Insider: Like A Broken Record

Domestic automakers have been clamoring for years about the in-effectiveness of Corporate Average Fuel Economy (CAFE) regulations in the U.S.

Domestic automakers have been clamoring for years about the in-effectiveness of Corporate Average Fuel Economy (CAFE) regulations in the U.S. They contend the standards set by the government require them to make vehicles customers don’t want. One executive likes to say it’s the equivalent of telling fashion designers they have to make one suit size that all men in the U.S. must fit into, regardless. The preferred alternative is to force consumers to alter their buying habits by hitting them where it counts: in the pocketbook. Politicians should raise gas taxes as opposed to increased regulation in order to move Americans from their gas-guzzling trucks and SUVs and into more fuel-efficient modes of transportation. Sounds logical to me but, there’s only one major problem with that: There isn’t one politician with a backbone in Washington who is going to propose raising gasoline taxes. That would be political suicide and we all know a politician’s best friend is employment—theirs, to be precise.

That’s probably why President Bush punted, asking Transportation Secretary Norman Mineta to draft a letter to Congressional leaders to give him the authority to direct the DOT to change the CAFE standards for passenger cars, a procedure the President currently holds for setting the standards for light trucks, vans and SUVs. “I encourage them [Congress] to give me that authority,” Bush said in April. His plan calls for dumping the 27.5-mpg standard for passenger cars and raising it to an undetermined level, along with allowing standards to be based on vehicle dimensions, as opposed to the current uniform standards for the entire fleet. Devising the new standards would take no less than 18 months, which means these advanced fuel-sippers would not be on the market until 2009 or 2010. Now that’s what I call addressing the issue at lightning speed.

Here’s a better idea: Provide oil companies with incentives to develop new fuels, including biofuels, and set a timetable for these fuels to hit the market. Make changes to the gasoline tax with progressive increases over the next several years to influence consumers to buy more fuel-efficient vehicles. At the same time, provide long-term, substantial tax incentives to consumers who purchase hybrids, diesels and biofuel-operated vehicles. These steps would go much further to improve the fuel economy of the vehicle fleet than any changes to the CAFE standards. How do I know this will work? Let’s take a look at what has happened in the first few months of this year as gas prices started to hit $3 per gallon in some parts of the country: Sales of mid- and full-size SUVs have tumbled and are expected to fall by double percentage digits this year. Ford Motor Co.’s top sales analyst, George Pipas, said his team thought SUV sales would fall only slightly this year, especially since GM introduced their new family of full-size models. Boy was he wrong. He called the fallout in SUV demand “eye-popping.” Some will say it’s not gasoline that’s driving folks out of SUVs and into crossovers. Tell that to the 2004 Chevrolet Tahoe owner who has to spend nearly $100 to fill their tank up every week. That’s pain. That’s what changes buying habits. Having to spend that amount of cash over six or more months will be more than enough to get people thinking about a Saturn Outlook or Ford Edge.