BODY: The prospect of $2-a-gallon gasoline this summer -- perhaps $3 by
season's end -- is raising automobile industry fears of a tougher regulatory and
operating environment. Hefty prices at the pump are a double whammy for the
Motor City.
More costly fuel, accompanied by soaring
utility bills and worries over economic weakness, threaten to further dampen the
consumer appetite for new chariots. U.S. vehicle sales fell about 10 percent in
April.
Expensive gasoline also is stirring debate in
Washington over vehicle fuel-efficiency standards. Tighter
federal fuel-efficiency standards could force General Motors,
Ford Motor and DaimlerChrysler -- whose profits now depend on sales of
sport-utility vehicles, minivans and other light-truck variants -- to revamp
their lineups toward smaller models.
Those leaning to
more regulation should reflect on the federal Corporate Average Fuel Economy
standards, first passed in 1977, which turned out to be a prime example of the
Law of Unexpected Consequences. CAFE, as it came to be known, may be the single
most important factor in the growth and popularity of sport utility vehicles.
The public was scared of gasoline shortages and
Washington's response produced results that neither it nor the industry could
have anticipated.
SUVs vs. Dinky Cars
Faced with a mandate to produce more efficient vehicles, automakers in
the early 1980s were forced to shrink the size of their car models to meet the
fuel-efficiency rules.
A small problem developed:
Motorists, no matter how much they profess a desire to save gasoline,
consistently choose larger and more powerful vehicles over smaller
fuel-efficient models. To give drivers what they want (and make a profit and
prosper), automakers developed models based on their pickup truck chassis that
furnished the same creature comforts and performance as large cars -- but
complied with federal law.
What are sport utilities,
after all, except glorified pickup trucks with an extended roof and an extra row
of seats? Detroit has long argued that the CAFE standards aren't truly effective
in reducing the consumption of gasoline.
A better way
to save gasoline, automakers say, is to impose heavier gasoline taxes, as do
European nations. In Europe, gasoline can cost $5 a gallon and more, and the
citizenry accepts vehicles that would be judged dinky by U.S. tastes.
Detroit's concern
But neither
political party wants to take the heat for making gasoline more expensive:
Outside the Beltway and west of the Hudson, people take for granted the
privilege of filling their tanks without assistance from a loan officer.
On Tuesday, a group of senators introduced legislation to
reclassify sport-utility vehicles as cars -- rather than light trucks -- for
fuel efficiency regulatory purposes. Automakers are required by law to maintain
a 27.5 mile-per-gallon average for the car models they sell in the United States
-- and a 20.7 mile-per-gallon average for pickups, minivans and sport utilities.
Shifting larger, heavier sport utilities into the car category could force
expensive redesign, or even cancellation, of some SUVs.
Lobbyists' clout
The new Senate proposal
didn't provoke headlines, nor are many in Washington worried about its passage.
But the political context is important. Detroit is concerned about recent talk
by members of Vice President Cheney's energy task force of where tightening
gasoline fuel-efficiency standards may lead.
The Bush administration wants to expand oil and gas drilling in
disputed areas such as the Arctic National Wildlife Refuge. Thus, some members
of the Cheney task force may see a pragmatic opportunity to tighten CAFE at
least moderately to mollify environmental groups such as the Sierra Club and the
Union of Concerned Scientists, which claims Americans will "spend $22.5 billion
more for gasoline this year than if light trucks were as efficient as cars."
Still, never underestimate the behind-the-scenes clout of
Detroit's automotive lobby or its comrades-in-arms, the Michigan congressional
delegation. They will make a persuasive case that energy-saving technologies
such as hybrid electric-gasoline engines are in the pipeline and that hurting
Detroit will cost more jobs.
And they can raise the
voice of experience in arguing that fuel-efficiency mandates may have unintended
effects that don't always save gasoline.
NOTES: Levin, a columnist for Bloomberg News, can be
contacted at dlevin5@Bloomberg.net.
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