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Car Makers Ignore Trumps Advice To Lower Fuel-Efficiency Standards (#GotBitcoin?)

Impasse between White House, California has auto makers scrambling for an alternative. Car Makers Ignore Trumps Advice To Lower Fuel-Efficiency Standards (#GotBitcoin?)

Major car makers are caught in the crossfire between the Trump administration and California over U.S. tailpipe-emissions rules, leading them down different paths in how to respond to the standoff.

The White House last year proposed easing the Obama-era fuel economy standards, freezing them at 2020 levels, or around 37 miles a gallon, through 2026. The move came after car companies had pressed for years for more flexibility on the existing rules, which were agreed to in 2012 and call for increases in fuel economy annually through mid-decade to an average of about 50 miles a gallon.

Car industry executives have argued the current fuel-economy requirements are too strict and don’t take into account the shift in consumer preference to larger, less-fuel efficient trucks and sport-utility vehicles. When President Trump came into office, they raised the issue in a White House meeting the week after his inauguration.

But the rollback being pushed by the administration is so extensive that car companies are worried it will set off a protracted legal battle with California—the nation’s most populous state and the biggest auto market—and ultimately conclude with manufacturers having to meet two different sets of requirements for selling cars in the U.S. Auto makers have warned the continuing tussle could hamper planning.

In a tweet Wednesday, Mr. Trump defended his plan, saying it would lower the average price of a car by $3,000 and have little impact on the environment.

Earlier this summer, four car makers— Ford Motor Co. , Volkswagen AG , Honda Motor Co. and BMW AG —splintered from the rest of the industry, striking a side deal with California to meet new standards that are tougher than the Trump administration’s proposal but less stringent than the Obama-era ones. For decades, California has had the legal authority to set its own requirements. Thirteen states now follow California’s rules, a number that has grown over time.

The car companies reasoned that even if the White House prevails in freezing the targets they could still be stuck with paying the added cost of building cars to meet California’s stricter standards, say people familiar with their thinking. California has sued the Trump administration trying to block its efforts and a legal battle could take years to resolve, prolonging uncertainty about the rules.

But other auto makers have been reluctant to join the California pact, preferring instead to wait for a final rule, which is expected to be made public later this year. Some foreign-based car manufacturers are also worried a public stance against the rollback would only embolden Mr. Trump to carry out his threat to impose tariffs on imported cars, according to one person close to the fuel-economy discussions.

General Motors Co. , meanwhile, doesn’t think the California proposal gives enough credit for sales of fully electric vehicles, an area where it is investing heavily, people familiar with GM’s thinking say. The Detroit auto maker is pushing for rules to require car companies to sell battery-powered cars across all 50 states.

Such a divergence is unusual for the auto industry, which has been mostly aligned on fuel economy in the past, say industry executives, former regulators and analysts.

“We tend to think of the industry as monolithic,” said Brett Smith, a director at the Ann Arbor, Mich.-based Center for Automotive Research. “But it is increasingly very different companies with very different goals.”

The administration views the regulatory rollback as a way to help car makers lower costs and adjust to the shifting demand for bigger vehicles. It also wants to revoke California’s federal waiver to set its own emissions standards.

California has already filed a lawsuit to prevent the White House from moving forward with its efforts and threatened more legal action if the existing rules are changed.

A U.S. Transportation Department spokesman said any car company that wants to exceed the proposed standards is free to do so if they can find enough buyers. “But California does not have the legal authority to, and should not, push the U.S. auto market to electric cars to serve its own political agenda,” he said.

A spokesman for California Gov. Gavin Newsom said in an email that California’s agenda is to clean up the air, fight climate change and protect the health of children.

The rift has left auto makers in the middle but with differing agendas. Some car companies have already made large investments in electric vehicles, putting them in a better position to comply with the existing standards, while others are more dependent on trucks and SUVs for the bulk of their sales, making those targets harder to reach.

“No two car companies are totally aligned,” said Mandy Gunasekara, a former Environmental Protection Agency official who had worked on the proposed rollback and left the administration this year.

Ford, Honda, BMW and VW had hoped for a truce between the administration and California. This spring, the companies and 13 other auto makers signed a letter urging Mr. Trump to personally find a compromise with California.

That letter was “summarily dismissed” by the administration, said an executive for one auto maker. The four car companies—representing about 30% of all U.S. vehicle sales—then forged their own agreement with California, working behind the scenes for more than a month and willing to risk political backlash from the White House, say people involved with the effort.

