Automotive News - June 30, 2008 - (Page 14)

14 • JUNE 30, 2008 Need is great, but energy policy lacking U.S. plods along despite increases in gasoline, CAFE Rob Liberatore For 30 years, three public policy issues have dominated auto industry debate: trade, health care and energy. Trade wars of old are over as international companies have become part of the American political landscape with their investments in the United States. Last year’s negotiations with the UAW addressed important elements of the health care issue. But energy policy remains a central challenge to the industry and to American society. America is schizophrenic on energy. We want plentiful, cheap energy, but we don’t want to harm the environment to produce it or use nuclear power. We want conservation, but we won’t tax the fuels that we want to conserve. Instead, we want manufacturers to control the mix of vehicles that people want to buy. Thus, we adopted a 35-mpg fleet average bill that should have settled the issue for a while. The auto industry is reeling from having misread the price of fuel and the change in consumer demand. Government must send clear fuel pricing signals for the future so the industry can make the right bets on product with its ever more limited resources. To do that, the next administration must generate the political will to strike a comprehensive energy deal on all fronts: production, conservation and alternatives. Undoubtedly, there will be calls for ratcheting up the 35 mpg number for combined car and truck fleets, and presidential candidates Barack Obama and John McCain promise an aggressive climate-change cap and trade system that could affect the industry on the manufacturing side and possibly the product side. But the big open question remains whether we will regulate fuel economy at the federal level, or let California dictate the standards for about the half of the market that has opted for California standards. The Bush administration tried to answer that question, saying a strong federal standard made more sense than a patchwork approach or one driven by one state. That is a battle in real motivation to conserve fuel. Dramatic consumer shifts in the 1970s virtually bankrupted Chrysler Corp., leading to the federal loan guarantee. But in the mid-1980s after the price of gasoline returned to $1 a gallon, Chrysler was left with a fleet of four-cylinder K-car derivatives as the public moved back to larger, more powerful vehicles. The automaker almost went bankrupt again in the early 1990s waiting for a new lineup of vehicles (Jeep Grand Cherokee, Ram pickup, LH cars, etc.) that made it the most profitable auto company in the world by the mid-1990s. EDITORIAL STAFF 313-446-0361 E-mail autonews@crain.com Web site www.autonews.com Keith E. Crain Publisher and Editor-in-Chief Peter Brown Associate Publisher and Editorial Director DETROIT 313-446-0361 Fax: 313-446-0383 1155 Gratiot Ave. Detroit, MI 48207-2997 David Sedgwick Editor dsedgwick@crain.com Edward Lapham Executive Editor elapham@crain.com Richard Johnson Managing Editor rjohnson@crain.com John K. Teahen Jr. Senior Editor Mary Beth Vander Schaaf Deputy Managing Editor Charles Child International Editor David Kushma Retail Editor Dave Guilford News Editor Philip Nussel Special Projects Editor James B. Treece Industry Editor Jesse Snyder Senior Writer Karen Faust O’Rourke Insight Editor COPY EDITORS: Bob Allen, Tom Fetters, Patricia C. Foley, Kenn Jones, Gregory Skwira Susan Zavela Bamford/Graphics Editor Rick Kranz/Product Editor REPORTERS: Leslie J. 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And we must worry about whether the price of fuel will collapse again and whether there should be a “contingent fuel tax” that would be applied if fuel prices fall below a certain level. We have yet to see the massive conservation that $4-a-gallon gasoline will bring, so the concern about collapsing prices is not fanciful. But given our history with energy policy, it is hard to imagine that we will do something that rational but politically difficult. The CAFE law is irrelevant with gasoline at $4 a gallon. Consumers will take the industry to 35 mpg without the automakers having to perform unnatural acts to sell vehicles that people don’t want. In fact, intelligent people in the industry have never said we can’t do 35 mpg. We do it. It’s done in Europe, and largely the same automakers operate there as in the United States. And they make money there because people demand small, fuel-efficient (50 percent of the passenger fleet is diesel) vehicles, and they are willing to pay a premium for fuel efficiency because gasoline costs $7 or $8 a gallon. When gasoline is cheaper than bottled water, as it has been for so long in the United States, forcing highmileage standards on manufacturers meets much resistance. Tell me what happens to gasoline prices, and I’ll tell you whether, like trade and health care, the CAFE debate gets overtaken by events. ISTOCKPHOTO Government must send clear fuel pricing signals so the auto industry can make the right bets on product with its ever more limited resources. comment Rob Liberatore is a senior trans-Atlantic fellow of the German Marshall Fund of the United States. He formerly was head of external affairs and public policy for Chrysler and DaimlerChrysler. which all participants in the industry, especially the auto dealers and manufacturers, have a big stake. corporate average fuel economy, or CAFE, program. The big improvements in mpg did not come principally from the CAFE program, though, but from consumers following their economic interest and buying more fuel-efficient vehicles. Similarly, the multiple mpg increases in the fleet that are inevitable during the next couple of years will have nothing to do with the new CAFE rules but, rather, the power of the marketplace, when consumers have a Gyrations of Chrysler The price of gasoline, $4-plus a gallon, now exceeds the 1970s prices that stood the industry on its head, started the shift from large vehicles to small and launched imported cars in the United States in a meaningful way. Ironically, the first oil shock, in 1973, resulted in the creation of the continued from Page 12 Hummer now; its time has passed” was a shining example (June 16). Hummer continues to be an iconic brand loved by a lot of consumers — and that’s OK. We live in America, where people should have the freedom to drive what they want, when they want and for whatever they’re willing to pay and not get guilt-tripped by an army of treehuggers and biased media pundits. While you were burning incense at the imports’ altar, you must have missed the memo on mpg and energy-cost comparisons for the Hummer H3 and many of its environmentally friendly, non“neomilitaristic”competitors. The value of owning a Hummer is its ability to embrace the American landscape and lifestyle. As to its four-wheel-drive capabilities, it continues to be like nothing else in the marketplace. General Motors will have to decide just how important that is to its portfolio, but most Hummer dealers have invested as much passion as money in this incredible vehicle. Hummer is not just a victim of $4- a-gallon gasoline. It has become the poster child of the global-warming gang, who are intent on controlling freedoms and resources. DENNY FitzPATRICK President FitzPatrick Hummer Concord, Calif. A hybrid Hummer? It can’t be done To the Editor: With their sales battered by rising fuel costs, Hummer dealers are clamoring for a hybrid Hummer (“Hummer Bummer: A death sentence?” June 9). A hybrid Hummer? Isn’t that a contradiction in terms? The whole idea of the Hummer in the first place was, in that delightful phrase, conspicuous waste. If General Motors comes across with a hybrid Hummer, I’m putting in for a fat-free pizza and an inexpensive Rolex. PAUL BLUMBERG Bloomington, Ill. The writer is professor of sociology emeritus at City University of New York. http://www.autonews.com http://www.autonews.com

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