New CAFE: Higher Number, Same Problems

By Michelle Krebs December 11, 2007

By Bill Visnic

The U.S. House of Representatives finally approved a massive energy bill whose cornerstone is the long-debated increase of fuel economy standards to a 35 miles per gallon average for both passenger cars and light trucks by 2020.

Trouble is, just when auto companies, politicians and environmental interests seem able to agree the public insists on something resembling “action” regarding auto fuel economy, the bill faces an almost certain roadblock in the Senate –- not to mention a threatened veto from President Bush –- because it retains a provision to reduce tax breaks for Big Oil and mandates large utilities produce at least 15 percent of their energy from renewable sources.

Both are measures eco-evasive Bush and Republican stalwarts say derail any prospects of the bill’s passage in the Senate.

Deal or No Deal?

The House’s sudden puckishness in the face of certain Senate opposition brings to a screeching halt what appeared to be the fast-tracking of an uneasy compromise to move forward with the proposal for the new 35-mpg Corporate Average Fuel Economy measure.

For weeks, Congressional leaders tooted the trumpets of compromise in proclaiming the serious hike in CAFE was imminent. Although the so-called “bumper sticker” number of a combined 35 mpg average is a marked increase over the respective 27.5 mpg and 22.2 mpg those vehicles are expected to attain today, most industry sources say any forthcoming deal is more about political expediency than relieving the nation’s dependence on foreign oil.

There will be tangible benefits, some of them immediate, if the proposed new vehicle fuel economy standards eventually are agreed upon by Congress and the overall energy bill is signed by President Bush.

But “the devil will be in the details,” says Ron DeFore, communications director for SUV Owners of America.

The most important of those details:

• Light trucks reputedly will continue to enjoy lower fuel-economy targets than passenger cars, although trucks must be figured into each automaker’s overall fleet average. Thus the definition of what constitutes a “truck” –- and who crafts that definition –- will be exceedingly important.

“As long as there is differentiation [between cars and trucks], there’s always going to be a ‘game,’” says Anthony Pratt, also a senior analyst at Pricewaterhouse Cooper’s Automotive Institute.

Some of the vehicles that have famously driven through the same loophole in today’s Corporate Average Fuel Economy regulations include Chrysler’s PT Cruiser, advantageously classified as a truck for CAFE purposes because it has removable rear seats, and Subaru’s Legacy Outback, which earned the company scorn when it deliberately fiddled with the redesigned ’05 car’s ground clearance and other details so that the National Highway Traffic Safety Administration, which administers CAFE, would call a “truck” what clearly is a car.

• It also appears any new fuel-economy legislation will continue to offer automakers the ability to win extra CAFE credits for producing “flex-fuel” vehicles capable of running either on gasoline or E85, which is 85 percent ethanol and 15 percent gasoline –- a fuel that ostensibly reduces dependence on foreign oil and is proven to cut emissions.

Retaining flex-fuel CAFE credits reportedly was staunchly defended by many politicians. Some industry sources suggest it is the presence of the ethanol credit that has enabled several automakers -– chiefly the U.S. domestics –- to meet CAFE standards over the past several years.

The House version of the bill –- which passed on December 6 by a 235-181 margin –- contains a provision to boost ethanol production to 36 billion gallons by 2022, a 700 percent increase from today’s levels.

The Alliance of Automotive Manufacturers says that as of March this year, there were about 6 million flex-fuel vehicles on the road. And with good reason: thanks to a bizarre formula for calculating these vehicles’ fuel economy, each flex-fuel vehicle earns its maker an outsized claim towards meeting CAFE. That is the reason many automakers spend perhaps as much as $100 per vehicle to endow some of their highest-volume models with flex-fuel capability.

An example from the blog of a former automotive engineer: a pickup truck with combined fuel economy rating of 18.6 mpg, if outfitted as a flex-fuel vehicle, is credited as a 31-mpg truck for CAFE purposes.

Currently, automakers can pump out enough flex-fuel vehicles to boost their full-line CAFE by as much as 0.9 mpg (from 1993 to 2004, it was 1.2 mpg). This doesn’t sound like much until the CAFE performance of a few of the largest producers of flex-fuel vehicles is examined. In 2006, the most recent year for complete figures, the light-truck fleet standard was 21.6 mpg; Chrysler and GM’s final truck CAFE squeaked in at 21.7 mpg. Nissan finished at 21.9 mpg, Ford at 21.1 mpg. Clearly, earning an extra 0.9 mpg makes a difference.

Most critics say the phantom promise of flex-fuel vehicles comes from the fact the preponderance of them rarely, if ever, are fed the fuel -– largely because it would be all but impossible: of the approximately 170,000 fuel stations in the U.S., only about 1,200 offer ethanol. The fuel is not available at all for retail sale in seven states. And there has been controversy regarding how much the nation’s intake of foreign oil actually is reduced by using the domestically produced E85.

35 MPG No Engineering Picnic

The targeted 35 mpg overall standard “is not insignificant,” says Dan Montague, also a senior automotive analyst at PWC’s Automotive Institute. “E85 credits will help to compensate for the fact it’s difficult to get there.”

The PWC analysts and DeFore of the SUVOA, a group that essentially has campaigned against CAFE standards of any type, saying such regulation essentially distorts market forces, say the inevitable “remixing” of vehicle fleet to meet the 35-mpg standard won’t come any faster or any less painfully because of new legislation.

And that pain will be most felt, they say, by domestic automakers because their current fleet mix is biased 57 percent toward light trucks. Meanwhile, sales for the so-called New Domestics (import

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Michael Claybon says: 9:07 AM, 12.17.07

The Chrysler 300 is a DOG. Pretty but not long out of the repair shop. This car is a "DOG". Meaning that this car is "no good". Looks are one thing having it to ride in is somthing else. I have had this car for 1yr and 10 months and out of that time my car has spent a total of 9 months in the shop. Tell me this car is not a "DOG".

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