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Trump Administration Irked with Car Makers on Fuel-Economy Policy

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05/10/2018 | 11:15am EST

By Timothy Puko and Chester Dawson

The leaders of the world's biggest car companies are arriving at the White House on Friday, and it may be their last chance to stop the Trump administration from a head-on collision with California.

The Trump administration wants to dramatically cut back on Obama-era emissions regulations, which are supported by California and other states. But while the president and his senior advisers have signaled willingness to confront the resistance from California and its allies, they are also frustrated by what they describe as tepid support from car makers for the administration's initiative to roll back rules.

The White House, along with its environmental and transportation regulators, are bringing in chief executives from the big three U.S. brands -- General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV -- and representatives from several international car makers to forge a common stance over fuel-economy requirements.

Auto makers have complained the standards for their cars and trucks are too rigorous, saying they don't reflect consumer demand. But the rollback being proposed by the White House is so extensive, some are concerned it will cause more problems than it seeks to solve.

High on the agenda will be California, which has its own powers over fuel-efficiency standards and is already suing to stop the administration's overhaul. That has escalated a power struggle between Washington and Sacramento that some fear will force auto makers to start meeting two different standards for selling cars and trucks across the U.S.

Ford Motor's CEO Jim Hackett and chair William Clay Ford Jr. have signaled their desire for a compromise. "We're not asking the administration for a roll back," Mr. Ford told shareholders at the company's annual meeting Thursday. "We want California at the table, and we want one national standard that includes California."

Mr. Hackett added at the meeting: "Bill and I have been clear in our position that Ford is designing its business to exceed and meet those standards that were set previously."

Statements like this have confused and irritated some leaders in the Trump administration who viewed their work as the biggest step possible to help car makers lower costs and stay in tune with consumer demand. Drivers have flocked back to fuel-gobbling trucks and sport-utility vehicles as gasoline prices have fallen in recent years, creating an opportunity for the Trump administration to lower -- or even consider eliminating -- tighter vehicle-emissions requirements set by Barack Obama's administration.

Some in both the auto industry and the Trump administration consider reluctance from auto makers to be a public relations ploy. Industry critics note Detroit, despite calls for compromise with environmentalists, is shifting away from sedans to less-efficient SUVs and pickup trucks in their product lineups.

"The only goal they seem to have in mind is that they don't want to look like the bad guys," said Mike McKenna, Republican president of the lobbying firm MWR Strategies and the former energy transition team leader for Mr. Trump. "This thing was destined for conflict from the go."

Auto makers have pushed for easing of fuel-economy rules dating from a 2012 agreement with the federal government which required a fleet average of more than 50 miles a gallon, or about 36 mpg in real-world driving, by 2025. They now say, however, that accord was based on flawed assumptions about gasoline prices and consumer demand for larger vehicles.

Auto makers chafed at efforts in the waning months of the Obama administration to rush to finalize tougher standards, and lobbied the Trump White House for relief from fuel-economy targets it considers unrealistic.

Representatives for the industry say they want a policy that threads the needle by softening fuel-economy targets but doing so in a way that doesn't unravel progress so far. "We support standards that increase year over year that also are consistent with marketplace realities," Mitch Bainwol, chief executive of the Alliance of Automobile Manufacturers, told a congressional committee this week.

The alliance, a lobby for more than a dozen U.S. and foreign auto makers, is one of two trade groups expected to attend the Friday meeting at the White House. It is eager to reach a deal to keep federal fuel-economy standards unified with those in California and other states.

The president is supposed to be at the meeting, along with at least half a dozen advisers, including leaders of the Environmental Protection Agency and National Economic Council, according to a senior administration official. Administration officials want an explanation of why auto makers aren't more supportive of their proposals and what they would suggest as better alternatives.

When Mr. Trump came to power, said Mr. McKenna, auto makers asked his team for two things: to keep a unified national standard, and to lower the rising standards installed by the Obama administration in coordination with California.

California has leverage in part because several other, mostly coastal and Democratic-led, states have pledged to follow California's lead.

And ultimately, its regulators want to see auto makers gravitating toward zero-emission vehicles such as electric cars.

Earlier this week, Mary Barra, GM's chief executive, sent a letter to employees in which she reinstated a pledge to debut 20 new fully electric vehicles globally by 2023 and promised to continue boosting all vehicles' fuel efficiency.

"Regardless of the outcome of these discussions, I assure you, we have an absolute and unwavering commitment to improve fuel economy, reduce emissions and invest in technologies to drive an all-electric future," she wrote.

Auto makers, however, aren't in agreement over how much easing of fuel-economy standards they are willing to accept. Nor can they agree on a timetable for changes. It is also unclear whether the Trump administration is willing to compromise with California.

The latest proposal, spearheaded by the National Highway Traffic Safety Administration, includes several options, some of which would eliminate the authority California now has to set its own rules beyond the federal standards. By including several options, the administration's goal is to create room for negotiating with California's regulators, according to a senior administration official familiar with the proposal.

The EPA is still collaborating on the joint proposal with the NHTSA and it is not likely to go back to the White House for a final review until the end of May or early June, the person said.

Write to Timothy Puko at tim.puko@wsj.com and Chester Dawson at chester.dawson@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
FIAT CHRYSLER AUTOMOBILES -1.01% 14.63 Delayed Quote.1.18%
FIAT CHRYSLER AUTOMOBILES 0.06% 13.262 End-of-day quote.4.57%
FORD MOTOR COMPANY 1.01% 9.02 Delayed Quote.17.91%
GENERAL MOTORS COMPANY 0.65% 35.54 Delayed Quote.6.25%
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Yield 2019 4,36%
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