by Laura Mckler, August 23, 2005
Federal officials plan to propose new fuel-economy standards today for SUVs, minivans and pickup trucks that are expected to force auto makers to modestly improve gas mileage on some of America’s most popular vehicles.
The change in fuel-economy rules has been widely anticipated, but details have been scarce. Industry and environmental officials yesterday said they expect the new proposal to moderately boost the standard that auto makers will have to meet in coming years. Environmental lobbyists said they believe the target would be raised by about 1.5 miles per gallon over three years, beginning with the 2008 model year. The average target is currently set to rise to 22.2 mpg for the 2007 model year.
Environmentalists already are criticizing the proposal. Eric Haxthausen, an economist with Environmental Defense, said it is “woefully inadequate.”
More fundamentally, the administration is proposing a major change in the method of calculating compliance. The current system averages the fuel economy of a manufacturer’s entire light-truck fleet, with the most efficient, smallest sport-utility vehicles and minivans countering big SUVs and pickups that get lower mileage. The new rules are expected to divide trucks into a half-dozen categories based on size, with the smallest vehicles forced to get better mileage than larger ones.
Comparable rules for passenger cars aren’t under consideration.
Together the changes represent the most significant change to the Corporate Average Fuel Economy program since standards were adopted three decades ago. For auto makers and their union workers, the exact terms of the new standards could pose a significant change to the economics of selling and producing light trucks.
Under the current rules, Ford Motor Co., General Motors Corp. and some others essentially subsidize prices of small pickup trucks and SUVs to encourage consumers to buy them. Industry officials say the change in the rules, depending on the details, also could remove current impediments to shifting production of some smaller, fuel-efficient trucks to low-wage economies such as Thailand.
Industry and other officials tracking this issue expect the truck standard will continue to cover crossover vehicles that most people think of as cars, like Chrysler’s PT Cruiser or Dodge Magnum. A loose definition has allowed manufacturers to classify these vehicles as light trucks and therefore be subject to a less stringent mileage standard.
Even so, many if not most of them will fall into the smallest size class and therefore be subjected to a higher mileage standard anyway, officials explained. “If you go to an attribute-based system, the issue of whether it’s a car or a truck becomes somewhat less important,” said one industry official.
On the other end of the size spectrum, federal officials have been debating whether to include the biggest SUVs, such as the Hummer H2, in the rules. As it is, vehicles topping 8,500 pounds are exempt altogether from fuel-economy standards, written at a time when no one imagined that such monster vehicles would be used by everyday drivers. Officials are expected to seek comments on this issue.
One question is whether the new structure will give companies that exceed the standard for one size class credits that can be applied if they fall short in another. Industry officials expect and hope for some sort of “credit trading.”
The proposed regulation is to be unveiled today in Atlanta and Los Angeles by Transportation Secretary Norman Mineta and Jeffrey Runge, the outgoing administrator of the National Highway Traffic Safety Administration.
The proposal will be open to comments and subsequent revisions. A final rule must be published by April 1, 2006 if it is to apply to the 2008 model year.
For years, Congress barred any change to the CAFE program, but that prohibition was lifted for light trucks after President Bush took office. The administration then began slowly increasing the truck standard, which will be 22.2 mpg for the 2007 model year, rising slowly from 20.7 mpg in 2004. New passenger cars must average 27.5 mpg.
Ford, GM and, to a lesser extent, DaimlerChrysler AG meet this standard each year only because of a provision that gives them credit for producing alternative-fuel vehicles, even though most of them never actually operate using alternative fuels.
Auto makers will have the option to stick with the current system during a transition period expected to last about three years.
The new rules seemed likely to help GM and Ford. The fleet-wide average now in place punishes companies that rely heavily on sales of the biggest pickup trucks and SUVs, a category that Ford and GM dominate.
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