Automotive News (sub) has a headline that the industry will likely latch onto as it continues its PR campaign to beg for federal funds to offset coming increases in CAFE requirements. And there's little denying the Global Insight research that says that CAFE compliance will cost American automakers considerably more than their Japanese counterparts. The Detroit three can expect to pay some $30b bringing its fleet up to the 31mpg average mandated by 2015, while Japan's big three will pay only about $14.85b to meet the standards. That's less than GM alone is expected to pay, according to Global Insight. The "fast start" 2015 goal is blamed for much of the expense, as it allows little flexibility for product planning, mandating a short-term 25 percent jump in efficiency, to be followed by a total 40 percent improvement by 2020. But wait, that still doesn't explain why Japan's companies can expect to pay so much less for CAFE compliance than Detroit. Is currency manipulation saving the Nipponese bottom line? Secret manufacturing techniques? Did someone hire Godzilla's lobbying firm? Actually, the reason comes in the form of a single-sentence paragraph. "Japanese automakers won't be hit as hard because their fleets already are more fuel efficient." How is that fair?
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These three should die in a fire. Seriously. Get dragged kicking and screaming into a bare minimum modest effort at making us less dependent on evildoers who attacked us on 9/11 — and then complain you didn’t get a head start.
$5/gallon will mean that consumers will demand 31 MPG. Germans faced that price level 5 years ago and averaged more than 31 MPG back then without any EPA intervention.
$4 gas is starting to have an impact that 30 years of CAFE could not. The Federal rules always had so many loophholes (e.g. credits for Flex Fuel, classifying the PT Cruiser as a truck)that the D2.8 never took it seriously.
But now that 10 year old Geo Metros are selling for $7,500 while new Rams sell for $12K, the D2.8 are being forced to sell fuel efficient vehicles.
The biggest change is that people who don’t need pickups and SUVs will start to make more rational choices. The big winner will be the carmakers that give them a prestigious choice that doesn’t scream econobox.
The Mini, 500 and Prius have started the trend. Soon, diesels and maybe that sporty new Honda hybrid will push it further. Exciting times.
$5/gallon will mean that consumers will demand 31 MPG. Germans faced that price level 5 years ago and averaged more than 31 MPG back then without any EPA intervention.
Seriously. Can higher gas prices kill the CAFE sham once and for all? I doubt it, but a man can hope.
Yeah, I don’t think this is going to kill CAFE. It will make it irrelevant though. High prices will do what decades of bureaucracy can only hope to achieve. If gas prices go back down… People with fuel efficient vehicles will feel that much wealthier.
I hope that the death of SUVs opens up some space in the marketplace for a renaissance of cheap and cheerful sports cars. The MR2, RX-7 were the attainable “cool” cars that any self respecting young male of the mid 90s aspired to.
The 95%+ of people who bought an SUV on ego are still going to want another personality prop.
Why indeed is it easier for Toyota, Honda and Nissan to hit the mark than for GM, Ford and Chrsyler. GM was the world’s largest auto company up until now, and still dwarfs Honda and Nissan. Ford has a major affiliate in Japan (Mazda). Both GM and Ford are also major players in Europe where higher fleet average fuel economies aren’t dictated by law as much as they are demanded by consumers who already pay crazy high fuel prices.
Isn’t part of the question why Detroit hasn’t been working on these issues aggressively since the fuel crunches of the 1970s? Any thinking person has known for a long, long time that this day was eventually coming.
John Horner :
Any thinking person has known for a long, long time that this day was eventually coming.
During Adlai Stevenson’s 1956 presidential campaign, a woman called out to him “Senator, you have the vote of every thinking person.” To which he replied, “That’s not enough madam. We need a majority!”
It’s the same deal with the 2.8. The thinking ones knew it, but there weren’t enough of them. Too many beancounters and too much short-sighted management, but we all know that tune.
So because GM, Ford and Chrysler didn’t have the foresight to invest in efficiency technology like their competitors did, we now have to use our tax dollars to prop them up? Does that mean that past and present 2.8 car executives will also return any bonuses paid to them over the past 20 years?
Give me a break – bad business judgement should not be rewarded with government sponsored corporate welfare.
What is hurting the domestic automakers is the change in rules that light trucks are included in the fleet standards. Before cars and light trucks had separate mileage standards. With the old rules it was more profitable to move fullsize car buyers into SUVs. Whereas Honda had no light trucks prior to the Ridgeline, they can easily absorb the new rules.
I rather like it when big the marketing department of a big company comes at odds with the lobbying firm. On the one had, Chevy bla-bla-blas about having 7 vehicles that get over 30 mpg (holy smokes! wow! amazing!) while their lobbyists are boo-hooing about the Japanese automkers having such marvelously efficient fleets!
The American auto industry got caught with their pants down during the 1970s energy crisis. That failure left a gaping hole into which the Japanese automakers stepped.
That the price of gas in the US would rise dramatically has been intuitively obvious for several years now. Again, Detroit has been caught with their pants down.
