The fuel economy fight: Why even if Trump wins, he loses

In Washington, D.C., bombshell news tends to drop late Friday afternoons. And so it was that last Friday, we learned the U.S. Justice Department’s antitrust division is investigating Ford, Volkswagen AG, BMW and Honda for potentially colluding with California on vehicle fuel economy standards. The EPA and NHTSA, meanwhile, want to rescind California’s right to even set standards. Mind you, the automakers haven’t signed such an agreement yet, so they’re being investigated for a thought crime at this point. But President Trump was said to be “enraged” and embarrassed by the deal, which deftly sidestepped his administration’s plan to halt fuel economy gains in their tracks.

We should be concerned that the Justice Department, which traditionally stands independent from the White House, is apparently being weaponized by a president who’s in prime pique. That’s Nixonian. But in this case, it’s also futile.

Some background: As the nation went crashing into recession in 2008-09, the federal government bailed out Detroit automakers to the tune of $80 billion. Bad decisions had left them vulnerable to recession and $4 gasoline, so by 2011 the Obama administration had developed a strategy to help future-proof the industry, reduce dependence on foreign oil, benefit consumers and address climate change. The plan: annual mileage goals that would incrementally push cars and light trucks to previously unimagined levels of fuel efficiency. Thirteen automakers and the UAW signed on to essentially double fleet mpg by the year 2026. Most important, California, which for decades had exercised the right to set its own standards and alleviate its smog-ridden cities, was on board.

The Obama standards are frequently credited with driving innovation — technical advances that have saved Americans hundreds of dollars a year at the pump. Even notoriously thirsty pickups, SUVs and crossovers became relatively more fuel efficient, but with the public’s buying preferences tilting heavily in the direction of those vehicles and away from more frugal, traditional cars, automakers (particularly in Detroit) were struggling to meet the standards and were buying emissions credits from Tesla.

So, in 2017, with a new president in office, car companies asked for a slight easing of the goals, but got more than they bargained for: Trump’s EPA and NHTSA set in motion the plan to freeze emissions requirements at current levels.

And that’s when things got weird: The automakers said whoa, we don’t want that. For what may be the first time in history, an industry told a government regulating it: Please don’t take your boot off our neck — just ease up a little bit.

Or in the words of Mitch Bainwol, chief executive of the Alliance of Automobile Manufacturers, "We support standards that increase year over year that also are consistent with marketplace realities.”

Trump must wonder, why have the automakers spurned his marvelous gift to them? Above all, they feared that California and the 13 states that follow its lead on the topic would continue to insist on higher standards (which, sure enough, they did), meaning litigation and uncertainty and two sets of standards to build to — and no business thrives in uncertainty. Plus, the auto industry works many years ahead on its products, so a rollback from its projected path is not a gift, it’s a problem. Carmakers around the globe are investing hundreds of billions of dollars in the coming EV evolution, and they need stability while the transition unfolds. Who knows, they might even feel a sense of corporate responsibility for their customers and the planet.

So why is Trump devoted to a policy the industry thinks is too lenient? There are many possible answers to that. The administration’s stated reasoning is that the policy will save lives, because easing standards will reduce automaker costs, which will reduce vehicle costs, which will allow more Americans to trade up to newer, safer cars. Furthermore, the plan states, if people get worse mileage they’ll drive less, further decreasing the risk. But experts question that reasoning. U.S. light vehicle sales surged to a record of more than 17.4 million units in 2016, so the Obama regulations didn’t seem to be slowing them down. And while it’s true the average vehicle transaction price has risen by nearly 30 percent over the past decade, the cost of mpg compliance is not the main driver — buyers are preferring more luxurious, high-tech and decidedly higher-priced trucks and crossovers.

And let’s face it: If automakers thought freezing the standards would actually help them sell a lot more product (with the added benefit of saving some lives), they’d be in Trump’s corner. They don’t, and they aren’t.

A more plausible answer is that the petroleum industry lobbied for the freeze; the administration projects it will increase consumption by 500,000 barrels of oil per day. Also, Trump’s time in office has been marked by a dismantling of environmental regulations that he believes are bad for business. (Never mind that the green economy in the U.S. is now believed to be equal in value to the fossil fuels sector.) Those who dispute climate change also lobbied for the freeze, going so far as to call car companies “the opposition.” And Trump himself doesn’t concede that human activity might be a factor in climate change, and is reluctant to admit it’s changing at all — he has now proclaimed five times, during each of the five Category 5 hurricanes while he’s been in office, that he’s never heard of a Category 5 before. (Translation: It’s a fluke, not a trend.) Lastly, Trump’s government has shown an eagerness to eliminate policies with Obama’s name on it.

So what’s to be done about all this? Mercedes was on the verge of joining the California cabal until the German government Friday expressed concern about getting in the middle of this mess — which is the chilling effect some said was intended by the DOJ investigation. But what we need instead is an “I am Spartacus” moment. Other automakers standing shoulder-to-shoulder with Ford, Honda, VW and BMW. Other states joining those already aligned with the California Air Resources Board. And together saying, “Freezing standards is bad for business and bad for the environment. Pick a fight over this, and you’ll have to fight us all.”

And the public undoubtedly enjoys getting an average of 5 miles per gallon more in recent years (depending on what you’re driving, a whole lot more than that) — and we’ll be especially thankful when gas prices rise again. Our take should be, “Keep innovating, we love it.” Automakers, consumers and environmentalists share common ground here. 

Maybe automakers won’t hit Obama’s standards, since they were already struggling there. But they won’t stop at Trump’s standards either. Even if the feds succeed in stripping the California waiver and imposing Trump’s freeze as the law of the land, it won’t matter. Automakers will continue to improve their products because that innovation and the EV evolution are already in play, and because the marketplace and the competition and other governments will demand it — the European, Japanese and Korean car companies certainly won't let up. We are too far down this road, too much is invested, and too much is at stake.

We will be driving more efficient cars. We will be driving more electric cars. And there will be a lot to like about all of that, not the least of which is the promise of a new EV era of high performance.

Trump can’t drag the entire auto industry backward.