The voluntary pact with California was signed in July.

“In this case, deregulation doesn’t produce lower costs. It produces higher costs,” this executive said.

Since then, no other car company has publicly revealed plans to join the California deal.

Auto makers, such as Fiat Chrysler Automobiles NV and Kia Motors Corp. , say they want one set of federal standards on fuel economy but declined to comment further.

GM has proposed its own plan to revise the Obama-era regulations, backing a proposal to increase fuel economy by about 1% annually through mid-decade, short of the 3.7% under the California agreement. The largest U.S. auto maker by sales is also pushing for federal rules requiring car companies to sell a minimum number of electric vehicles across all 50 states.

Mark Reuss, GM’s president, said last fall a federal program for requiring electric cars would foster a market for these vehicles and help manufacturers better plan for the future.

“We’re making bets now on a lot of uncertainty, which is highly destructive to capital,” he said.

Updated: 9-19-2019

Trump Administration Takes Step Toward Loosening Vehicle Emissions Standard

Move marks another step in easing requirements set under the Obama administration.

The Trump administration took a step toward loosening emissions rules for vehicles sold in the U.S. by moving to strip California’s ability to set its own tougher requirements, which officials said will give drivers access to cheaper, safer cars.

Officials from the Environmental Protection Agency and the Transportation Department said Thursday they issued a final action on a rule that will unify the country’s fuel-economy and greenhouse-gas-emissions standards. The announcement, which had been previewed by President Trump and other officials earlier in the week, marks another step in easing requirements set under the Obama administration in 2012.

The actions ensure that “no state has the authority to opt out of the nation’s rules, and no state has the right to impose its policies on the rest of the country,” said Secretary of Transportation Elaine Chao.

Critics say the administration’s moves will hurt air quality and the fight against climate change.

“You created chaos here because the auto makers are not going to know what to do,” said Rep. Zoe Lofgren (D., Calif.) at a hearing on Capitol Hill following the announcement. “This is going to be tied up in court for the foreseeable future.”

EPA Administrator Andrew Wheeler said that the action will provide certainty for auto makers as they prepare to comply with stronger standards designed to cut air pollution.

“Most auto makers can’t comply with the trajectory of the current standards,” Mr. Wheeler said at a press conference Thursday morning.

In the press conference, Ms. Chao called the standards set by the Obama administration “unattainable” and said they made the price of new cars unaffordable for some families. “The rule will not force auto makers to spend billions of dollars developing cars that consumers do not want to buy or drive,” she said.

California has long had the authority to set its own rules on limiting air pollutants from cars, but the Trump administration believes such requirements should be set by the federal government. California has already taken legal action to block the White House’s efforts to take away its waiver to set its own standards, and top state officials threatened more lawsuits on Wednesday.

Federal officials said they are still working on additional rules that will give auto makers the full scope of requirements and expect to release those details later this year.

Rescinding the California waiver would fulfill a longstanding goal of the administration to curb California’s influence over the car industry with its ability to set more stringent emissions rules than federal mandates. In July, four car companies— Ford Motor Co. , Honda Motor Co. , Volkswagen AG and BMW AG —signed an agreement with California to meet tougher emission requirements than those proposed by the Trump administration.

In previewing the planned action, Mr. Trump tweeted Wednesday: “Auto makers should seize this opportunity because without this alternative to California, you will be out of business.”

Led by California, States Sue EPA Over Tailpipe-Emissions Dispute

Move comes a day after the Trump administration announced new regulations to strip away California’s authority.

California, joined by 22 other states and the District of Columbia, sued the Trump administration Friday in a bid to preserve the state’s power to set tougher vehicle-emissions standards for the country’s auto industry.

California Attorney General Xavier Becerra filed the lawsuit in a Washington, D.C., federal court the day after officials from the Transportation Department and the Environmental Protection Agency announced new regulations to strip away California’s authority.

“California has been regulating vehicle emissions since 1959. Its authority to do so has been repeatedly recognized, reaffirmed, and even expanded by Congress,” the states said in the lawsuit. The new Trump administration effort “flies in the face of this history,” the states said.

California’s authority to set its own greenhouse gas emissions standard exists in the form of a waiver to the Clean Air Act. Thirteen other states follow California’s rules—representing roughly one-third of overall U.S. auto sales last year—giving California’s air regulators wide power over national standards.

Federal regulators are working on their own tailpipe-emission rules that could ease requirements set under the Obama administration in 2012. Their efforts, they said, would give drivers access to cheaper, safer cars while providing certainty to auto manufacturers as they engineer future models of cars that comply with anti-air-pollution rules.