Fool me once, shame on you. Fool me twice, shame on me.
It’s been a while since the last time I saw fleet mpg numbers for all the automakers, but aren’t the 2.8 around 19-20 while toyonda are 22-23? They all have a long ways to go, but I can see why toyota recently anounced a 60% increase in prius production and honda with their new hybrids.
How many Volts will gm have to sell to make their fleet avg work? 500k + per year maybe?
Of course the Japanese have more vehicles they can sell for our new lower standard of living in this country – they’ve been selling vehicles in 2nd world countries for decades – it’s only been in the last few years that the United States’ movement to a 2nd rate country is hitting home.
It will take some adjustment by both industry and the buyer to our loss of wealth.
In 2007, in the US, roughly 16 million vehicles were sold, GM/Ford/Chrysler – 52.2%, Toyota/Honda/Nissan – 32.5% (of course percentages will be closer this year).
So since the ‘domestics’ sell more vehicles than the ‘imports’, the cost per vehicle to meet the CAFE regulations isn’t quite as lopsided as it first appears (30 billion vs. 15 billion), it still means that in the end we will have to pay more for our cars (car companies have to make a profit afterall).
Toyota has a much lower fleet average than Honda, because they have a lot of trucks, and bigger trucks
The American auto industry got caught with their pants down during the 1970s energy crisis. That failure left a gaping hole into which the Japanese automakers stepped.
….
Well said. This will be round three. Detroit chose to put short term profit (trucks/SUV’s) over long term planning. Now it is time to pay the piper. It is pretty clear that most who post here are not supporters of CAFE. While it is somewhat flawed in execution, look at how much effort Detroit put in to game the system and bend the rules. I’d hate to think how poor the average mileage would be today if there was no CAFE at all. Gaming the system has dropped today’s mileage back to the average level of 1981. I’d bet that without any regulation we would have a fleet average of 12 mpg. Good ol corporate America. Back then I was very sympathetic to Detroit’s plight. Not any more.
People (and the Big 2.8) have had nearly thirty-five years to get their minds around smaller cars and trucks. People who have chosen large vehicles in their desire to impress the peasants who stare in awe as they drive by are now paying the price for their extravagance. If the car companies were smart (sorry, I lost my mind for a few minutes), they would build a mix of small, cheap cars, small luxury cars, small cars at every price-point in between, as well as (fewer) large cars for those who truly need them and who can afford the fuel for them. And where are the little, fuel-efficient, cute pickups that I used to buy and love ? They have all grown to ginormous proportions and are now not the fuel-sipping misers that many people want. Only Toyota has a cheap, small, efficient pickup on the market now. That will be my next vehicle.(My 1st Toyota.)
“Of course the Japanese have more vehicles they can sell … they’ve been selling vehicles in 2nd world countries for decades”
GM and Ford are also both in those same markets in a big way.
I’m not surprised at all given the trend in America bashing these days. Everything anti-US appeals to the m(asses). The domestics were filling the need American consumers demanded for pick up trucks and large SUV’s. The Asians, for the most part, were happy to specialize in the smaller vehicle arena. You are asking the US side of the industry to totally re-tool and adjust to a government mandated economy. While the imports (Toyota trucks and Nissans gas hogs excluded)are already in that position. So stop all the whining that it’s GM, Ford and Chrysler that failed to see this coming. It’s the consumer that drives the market.
@Skooter:
Y’know what, you can’t just blame “anti-American sentiment” for everything wrong with the Detroit Three. As a card-carrying domestic lover/import hater, I know that is your wont, but please. The fact remains that although people bought SUVs in droves 5 or 10 years ago, they don’t now. But the Detroit Three are still too truck heavy. Even if CAFE didn’t exist, they’d still be too slow to move.
A question to ponder, and dont be bashful about replying:
If a domestic small car got the same fuel economy as a Japanese counterpart, would people be swayed by that alone to buy domestic?
Let’s say a Chevy Cobalt got 35 mpg, and a Toyota Corolla got 35 as well…Would most people choose the Cobalt over the Corolla?
Do features, resale value, maintenance costs, driving dynamics, service experience play into the equation?
Don’t forget that US automaker successfully lobbied against increase mpg legislation in the 90’s. And this in light of their experience with the two “oil shocks” in the seventies & eighties.
To my mind the 80’s was a sort of a reniasance in vehicular design & engineering. We went from castle/bordello on wheels styling powered by carbureted low output large pushrod motors to smaller fuel injected mutivalve motors and trim more aerodynamic European styling. Vehicles became more practically sized, and performance increased even as fuel economy did too. CAFE played a significant part in this pregression.
Terry asked, “Do features, resale value, maintenance costs, driving dynamics, service experience play into the equation?”
Yes.
Oh, that was a rhetorical question, wasn’t it?
But in this forum, was it a rhetorical question?
It seems this topic is designed to provoke sympathy for the domestic carmakers based on CAFE ratings.
As if to say “Gee, if only our cars had the fuel economy numbers the Japanese cars have, all our troubles would be over!”
