to get on Trump's good side — at least temporarily — it worked.

The president thanked GM, Fiat Chrysler Automobiles, Toyota and the Association of Global Automakers lobby for siding with his plan to loosen Obama-era fuel-efficiency targets. The rollback, Trump said on his Twitter account, will create less expensive, safer cars.

Toyota issued a statement last week explaining why it had supported a legal filing in favor of the Trump administration, in a lawsuit that could impact California's authority to set its own standards. Other automakers declined to comment.

"We do not believe that there should be different fuel-economy standards in different states. There should be one standard for all Americans," Toyota said. "That is why we decided to be part of this legal matter. Doing so does not diminish our commitment to the environment, nor does it lower our desire to manufacture vehicles that produce fewer emissions."

California, under a waiver of federal rules that goes back to the late 1960s, has set its own greenhouse gas standards to fight heavy urban air pollution. Because emissions and fuel economy are linked, California indirectly has some control over mpg mandates.

The Trump administration argues that only the federal government should set those rules and that they should be less aggressive than the standards put in place by the Obama administration and embraced by California.

The fight has even divided some members of the Global Automakers group, a trade association that represents international manufacturers. Members include Toyota, Honda, Kia, Hyundai, Nissan, Subaru, Isuzu, Aston Martin and McLaren.

In a statement, Honda distanced itself from the association's legal filing on behalf of the Trump administration.

"Honda is not a participant in this litigation, and is not contributing any funds supporting our trade association's activity in this area. We have been very clear on wanting to avoid lengthy and costly litigation on this issue, which will result in a great deal of regulatory uncertainty," Honda said. Its deal with California eases some of the Obama-era targets.

Beyond the great debate over how quickly to increase fuel efficiency and decrease emissions — and each manufacturer's calculation on which timetable favors its business model — some analysts think the latest move by automakers against California is more about getting on Trump's good side than anything else. But perhaps at a high cost.

"I think the intervention by Toyota, GM and the other automakers that are part of the coalition is all about currying favor with the Trump administration," said Ann Carlson, a professor of environmental law at UCLA. "I don't think their intervention will make any difference to a court in analyzing the legal questions."

What it certainly has done, at least among environmentally friendly car buyers, is tarnish the green credentials of some automakers that worked hard to establish them, she said.

"Both GM and Toyota, for example, have produced cars like the Bolt and Prius that are important contributions to reducing emissions. The only explanation for their intervention [in the legal case], in my view, is that they fear retaliation by the Trump administration in the form of tariffs and other forms of retribution," Carlson said in an email interview.

Taking sides one way or another doesn't necessarily translate to lost sales, said Jessica Caldwell, executive director of industry analysis at Edmunds. But it does invite controversy.

"The majority of average car shoppers probably aren't paying close attention to this story and don't let policy matters influence their buying decisions, but politics are always a polarizing subject," she said.