The administration’s moves against California, critics say, will hurt air quality and the fight against climate change.

California’s rules got some industry support earlier this year. In July, four car companies— Ford Motor Co. , Honda Motor Co. , Volkswagen AG and BMW AG —voluntarily signed an agreement with California to meet tougher emission requirements than those proposed by the Trump administration. The companies said the agreement is intended to show support for a single, nationwide vehicle-emissions standard.

Specifically, the auto makers agreed to improve average fuel efficiency by 3.7% annually from model years 2022 to 2026. They would get some credit toward that goal for selling electric vehicles.

Updated: 10-31-2019

White House Backing Off Proposed Fuel-Efficiency Freeze

Trump administration plans for annual efficiency increases of 1.5%; rule likely to come by year’s end.

The Trump administration is backing away from a plan to freeze tailpipe-emissions targets for new vehicles through 2025, say people familiar with the process.

The administration is now considering requiring a 1.5% annual increase in fleetwide fuel efficiency, using an industry measure that takes both gas mileage and emissions reductions into account, the people said. The target moves the number closer to the Obama-era rules calling for 5% gains but still provides auto makers with significant relief and would allow cars to emit more pollution.

The new final number for annual increases could change, as the rules remain under review, one of these people said. In addition, the administration’s number is expected to be challenged in court by California and other states, which favor tougher regulations.

President Trump has been trying for years to soften a set of stringent targets to reduce greenhouse gas emissions first agreed to in 2012 by the Obama administration, California and much of the automobile industry. The move to 1.5%—expected to be announced by year’s end—comes after intense industry lobbying, which opposed the Trump administration’s original plan to freeze targets at 2019 levels, around 37 miles a gallon.

The process has cleaved an auto industry traditionally united on emissions policy, with some companies siding with California and some with the White House over who should set the standards and what they should be.

California’s Air Resources Board said that a 1.5% annual increase wouldn’t be enough for the state to meet federal air quality standards.

A coalition of companies including General Motors Co. , Toyota Motor Corp. and Fiat Chrysler Automobiles NV filed Monday to intervene in a lawsuit over the standards, lending support to the Trump administration’s argument that the federal government set emissions targets. In July, Ford Motor Co. , Honda Motor Co. , Volkswagen AG and BMW AG agreed to recognize California’s authority to set its own targets, which would be more stringent than those proposed by the federal government and are followed by 13 other states.

“The Trump Administration is focusing on finalizing [its] rule which will deliver one national standard to the American auto market,” Environmental Protection Agency spokesman Michael Abboud said in response to questions.

The agency’s administrator, Andrew Wheeler, hinted last week in Detroit that the final rule would be more restrictive than the proposed freeze, in part because of industry feedback, but declined to provide details. He said the agency expects to publish the new requirements by year’s end and hoped they will appease both auto makers and California.

“I’m, again, the eternal optimist: Once everybody sees our final CAFE regulation, everybody will see that it makes sense and maybe we won’t have litigation on that part of it,” Mr. Wheeler said, referencing the acronym used for federal fuel efficiency standards.

A regulation satisfying all parties seems unlikely considering the long and contentious rule-making process so far. The administration first proposed freezing the Obama standards at their current levels in August 2018, triggering fears in the industry of disrupted product planning and prolonged uncertainty pending rulings by the courts.

Those anxieties pushed Ford, Honda, BMW and Volkswagen to strike their deals with California, people familiar with those companies’ thinking said. The move angered the White House, and the Justice Department has opened an investigation into whether the four companies violated antitrust statutes in negotiating with California.

In September, the administration moved to revoke California’s ability to set its own standard under a federal waiver granted through the Clean Air Act.

But the emissions targets themselves have been delayed, as the data analysis supporting the rule change has been redone, according to people briefed on the process.

The administration initially justified freezing the standards by arguing that improvements in technology have made new cars safer and that any emissions improvements would raise the prices of new cars. According to the analysis, people would consequently keep their older cars on the road longer, leading to increased deaths and injuries from crashes.

The initial analysis showed that the most social and cost benefit would come from eliminating the emissions-target increases entirely, a former EPA official involved in that effort said.

Opponents of the proposal have focused much of their criticism on the assumptions and data underpinning the administration’s analysis.

Since then, changes have been made in the modeling of the data that show room for an increase in the efficiency targets, people briefed on the matter said.

“It’s not as cut and dry anymore,” the former EPA official said.

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