Welfare for Gas Guzzlers

The U.S. auto industry has its own peculiar logic. The thinking goes like this: Big SUVs have sold really well for us in the past. They’re really cheap to make, but we can charge a lot for them. By relying on mammoth land yachts we don’t have to worry about making cars that can compete with what’s coming out of Europe and Japan.

The Hummer H2: damn the falling sales, full speed ahead!

Therefore, even though gas prices have soared and the public is abandoning big SUVs at a record rate (causing our stock to sink into junk bond territory), we’re still going to count on big guzzlers to be our saviors. If people are reluctant to buy them, we’ll bargain away our profits with steep consumer discounts. We’re also going to continue our ultra-cautious strategy on hybrids, despite the Prius being a runaway hit (and even coming within striking distance of the popular Chrysler 300), and make sure even our eco-cars are SUV-based. What’s more, even though big SUVs wreak havoc with air quality, aggravate global warming and take us ever further from our supposed goal of energy independence, we expect Washington to guard our backs by not passing any laws that interfere with our illogical strategy. So there. Oh, and while you’re at it, can you make sure our big SUV customers get tax breaks?

The carmakers are getting everything they wished for. Under Bush’s proposed Corporate Average Fuel Economy (CAFE) plan, car mileage rules (unchanged since the mid-1980s) will stay as-is, but light-duty trucks will have to average 22.2 mpg by 2007. The largest SUVs and pickups will continue on their merry way, completely unregulated. The loophole that was supposed to be closed will remain open.

In the penultimate episode of Six Feet Under, a drunken Claire starts pounding on a Chevy Suburban and blaming it for the war in Iraq. She’s none too coherent, but she makes more sense than the Bush administration’s auto regulators, who according to the New York Times, are preparing to, once again, exempt “Hummer H2s and other huge sport-utility vehicles” from proposed fuel-economy regulations. Why exempt the very vehicles that are most in need of regulation? We’re talking about pollution-spewing road hogs weighing more than 8,500 pounds here.

And why is Washington backing off? Out of concern for the ailing domestic auto industry, of course. The government’s plan will convince automakers of the rightness of their strategy, pushing them even further down the road to economic disaster. As the Times put it, “Domestic automakers are likely to see it as a victory, since the new plan will decrease advantages that some foreign automakers, like Honda, have in the current system because they do not make the heaviest trucks and SUVs.”

The presumption is that Detroit’s Big Three are only competitive in the largest vehicle segments. But even there the domestics have lost ground. Honda offers the massive Ridgeline, a V-6-powered extended-cab pickup that strikes at the heart of GM and Ford’s strengths. It even gets lousy gas mileage! Toyota is also making inroads into big SUV territory with the grossly oversized Sequoia, and Nissan has—get this—the Armada, a huge V-8-powered SUV that out-Detroit’s Detroit and competes directly with the Ford Expedition and Chevy Suburban. Sales of the Armada were up 33 percent through last February, at the same time the Suburban plunged 37 percent and the Hummer H2 32 percent.

A crucial point is that Japanese carmakers would still be in good shape even if the Armada and the Sequoia weren’t selling, because they have competitive models in every segment. For American automakers, big SUVs are leading the way to closed plants and layoffs. With the Expedition and the Excursion out front, Ford started talking about both things August 16. In the second quarter of 2005, Ford is poised for a pretax loss of $1.21 billion. “The challenge we face isn’t a traditional economic downturn,” said Ford chairman Bill Ford. “It’s a new, rapidly evolving, brutally competitive global marketplace.”

Yes, Bill, a global marketplace that is increasingly interested in innovative, fuel-efficient cars, not just antiquated gas guzzlers. As Reuters noted, “The Detroit automakers are also hurting from this year’s dramatic slowdown in sales of their profitable mid- and large-size sport-utility vehicles amid high gasoline prices. [Ford and GM] have used aggressive discounts, which erode profit margins, to sell down swollen inventories of the unsold SUVs.”

In the end, it probably won’t matter what the regulators at the National Highway Traffic Safety Administration do. Big SUV customers are voting with their feet, looking elsewhere. Some basic math shows why consumers are reeling from the impact of high gas prices. The Ford Excursion has a 44-gallon gas tank, so at $3 a gallon (a price already on pumps in California) it will cost $132 to fill up. It’s not surprising that the Lexus 400h, a big SUV with a hybrid drivetrain and 27 mpg fuel economy, is a hit. It allows consumers to have it all, size and car-like fuel economy. Detroit has nothing comparable save the Ford Escape Hybrid, which is much smaller.

Environmental groups are understandably dismayed by the administration’s course. This was noted during the rulemaking process. Green groups, the regulators said, “contend that basing CAFE standards on the manufacturers’ product plans unduly limits the agency to conducting passive rulemakings that neither force the companies to alter course nor advances the nation’s longer-term energy needs.They also contend that technologies are available to manufacturers to enhance the fuel economy performance of their fleet.”

They said it then, and they’re repeating it now. Brendan Bell, an associate Washington representative on global warming for the Sierra Club, says, “The Bush administration is giving the Big Three a shovel to dig their own graves with. This ruling shows complete callousness for the problems Americans are actually facing: paying high prices at the pump, breathing dirty air and experiencing global warming.” The Sierra Club marshalled 60,000 comments on the rulemaking, but not surprisingly had no impact.

What a situation we’re in. As fuel prices reach new pinnacles and commentators warn we’re close to the peak of oil production, we’re working overtime to make sure the vehicles that mainline Saudi crude stay on the road. We’re even subsidizing them through tax breaks and a regulatory pass. The Onion had it right. “President Bush unveiled an aggressive initiative Monday that would make the U.S. free of petroleum dependence by the year 4920, less than three millennia from now,” the fake newspaper wrote. It quoted the president as saying, in a Fort Bragg speech, “Our mission is clear: We must free ourselves from dependence on fossil fuels within 85 generations. A cleaner, safer America is my vision. And it is our great, great-great-times-80 grandchildren who will realize that vision.”

Jim Motavalli is editor of E.


Sierra Club

Ecology Center Auto Project

Department of Transportation rulemaking onlinel