While I can’t say much since I’ve owned my fair share of SUVs and Trucks (and my occasional hauling and offroading don’t cover the overall expense of things), I’ve never understood why Americans don’t long for more luxury small cars. Sure, bigger is better if you have people to haul, but most Americans seem to drive with 0-1 passengers at any given time.
My ideal car is a hatchback 2-4 door with 2+2 seating. Eliminate the ridiculous middle seat in the back, make the two remaining COMFORTABLE, add some nice textures and sound dampening (hear me, Audi?? Where’s my A1?!), and I’m sold.
What digs under my skin is getting stuck behind these midsize sedans with these HUGE engines pumping out more horsepower than anyone would ever need in my xA. Anything from V6 Accords to Luxury 100K+ vehicles – they drive so SLOW, yet have so much power. Maybe it’s the whole “driving a slow car fast is more fun…” saying coming into play, but is it too much to ask for people to press the pedal? I guess since my in-city is 30+mpg, I don’t worry about revving my engine.. but this just goes back in an endless loop – why buy it if you aren’t going to use it?
So yes, it is partly the consumers because of what they are buying.. but come on! If the cars were HERE to CHOOSE from, doesn’t it make sense that at least SOME would say “Hey, I don’t even have 4 people in my family…” and buy the nicer, smaller cars? Mini coopers seem to be doing fairly well, and I’d be hard-stretched to call That interior anything beyond “hideous.”
It’s almost as if the industry in the US (both sides!) has deliberately set up a market where Smaller is Economy and Larger is Image. While this might be the way of thought for most people, you have to ask yourself what came first.. the idea, or the desire? Who threw the idea out? Whose to blame?
I can see how some might see it “unfair,” since, for example, Toyota has a heavy selection of small cars that could just be imported as demand increased. But my problem with this is that ALL manufacturers should be wise enough to have backup plans, especially when the two top-selling points of any car has and always will be Price & Gas Mileage. Throw out these crappy, huge, gas guzzlers while fools will pay for them, but how about developing fuel-efficient engines BEFORE there is a problem?
“How is that fair?”
So we should discriminate against a country simply because their product is better? (better as in, more efficient). GM and Ford chose to ramp up SUV production during cheap oil while Toyota released the first generation Prius when oil was US$12 in 1997.
GM, Ford et al scream that small cars are unprofitable. So how has Japan got away with it all these years?
This is just funny. The reason it will cost Honda or Toyota so much less is that only about 30% of either’s sales are minivans, trucks, CUVs, SUVs, etc. Ford and GM are about 70% CUV, SUV, truck, minivan, etc. The CAFE average of Ford and GM’s car fleets is not that much different from Honda (Toyota is different because they have the Prius). The CAFE average of Ford and GM’s truck fleet is lower because they sell 4x-5x as many full-size trucks as Toyota (Honda doesn’t have any). Why? Because that’s what they’re known for – that’s what they’re good at.
It is almost all mix. Ford’s CAFE for cars in 2010 will probably be 31-32 mpg with the Fiesta and Fusion hybrid. With 4-cylinder Ecoboost engines comoing and additional hybrids in the works, I imagine hitting the 35.5 CAFE for cars won’t be hard…. remember CAFE is not EPA mpgs. It’s about 30% higher.
But their “truck” line will kill them. And that’s because when people need a capable and dependable truck, they turn to GM or Ford for their F-150s/Silverados/Sierras and their HD lines, which will be included in CAFE in 2012. That need for full-size trucks won’t die. It will languish a little, but will never die, and Ford and GM will also dominate that market.
Ford’s introduction of the EcoBoost, diesel lines and their pending import of the EcoSport from Brazil (not clear if it will be named that or Bronco – or if Bronco is another one altogether) will probably still not be enough to raise their CAFE 30% on the truck side in 6 years. Ditto GM….
It’s all mix.
Update- I checked out the Toyota, Ford, Chevy, Dodge, and Nissan sites last night. Toyota, Ford, and Chevy have cheap (relatively) small pickups available with 4 cylinder engines and 5 speed manual trannies. Dodge and Nissan are priced several thou above the others. My next vehicle will be a Chevy, Ford, or Toyota SMALL pickup. Woo-hoo !
The fact remains that in the US, most people equate the size of a car with prestige. Any manufacturer would be stupid if they didn’t acknowledge this trend. Even today with the price of gas setting record highs, I hear from many people that they are willing to pay the price as long as they are able to drive their bigger, “safer” cars. The words, “I’m not driving some small shitbox” usually follows.
Until this kind of attitude changes, any company that gambles on bringing out a well-equipt small car, is taking a major chance on it flopping. This is true no matter how well-equipt or how well built the offering is. If it’s a hatchback, the risk triples.
….
GM, Ford et al scream that small cars are unprofitable. So how has Japan got away with it all these years?
Chrysler makes a profit on their compacts.
But yet all of you here already consider them dead, so that doesn’t matter to you.