Raising fuel standards could save auto industry

January 26, 2006

Cleveland Plain Dealer

High gas prices have spurred market for more efficient cars

BY MARC ROSS

  Last fall, Congress summoned oil company executives to Washington to ask about their record profits. Drivers, suffering under high gas prices, might have been better served if lawmakers had instead called on the American auto industry to account for its financial woes.
  That’s because the recent rise in spending at the pump and decline of car manufacturers’ earnings can be traced, in part, to a common cause: the dismal fuel efficiency of the U.S. auto fleet. In fact, a new economic analysis shows that higher fuel economy standards could create 15,000 new domestic autoworker jobs by 2020, while cutting consumer expenditures on gasoline by 10 percent.
  In 1975, Congress passed the first fuel economy requirements over the objections of the auto industry, and every day our nation saves 2.8 million barrels of oil as a result. But in recent years, the industry has defeated several attempts to strengthen those standards, and since the late 1980s the average fuel efficiency of U.S.-made vehicles has actually fallen by more than a mile per gallon.
  When rising gas prices made that lost mile more costly, drivers began to switch over to fuel-efficient cars, leaving American auto lots packed with unsold behemoths.
  Meanwhile, analysts expect U.S. carmakers and their suppliers to cut up to 75,000 jobs during their current restructuring efforts, a serious concern for Ohio’s more than 136,000 auto-sector employees.  While these financial problems cannot be fully explained by any single cause, one clear solution lies in the production of more efficient, and thus more popular, vehicles.
  Ironically, Congress has refused to raise fuel economy standards because of the misconception that such a move would harm the U.S. auto industry. Automakers, which have prioritized short-term gains over long-term growth, fueled this myth: In 2002, General Motors Vice President Guy Briggs claimed that higher standards would "wipe out more than 100,000 auto-related jobs."
  Congress relented, and today that inaction, combined with high oil prices, is wiping out auto-sector jobs. According to new modeling commissioned by the National Environmental Trust and performed by a team of University of Maryland economists, U.S. autoworkers could lose more than 10,000 jobs over the next decade unless oil prices return to $30 per barrel.
  On the other hand, if oil prices remain above the now conservative estimate of $40 per barrel through 2020, then Congress could protect industry profits and spark a major upsurge in autoworker employment by increasing fleetwide fuel economy standards to 36 miles per gallon. That’s well within the range of possibility. Fuel-efficient vehicles would cost consumers a little more upfront, but, when savings at the pump are factored in, the average household would spend about $200 less a year on its car and gasoline over the next 15 years.
  Yet U.S. automakers continue to fight stronger fuel economy standards. These same companies also claimed that fuel-efficient vehicles were not technologically feasible, until the Toyota Prius and Honda Civic Hybrid proved them wrong. American companies have been playing catch-up ever since, and today six of the seven most fuel-efficient cars on the market are foreign made.
  Detroit has argued that higher fuel economy standards would compromise vehicle safety by forcing drivers into smaller cars. Not so, said the National Academy of Sciences, which found that fuel economy standards could be raised "without any loss or performance . . . [or] degradation of safety."  Moreover, when you consider the combined risk to both parties in a collision, midsize cars are safer than SUVs. In addition, SUVs are much more dangerous in rollover accidents.
  So now the big-industry-that-couldn’t is exaggerating the price of higher fuel economy standards for consumers and autoworkers. Eventually, these excuses become self-fulfilling prophesies, as U.S. carmakers spend so much time battling legislative progress that they fall even further behind their international competitors. As the forefather of the American auto industry, Henry Ford, is reported to have said: "Whether you think you can or whether you think you can’t, you’re right."

Ross is a professor emeritus of physics at the University of Michigan, Ann Arbor.