Dealers Lobby for Looser CAFE Rules Amid Fresh Industry Criticism

On the same day that a Washington-based consumer group declares Detroit auto makers stuck in neutral on fuel-efficiency improvements, a number of prominent dealers fan out across the nation’s capitol to drum up support for looser corporate average fuel economy (CAFE) requirements.

The Senate approved late last month a comprehensive energy bill that would raise the current CAFE requirement to 35 mpg (6.7 L/100 km) from the current 25 mpg (9.4 L/100 km) standard by 2020.

Although the House recently withdrew fuel standards from its energy legislation to essentially postpone the debate until this fall, the National Auto Dealers Assn. (NADA) warns that Democratic leaders who favor a higher CAFE could raise the issue as early as next week.

So the group sent key members to Washington July 17 to promote fresh legislation that would amend the House energy bill to include a requirement that calls for auto makers to raise CAFE to between 32 mpg (7.4 L/100 km) and 35 mpg (6.7 L/100 km) by the ‘22 model year.

Auto makers, dealers and the United Auto Workers union consider the Senate’s 35-mpg CAFE requirement unrealistic and say it fails to take into account consumer demand and marketplace realities.

David Kelleher, who owns two Chrysler-Dodge dealerships in suburban Philadelphia, says lawmakers lack a full understanding of what the proposal could do to the industry.

“They hear 35 mpg and that it can be done and think it’s great, but they don’t look at the details,” says Kelleher, who was in Washington to meet with lawmakers for the second time in less than four weeks.

Kelleher says he told lawmakers a 35-mpg standard would force auto makers to adopt alternative powertrain technologies sooner than they should and that the extra expense would get passed on to the consumer.

“What we’re saying is forget about the (vehicle) manufacturers and the promises they might have made 20 years ago,” says Kelleher, whose business leans heavily to pickups, minivans and SUVs. “If you raise the price of a vehicle by $6,000 or $7,000, a lot of people are going to lose their jobs.”

The newly introduced amendment to the House energy bill favored by Kelleher and other dealers, and sponsored by Rep. Baron P. Hill (D-IN) and Rep. Lee Terry (R-NE), would assign specific CAFE standards to different classes of vehicles, such as cars, trucks and SUVs.

NADA says such a consideration would preserve the diversity of vehicles consumers demand.

“The measure not only gives auto makers enough lead time to develop the technology needed to meet the new standards but balances fuel-economy increases with vehicle diversity, safety concerns and affordability,” NADA says in a statement.

At the same time, however, the Consumer Federation of America (CFA) releases a new study that says Detroit’s Big Three auto makers have failed to improve fuel economy in response to rising gas prices in recent years.

Founded in 1968, the consumer advocacy group’s membership counts about 300 non-profit organizations, including Consumers Union, which publishes Consumers Reports magazine and website. The group tends to represent the interests mostly of less affluent Americans and gained special notoriety in 2002 for its push to ban the use of all-terrain vehicles for riders under the age of 16.

The CFA contends General Motors Corp., Ford Motor Co. and Chrysler Group decreased this model year the number of fuel-efficient vehicles they sell, despite promises in 2001 to make improvements and general sales gains over that period.

According to the CFA report, while the average price for a gallon of gasoline rose to $2.72 in 2007 from $1.12 in 1998, the number of vehicle models achieving at least 30 mpg fell to 46 from 61. The number of models getting less than 30 mpg over that same period grew to 1,083 from 745.

Combined average fuel economy in the period rose less than 1 mpg (0.43 L/100 km) to 24.4 mpg (9.3 L/100 km) from 24.6 mpg (9.6 L/100 km), the report says.

Consumer concern over gas prices, meanwhile, has skyrocketed to 91% of all households earning between $25,000-$35,000 annually, according to a study of 1,000 randomly selected adults by the CFA and poll-taker Opinion Research Corp.

Furthermore, the survey shows, 88% of Americans now believe lawmakers should require auto makers to build more fuel-efficient vehicles.

“U.S. auto makers can no longer defend their lack of fuel economy progress by (claiming) they just give consumers what they want,” a CFA spokesman says in a statement issued Tuesday.

“Unfortunately, forcing the U.S. car companies to improve their fuel economy through legislation has become critical to ensuring their future success and protecting the jobs of millions of U.S. workers.”

As such, the CFA favors legislation introduced in March by Rep. Edward J. Markey (D-MA) and Rep. Todd Russell Platts (R-PA) that calls for 35 mpg by 2017, a standard backed by other environmental groups such as the Sierra Club.

Kelleher, however, says it’s a mistake to think that many consumers favor stricter fuel-economy requirements.

“Unlike a lot of guys who own dealerships, I still work the sales floor and I can tell you that fuel economy is No.10 on the list (of consumer concerns),” he says.

“(Buying a car is) about vanity, comfort, convenience and utility. They’ll complain about fuel prices, but they won’t blame their vehicle. They’ll blame the people making the gasoline.”