GM, Honda Uneasy About Trump Plan to Dump Fuel-Economy Rules

(Bloomberg) -- Two of the biggest automakers and California officials are pushing back on the Trump administration’s proposed rollback of U.S. fuel economy standards.

In filings due Friday, General Motors Co. plans to propose that instead of opposing California’s so-called zero emission vehicle sales mandate, federal regulators should instead embrace a nationwide electric-car sales program starting in 2021. Honda Motor Co., meanwhile, took exception to Trump’s proposed freeze on mileage standards and called for steadily increasing requirements to continue.

The formal comments to regulators mark one of the clearest signs yet of the auto industry’s misgivings about the proposal to cap federal fuel-economy requirements in 2020 and unwind California’s power to set its own vehicle efficiency standards and its zero-emission vehicle mandate.

Almost 100,000 comments had been posted on a government website by Friday afternoon, with several hours to go before the deadline for public comment at midnight.

‘Can Do Better’

GM, Honda Uneasy About Trump Plan to Dump Fuel-Economy Rules

“We know that we can do better” than the Trump proposal, Mark Reuss, GM’s executive vice president of global product development, told reporters in advance of the deadline. “We know that the industry can do better than that.”

GM says a nationwide program could put 7 million long-range electric cars on the road and slash 375 million tons of carbon dioxide emissions by 2030, compared with existing zero-emission vehicle mandates.

The Environmental Protection Agency and the National Highway Traffic Safety Administration in August recommended keeping federal fuel economy requirements at 37 miles per gallon from 2020 through 2026, instead of raising them to roughly 47 mpg by 2025 under rules adopted by the Obama administration. The agencies also want to revoke the most populous U.S. state’s authority to adopt vehicle efficiency rules of its own, including its electric-car mandate.

The agencies said the proposal would reduce societal costs by as much as $500 billion over a number of years and highway deaths by as many as 1,000 per year, in part by making newer, safer autos more affordable. Industry experts and even some on the EPA staff have questioned aspects of the proposal.

The California Air Resources Board’s filing called on the Trump administration to withdraw its plan. “Finalizing this proposal would worsen air quality for the most vulnerable, waste billions of gallons of gasoline, forfeit our best chance to fight climate change, and results in years of uncertainty in the marketplace, thereby stifling job-creating investments,” Richard Corey, the ARB’s executive officer, said in a letter to federal regulators. “The only clear winners from the efficiency-killing proposal are oil companies.”

Faulty Modeling

Corey said the administration’s plan was based on faulty computer modeling that erroneously inflates the cost of current regulations, and the potential traffic safety benefits of rolling them back. He also accused the Trump administration of “unaccountable agency overreach” in trying to rein in California’s ability to regulate tailpipe greenhouse gases. This attack on states’ rights, he said, “will be reversed by the courts.”

Mary Nichols, chair of the California Air Resources Board, said at a press conference on Friday that she’s willing to negotiate on changes to existing rules. But she said the Trump administration has shown no flexibility, and seems determined to strip California of its authority over tailpipe emissions. “I don’t see any way to take what’s out there and turn it into an acceptable program,” she said.

California Governor Jerry Brown said the administration’s plan would put the U.S. at risk of losing electric vehicle and advanced battery jobs to China and other countries that are “totally committed” to the technologies.

“Trump is saying he’s defending America, while at the same time taking steps to destroy the American automobile industry,” Brown said. “It will not stand. He’ll be out of office long before this law reaches the final determination in a court of law.”

EPA Acting Administrator Andrew Wheeler issued a statement saying that Nichols had promised to submit a counteroffer to the Trump plan in August but still hasn’t done so. “It is my hope that we can continue to work together and reach one national standard that will get more Americans into newer, cleaner, and safer vehicles,” he said.

In his letter, Corey said California’s willing to negotiate on changes to existing rules, if automakers can document them.

