Detroit Three's CAFE Investment to Outpace Asian Rivals

A Ward's analysis of U.S. Department of Transportation and Environmental Protection Agency data shows Detroit auto makers will invest more in technology to meet the new rules than their Asian rivals.

At the same time, government estimates show Chrysler Group LLC, Ford Motor Co. and General Motors Co. will be asked to meet a weaker fuel economy bogey than Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Toyota Motor Corp.

The government considers the playing field even. It says in an economic impact assessment the new standards are modest enough so they do not have a detrimental effect on the relative competitiveness of various vehicle manufacturers.

Nonetheless, federal records show Chrysler will add an average of $1,329 in technology to every vehicle it sells to meet the 2016 mandate.

Chrysler's per-vehicle cost is $381 over the expected industry average, leads the Big Six auto makers and is second overall to Volkswagen AG at an estimated $1,694 per vehicle.

Honda, currently ranked second in fuel economy by the Environmental Protection Agency, will spend $575 on technology per vehicle and Nissan faces an outlay of $810.

Also, Toyota, Honda and Nissan rank among a handful of auto makers not expected to spend a dime on new technology to meet the new standards when phased-in implementation begins next year.

They are joined in that elite group by Mazda Motor Corp., Kia Motors Corp. and U.S. fleet fuel-efficiency leader Hyundai Motor Co. Ltd.

Those auto makers are expected to make their investments later in the cycle.

Ford will spend $73 per vehicle to get its fleet primed for the first increase in 2011, while Chrysler will invest $33 and GM $31.

But while the new CAFE and emission regulations combine to force auto makers to reach an industry fleet of 34.1 mpg (6.9 L/100 km) by 2016, the federal government bases the standard for each individual manufacturer on its sales mix so auto makers traditionally selling bigger vehicles face a weaker standard.

The government's data does not offer a single fuel-economy target for auto makers, but the numbers suggest Honda could have to hit the highest mark.

Its cars must reach 38.3 mpg (6.1 L/100 km) in 2016 from 30.8 mpg (7.6 L/100 km) next year, while its trucks must improve to 30.4 mpg (7.7 L/100 km) from 25.7 mpg (9.1 L/100 km).

Toyota and Nissan are confronted with similar climbs.

GM faces the most modest increase, with cars targeted at 36.9 mpg (6.4 L/100 km) for 2016 from 30.3 mpg (7.8 L/100 km) in 2011, and trucks reaching 27.2 mpg (8.6 L/100 km) from 23.3 mpg (10.1 L/100 km).

Trucks accounted for 56% of GM's sales in 2009, second to Chrysler at 77%.

Ford's mix last year was 53% trucks. Trucks took up 43% of Toyota's sales and 42% of Honda's.

The industry average in passenger-car fuel economy will move to 37.8 mpg (6.2 L/100 km) from 30.4 mpg (7.7 L/100 km), and truck efficiency will increase to 28.8 mpg (8.2 L/100 km) from 24.4 mpg (9.6 L/100 km). Trucks comprised 49% of industry sales in 2009.

The government believes the increases are “technologically and financially feasible” for the industry, given a consensus among stakeholders, including 14 auto makers, “on desirable and achievable fuel-economy standards” and various federal assistance programs available to meet them.

While the government expects auto makers to pass on the costs of meeting the new standards to consumers in the form of higher sticker prices, it also suggests consumers will be willing to pay more for fewer trips to the pump.