Trump moves to dismantle Obama’s mileage rules
WASHINGTON — When President Barack Obama in 2009 announced a plan to bolster the fuel efficiency of cars to record levels, he stood shoulder to shoulder in the White House Rose Garden with chief executives of the largest automakers.
It was a far different scene at Environmental Protection Agency headquarters on Thursday, when Administrator Andrew Wheeler and Transportation Secretary Elaine Chao formally began to dismantle the program.
Instead of a cadre of CEOs, the automobile industry’s lone envoy was a trade association official who after the event said the group neither opposed nor supported the plan just yet.
The contrasting scenes highlight the awkward position in which carmakers have found themselves in President Donald Trump’s Washington. The industry aggressively lobbied him to ease the Obama rules, yet the plan proposed in August 2018 went beyond what most carmakers actually sought.
No manufacturer has endorsed it so far, and in June, 17 urged the president to secure a single nationwide standard that all could support — including California’s regulators — warning that failure to do so would trigger “an extended period of litigation and instability, which could prove as untenable” as the rules they sought to change in the first place.
The next month four of them defied the administration by negotiating a compromise standard with California.
Chao and Wheeler on Thursday all but guaranteed the instability the industry feared by revoking California’s authority to regulate tailpipe greenhouse gas emissions. California and other states are expected sue to block the move, leaving automakers facing uncertain requirements as they plan their vehicle lineups. “This is exactly what we were trying to avoid, this uncertainty that is happening now,” Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, said on the sidelines of the event Thursday. “We’re going to have to look at whatever the final rule is and look at the entire package and decide then what our position’s going to be, and different companies may fall in different places.”
That uncertainty comes in an already volatile time for the industry. Carmakers are under pressure from investors to funnel billions into future-oriented technologies including electric and autonomous vehicles. The U.S.-China trade conflict has pinched margins while the threat of punitive new American tariffs on imported autos and parts still looms. Sales in the U.S. market are softening amid signs of broader economic risk. All of that has raised the stakes for the auto industry when it comes to fuel-efficiency planning.
Automakers are “making enormous investments and bets, and those bets determine the outcome of the future of the company,” said Brett Smith, director of propulsion technology and energy infrastructure at the Center for Automotive Research, a nonprofit. “If they’re wrong because a policy changes in six months or two years, that hurts them, and it hurts them massively.”
Carmakers plan their vehicle portfolios several years in advance, so lineups through 2022 model year are largely locked in place, said Gopal Duleep, president of H-D Systems, an industry research firm in Washington. “So really, 2023-2025 is where you might see some differences.”
If the Trump administration prevails on all fronts — weakening national standards and stripping California’s power to set its own — it won’t necessarily be a clear-cut win for the industry. Those locked-in product plans and parts contract already have improved fuel-efficiency baked in, both for vehicles powered by gasoline and electricity.
“If the standards are weakened, then those suppliers who worked on those technologies — be they internal-combustion-engine or electric-vehicle — will find those volumes lessened, so it’s a risk for the suppliers,” said Alan Baum, an independent auto analyst in West Bloomfield, Michigan.
The nightmare outcome of the anticipated litigation is a bifurcated market, in which companies face California’s more stringent standards in more than a dozen states that follow its lead while Trump’s rolled-back standards govern elsewhere.
Some companies may also alter pricing and vehicle incentives to manage diverging standards, said Joshua Linn, a senior fellow at Resources for the Future who’s studied the effects of mileage regulations. For example, plug-in hybrids could be discounted in states that follow California’s standards, such as Maryland, but not in states under federal standards, like Virginia.
“So, you could have an odd scenario where you just go across the border and get a deal,” he said.
Seeking to avert that, Ford Motor Co., Honda Motor Co., BMW AG and Volkswagen AG in July agreed to meet compromise efficiency requirements offered by California even if they are more stringent than what the Trump administration proposes.
The California deal essentially pushes back the Obama-era standards by one year, lowering the pace of annual improvements, and enhances compliance incentives for electric vehicles, among other features. It also includes an agreement by the carmakers to not challenge California’s authority.
In a statement Thursday, Ford said it has “consistently said that the best path forward is a negotiated settlement that offers a workable compromise. We need regulatory certainty, not litigation.”
Hyundai Motor Co. echoed that sentiment. “While there are differences between the various stakeholders, it is our hope that a solution to reduce carbon emissions would provide business certainty, balance consumer choice, and avoid lengthy litigation,” the company said in a statement.
General Motors Co., Fiat Chrysler Automobiles NV, Mercedes-Benz parent Daimler AG and others either declined to comment on the Trump administration’s move or deferred to the Alliance.