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US carmakers walk a perilous line

words - Tim Britten
New economy and emissions regulations will test an industry already under immense pressure

As if the US car industry didn’t already have enough to worry about.

Already walking a survival tightrope with the Obama administration holding one end of the wire, US carmakers are now facing new legislation requiring them to meet tough new fuel economy standards, that are way in excess of current requirements, by 2016.

The new requirements are that carmakers must average 39 mpg (7.2 L/100km) by 2016 across their entire vehicle range – a big jump over the current average of 25mpg (11.3L/100km). The standards will come into full bloom in 2016 after initial new targets begin implementation in 2012 and increase by stages yearly.

The bright spot is that the new standards will be nationwide – not a hotchpotch of differing state by state requirements. The new policy also aims to clarify and simplify by linking the CAFE corporate average fuel economy standard with the EPA Environmental Protection Agency’s greenhouse emission standard.

Among the first car-makers to issue official responses are Chrysler - which is the only company selling US-built cars in Australia and has just gone into partnership with Fiat - and BMW, which already walks tall in terms of exceeding fuel economy requirements in both the US and Europe.

Chrysler’s alliance with Fiat can only benefit its ability to meet fuel economy objectives as it will release a whole lot of possibilities stemming from the wide range of Euro-efficient cars and powerplants from the Italian car-maker.

The US company, like others, also plans to leverage its development of “several” electric powered vehicles from its in-house ENVI organisation that are due to hit the US market by 2013.

Chrysler is also about to introduce a new V6 engine that will enable it to deliver “up to 8 percent improved fuel economy across the company’s current vehicle lineup.”  

Though not a US car-maker, BMW does have its Spartanburg plant in South Carolina where it builds X5 and X6 models and is happy to note that it has been rated in Europe as having the lowest average fuel consumption of any premium car-maker between 1995 and 2008, “exceeding the voluntary commitment made by the Association of European Automobile Manufacturers to reduce average CO2-emissions by 25 per cent from 1995 to 2008.”

The German company has done similarly well in the US, where a recent report entitled “Automakers’ Corporate Carbon Burdens” and published by the Environmental Defense Fund, “found that the BMW Group had reduced fuel consumption and CO2 emissions in the US more than any other automotive company between 1990 and 2005.”

It can be assumed most other European car-makers will support the new US policies.

The US car industry has been notoriously insular and slow to change, so the tough new legislation could be viewed as coming a lot later than it should have. It has been accepted for decades that the US industry has lagged behind most countries in facing ecological realities, but the chickens have come home to roost as domestic buyers increasingly favour generally more efficient imports.

Now the ball is in the US industry’s court. But it is a matter not just of its technical ability to respond to the new dictates, but also of how it is going to be able to afford them.

Concerns about the consumer costs of adopting the new measures (about the equivalent of A$700) are potentially offset by the concomitant fuel savings, with the White House saying the programme during its life will save something like 1.8 billion barrels of oil and reduce greenhouse gas emissions of 900 million metric tons. Officials said this was the equivalent of taking 177 million cars off the road, or shutting down 194 coal plants in the US.

For Australia, a direct impact of the new US requirements will be less likely and will be evidenced only in the US-built cars sold here by the Chrysler group, including Chrysler, Jeep and Dodge.

However a meeting of Australian transport and environment ministers scheduled for this week is to consider adopting mandatory standards for CO2 emissions while examining overall fuel efficiency policies applying to local manufacturers.

At present, Australian car-makers operate under a voluntary arrangement with an average across the model range figure of 10L/100 kilometres, which falls somewhere between existing US averages and those to be mandated by the new laws.

From the end of 2008, all new cars sold in Australia were required to display a sticker quoting average fuel economy and CO2 emissions.


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Published : Wednesday, 20 May 2009

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