Auto Dealers Tepid Over Higher CAFE Standards

DETROIT – If fuel economy standards rise to the level proposed in a comprehensive energy bill currently before lawmakers in Washington, David Kelleher says his business and its 150 employees will not survive.

“It will alter our market and crack us,” says Kelleher, who owns two Chrysler and Dodge dealerships in suburban Philadelphia.

Lawmakers in the Senate already have begun debate over the bill, which includes an increase in corporate average fuel economy (CAFE) to 35 mpg (6.7 L/100 km) for cars and trucks, combined, by model year 2020. Light trucks today must achieve 24 mpg (9.8 L/100 km) by 2011, while cars have been required to average 27.5 mpg (8.5 L/100 km)for the last 17 years.

Auto makers and their dealers consider the increase unrealistic and say it fails to take into account consumer demand and marketplace realities. A compromise from senators Carl Levin (D-MI) and Debbie Stabenow (D-MI) would provide separate standards for cars and trucks, with the former getting 36 mpg (6.5 L/100 km) by 2022 and the latter achieving 30 mpg (7.8 L/100 km) by 2025.

A spokeswoman for Levin’s office says the senator soon will introduce the compromise and that the Senate could take it up for consideration as early as today.

Late Tuesday, however, Rep. John Dingell (D-MI) pulled all CAFE proposals from the energy legislation he planned to put before the House after they met strong opposition from Democrats.

Dingell says in a statement he will revisit the CAFE issue in the fall when the House considers comprehensive climate-change legislation.

Dealer opposition to higher CAFE standards tempered in markets where consumers prefer small cars.

That gives both sides more time to gear up for the debate but still leaves legislation before the Senate, which could spell trouble for dealers such as Kelleher.

“At least break out the cars and trucks,” says Kelleher, whose business leans heavily to pickups, minivans and SUVs.

The dealer joined other industry groups June 19 on Capitol Hill to lobby against the Senate bill because consumers won’t buy the sort of vehicles auto makers must make to meet standards they’re looking at now.

“We’re not going to change consumer sentiment,” Kelleher says, calling SUVs “still the most dynamic business line” in the industry.

“In fact, some of my customers have traded in for vehicles with better fuel economy only to turn around and trade them back in, because the sacrifice in comfort and convenience wasn’t worth it.”

The energy bill also calls for medium- and heavy-duty trucks to achieve 4% annual improvements in fuel economy between 2011 and 2020. Auto makers and dealers call that standard unworkable and unreasonable, as well.

Bismark Colombiet, a sales manager at Blake Chevrolet-Cadillac in Homestead, FL, thinks higher fuel standards could affect his business, given that he sells “50 trucks to every car.”

“If you look 25 or 30 miles (40-48 km) in any direction here, they’re mostly selling trucks, too,” Colombiet says.

That doesn’t mean his customers aren’t concerned about the high price of gasoline, which has spent several months at or above $3 per gallon in most of the country. But instead of shopping more fuel-efficient models, customers look more closely at vehicle prices, he says.

Besides, customers in Colombiet’s rural market don’t have a choice. “They can’t do with a Chevy Cobalt (small car) what they can do with a Silverado (light-duty pickup) or a Kodiak (medium-duty pickup),” he says.

The thought of selling smaller vehicles with more modest power doesn’t necessarily bother Gabriel Piceno, sales manager at Clippinger Chrysler-Jeep-Dodge in West Covina, CA.

“We don’t get a lot of customers looking for the big trucks with the big engines,” he says, perhaps suggesting fuel-economy standards as a regional, rather than national debate.

“Our customers want 4-cyls.; 6-cyls.; the Chrysler PT Cruiser; the Dodge Caliber; the Jeep Patriot. And our one V-8 comes in the Chrysler 300, which comes with two other engine choices.”

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