While the auto industry sought relief from the Obama rules, carmakers view the Trump administration’s response as too aggressive. They fear it could force them to build vehicles for California and 12 other states that follow similar standards, and another fleet for the rest of the nation. That, said Reuss, would be “very costly, and frankly unnecessary.”

Automakers also worry about a drawn-out court fight.

“GM is taking a leadership position in at least offering an alternative to what could be this endless battle between the federal government and California,” said Michelle Krebs, an Autotrader analyst. “Whether the administration will accept it, that’s another question.”

Drivers Penalized

In a statement on Thursday, the free-market Institute for Energy Research said the existing standards are too aggressive, effectively requiring automakers to produce electric cars that consumers still purchase in relatively small numbers. The group supports the proposed rollback, saying manufacturers currently must raise prices of more popular autos to compensate for losses on electric vehicles, unfairly penalizing suburban and rural consumers who tend to be more concerned about driving range and reliability.

California and 18 other states plan to attack the EPA and NHTSA proposal as unlawful. California Attorney General Xavier Becerra on Wednesday called it arbitrary and capricious, and said that it violates procedural requirements and EPA’s statutory obligation to reduce harmful pollution.

Industry Uncertainty

In its comments on the U.S. proposal, Honda said it disagreed with the Trump administration’s plan for revoking California’s rule-making authority and that key elements of the federal government’s analysis on traffic safety are flawed and should be scrapped.

Honda said pursuing the administration’s preferred option would “bring years of uncertainty for the auto industry” while state and federal regulators duke it out in court.

“A far better path would be for federal and state policy makers to negotiate a national program that is acceptable, if not ideal, for all parties including automakers,” Honda wrote.

Honda also recommended that the EPA maintain greenhouse gas targets that grow tougher each year instead of freezing them.

“The industry is united in its request that the agencies work out an agreement with California,” Honda said in its comments.

Toyota Motor Corp. said it too favors a 50-state emissions plan, saying in a statement that it is optimistic that “adjustments” can be made to the current regulations “that will continue environmental progress,” satisfy regulators and companies while avoiding a patchwork of rules.

The Alliance of Automobile Manufacturers also said its supports a national standard with California’s continued involvement. The association of 12 automakers including GM, Toyota and Volkswagen AG urged federal regulators to set “achievable” standards that “advance environmental and energy goals while recognizing marketplace realities.”

U.S. and California officials have agreed to hold talks to explore whether uniform standards nationwide can be maintained. Senior U.S. officials have also said they’d like to reach a compromise, but no deal has materialized thus far.

Tax Credit

Krebs said GM is taking this step because it’s concerned that the U.S. could fall behind Europe and Asia in the development of electric cars. The automaker is also hoping officials will enhance a $7,500 federal tax credit for electric-car buyers that will soon begin to be phased out over several quarters for GM, Tesla Inc. and others, she said.

To be sure, GM stands to benefit if the proposal gains traction. It’s readying a range of new electric cars and plans to begin an EV-based robotaxi business in the coming years. GM’s proposal seeks “additional consideration” for electric vehicles placed into autonomous ride-hailing fleets.

Some greeted GM’s proposal with skepticism. David Friedman, a former NHTSA deputy administrator during the Obama administration, said in a statement that unless a national electric car mandate is coupled with stringent efficiency requirements, carmakers could still prioritize gas guzzlers and blunt emissions reductions.

“The devil is in the details,” said Friedman, the vice president for advocacy at Consumer Reports. “We hope GM is truly serious about this proposal. If they are, they will support the existing GHG standards they committed to meet back in 2012 and sit down with us and other organizations to craft a proposal designed to help all consumers.”

Reuss said a national electric car program would ease some of the challenges that this type of vehicle presents to all automakers.

“It will facilitate more makers to be able to really focus on development of electric vehicles more efficiently, and take the guesswork out of what we think may or not happen,” he said. “We’re making bets on a lot of uncertainty, which is highly destructive to capital.”

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