GM’s Move to Shelve RWD Cars Signals Industry Sea Change

Commentary

General Motors’ recent decision to hit the pause button on development of its upcoming rear-wheel-drive cars marks the first strong reaction by the U.S. auto industry to coming fuel-economy mandates and greenhouse emissions curbs.

While this may be a bit of saber rattling, the decision to postpone its RWD program is no small move for the world’s biggest auto maker.

At risk are a rear-drive Impala sedan, fullsize Buick, compact Cadillac and high-powered Solstice and Sky roadsters. Pontiac says its new RWD G8 car coming from Australia is safe.

Another important RWD car in the works is the Chevy Camaro sports coupe due late in 2008, which GM says is still a “Go.” Both the new Impala, due in 2009, and Camaro coupe are expected to be big sellers and major profit contributors to GM.

However, says GM Vice Chairman Bob Lutz in an interview at the recent New York auto show: “If we have to devote our resources to meeting fuel economy mandates that demand we get 30% better mileage, we can’t devote them to future rear-drive products that we don’t know how to get 30% better mileage from.”

GM made its call following the Bush administration’s recently proposed plan to raise corporate average fuel economy standards 4% per year from the current 27.5 mpg (8.5 L/100 km) requirement today. Other proposals in Congress would put CAFE requirements at 34 mpg (6.9 L/100 km) by 2016.

It also is a reaction to the U.S. Supreme Court’s recent ruling that the Environmental Protection Agency has the power to regulate vehicle carbon dioxide emissions – considered the main culprit in global-warming – which also could force higher CAFE requirements.

Some of GM’s planned RWD cars are high-performance models, while others are larger and heavier than existing front-drive cars they would replace – and that’s what is causing the auto maker concern.

Says Lutz, noting his company is freezing its RWD programs while it seeks clarification of the new regulations: “It’s no longer full speed ahead.”

Welcome to the new reality, one that makes TV’s Survivor program pale.

Where once Detroit’s Big Three fought government efforts to regulate fuel economy and tailpipe emissions, today they are said to be seeking an active role in reducing damage vehicles do to the environment. But this is not an altruistic move.

Global warming aside, savvy car companies know they must lead rather than follow as a new political momentum harkens a toughening of federal rules. They also know it’s too late to deny that cars and light trucks generate about one-fifth of U.S. CO2 emissions, produced when fossil fuel is burned.

While CO2 also occurs naturally and climate change is an inevitable global occurrence, scientists say businesses and governments can help slow it down by achieving a more carbon-free planet.

However, automotive is not the only industry to create CO2 emissions, and America is far from the only country at fault.

Fearing tougher fuel-economy rules, Detroit’s car companies are said to favor a cap-and-trade plan that would include all sectors throughout the U.S. economy that produce CO2, thus spreading the pain around.

There are many voices yet to be heard and plenty of fights yet to erupt, and auto makers know any policy inevitably will impose costs.

Perhaps, then, Lutz’s acerbic remarks can be excused in light of the industry’s frustration: “If we legislate CO2 from cars,” he says, “why not legislate (taking) one less breath per minute, since humans release capricious amounts of CO2 each time they exhale?”

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