Update: White House Opens Negotiations With 56.2 MPG Fuel Economy Standard… Make That 54.5

The Wall Street Journal reports that the Obama administration has again lowered its ambitions for the next round of vehicle fuel economy standards for cars and light trucks.

In June, the White House said it would start negotiations with automakers by asking them to achieve average fuel economy of 56.2 miles per gallon (mpg) by 2025.

Now the administration is asking them to respond to a proposed target of 54.5 mpg, according to “a person with direct knowledge of the situation.”

Both targets are below the upper range of 60 mpg the administration said it was considering last fall.

WSJ says the new proposal includes credits for hybrid vehicles and conditions that will make it easier for larger pickups and SUVs to meet the target.

The White House has long said it would propose the next round of automobile fuel economy standards by September and finalize them by July 2012. After over 20 years of successful lobbying from the auto industry to prevent fuel economy increases, the administration did finally increase the standards last year to 34.1 mpg by 2016.

Now, the administration will decide how much further to push through 2025.

Obama’s negotiating pattern seems to start lower than the outcome desired by the environmental community and then go lower still during negotiations.

Boosting the standard to 56.2 mpg would raise the average price for a car by about $2,200, but would save car buyers  $5,500 – $7,000 in fuel costs and would significantly reduce emissions and oil consumption.

Until now, the position of the major automakers expressed through their lobbying group, the Alliance of Automobile Manufacturers, has repeated their tired old line – that raising mpg will cripple them financially and cost the US jobs. It’s the same argument they used to prevent raising standards from 27 mpg for over 20 years, and the same one used to oppose seatbelts and airbags.

They’ve been running radio ads against standards that would negatively impact the industry, criticizing the 60 mpg proposal.

But now, there’s a pleasant surprise. GM’s North American President, Mark Reuss says rather than fighting for lower standards, his company can find a way to achieve 56.2 mpg. Ford and Chrysler have yet to comment.

According to recent reports from the Associated Press and Automotive News, Reuss conceded that many easy, less-costly solutions are under way or have already been found, such as switching to smaller engines and developing more fuel-efficient transmissions.

“When you put those things in for the first time, they may be more expensive,” he says. “But this is a volume and scale industry. What was very expensive in the past is no longer very expensive.”

Reuss’ comments reflect a move in the industry to gain fuel economy through more efficient conventional cars, and car buyers are responding positively to them. They are buying fuel efficient conventional cars, some of which already achieve about 40 mpg, rather than more expensive hybrids and electric vehicles.

While nearly all major automakers worldwide are moving forward with a mix of hybrids, plug-ins and electric vehicles, the short- to mid-term market will be dominated by highly efficient internal combustion vehicles.

Hybrid sales peaked in July 2009 at 3.6% of the US market, according to Edmunds.com. Last month the market share was down to 1.6% even with high gas prices.

Sales of Hyundai Elantra, Ford Focus and Chevrolet Cruze are strong, but hybrid sales have stagnated. It’s easy to see why – conventional Elantras and some Focus, Cruze and Honda Civic models get 40 mpg or more on the highway, close to what their hybrids get. The Ford Fusion hybrid gets 36/41 mpg (city/highway) and the Hyundai Sonata hybrid gets 35/40, for example. The Toyota Prius still tops the group by far at 50 mpg average city/highway.

In 2010, Hyundai topped the 2010 model-year list for best fleetwide fuel economy – 25.9 miles per gallon, barely beating out Honda – at 25.6 mpg according to the U.S. EPA. Chrysler’s average mileage was the worst at 19.2 mpg. Toyota, Mazda and Daimler all had fuel economy declines from 2009.

Last year, Hyandai announced it would voluntarily target 50 mpg by 2025.

In an online interview with Automotive News, Mark Reuss said of GM’s turnaround on meeting higher standards: “The challenge for us as automakers and engineers is to dig in and support things that enable clean air and fuel economy and unleveraging ourselves from foreign oil. I think those are all the things everybody are concerned about and that’s the task.

Will the other companies step up to the plate and not force the administration to negotiate down?

In a blog post, nonprofit Natural Resource Defense Council (NRDC) takes the automaker lobbyists to task over their claim that doubling fuel efficiency over the next 14 years will make cars unaffordable and toss workers out of jobs.

Automakers have the technology and the know-how to meet strong fuel economy standards, despite their protests to the media and the White House.  Meeting strong standards does not require any breakthroughs in new technologies and only modest amounts of electric vehicles.

The auto industry has a four decades long, well documented and not-so-proud history of exaggerating cost claims by 2 to 10 times. Their latest 3 times higher costs claims ring hollow when compared to latest peer-reviewed cost analysis of what can be achieved by 2025.

Meanwhile, 15 governors, all Republican except one Democart, warned the Obama administration that “overreaching” vehicle fuel economy standards will impose major burdens on consumers’ pocketbooks and could harm the auto industry.

Who are they? Govs. Rick Snyder (R-MI), Robert Bentley (R-AL), Butch Otter (R-ID), Mitch Daniels (R-IN), Terry Branstad (R-IA), Sam Brownback (R-KS), Paul LePage (R-ME), Haley Barbour (R-MS), Brian Sandoval (R-NV), John Kasich (R-OH), Nikki Haley (R-SC), Bill Haslam (R-TN), Gary Herbert (R-UT) and Robert McDonnell (R-VA), and the lone Democrat, Steve Beshear (D-KY).