Fed CAFE Timing Is Bad Timing Indeed
Ever since Barack Obama was sworn in as the 44th president of these United States on January 20th, we’ve been treated to one plan after another regarding stem cell research, abortion policy, the banking bail out, mortgage rescue, education, you name it. Honestly, I can’t keep up with everything, perhaps that’s the idea: flood the American populace with news and soon they won’t be paying attention to anything at all.
Well, I’ll stick to my area of expertise, namely what is going on with the auto industry. Just to let you know, approximately half of my income (work) is derived from writing about this industry alone, but that percentage would be higher if some of my clients didn’t have to cut back recently. I’m sure I’ll survive even if some of the main players do not.
CAFE Standards Will Rise For Model Year 2011
You would think that with the auto industry being in dire straits that the Obama administration would cut it some slack, especially when it comes to regulatory requirements. But, they won’t as they promised today to raise corporate average fuel economy (CAFE) standards to 27.3 mpg for the 2011 model year.
In case you don’t know it, some 2010 model year cars are already out (Mercedes GLK350, Ford Fusion, Mercury Milan to name a few) — guess who’ll have to think quickly on their feet to meet the new standards? Everyone!
To be fair, requiring better fuel economy makes sense as that move helps lower our dependency on foreign sources of fuel while reducing pollution. I think most manufacturers will have no trouble meeting the new numbers, but I think it would have been better to delay the changes for at least a year or two. Most definitely until after the economy recovers.
Additional Increases Through 2020
By 2020, the corporate average will increase to 35 mpg which means that an automaker’s fleet of passenger vehicles will have to become even more efficient. I believe that most manufacturers will be able to achieve these numbers for the simple reason that the technology to produce hybrid and pure electric vehicles will already be in place.
But, I also know that developing, refining and bringing this technology online will cost the industry billions of dollars. Per company, that is. Even supposedly “healthier” car companies could use a break…what’s the rush?
There are a few other things looming which could add to the industry’s burden such as pushing that 35 mpg CAFE threshold higher, perhaps above 40 mpg for 2020 and allowing individual states to establish their own guidelines.
CARB Manages California Policy
California, for instance, operates the California Air Resources Board (CARB) which establishes it own emissions and fuel economy guidelines. Under President Bush, the Golden State was only allowed to regulate emissions, but not fuel economy. However, the Obama administration is willing to let California and other states set their own requirements, which will be higher.
Why are we putting yet another burden on the backs of a troubled industry? And, why isn’t big labor speaking up? Every hit against the car companies means additional lost jobs. If I were an assembly line worker, I’d be screaming at my union rep.
Let us not forget: California is essentially broke with a $41 billion budget shortfall on the horizon. In California they’re quick to raise taxes even as unemployment jumps and the housing industry slumps. No wonder there is a net migration out of the state.
Hitting Back Against DC Tyranny
There is a huge backlash brewing in this country aimed toward a rapidly expanding federal government that is seeking more power, expanding regulation and raising our debt burden to unseen levels. Lost on many is that a contributing factor to the woes besetting the car industry are federal government regulations. Laws are passed and the car companies are expected to comply at their own expense, not all of which can be passed on to the consumer.
Billions more money will be going to General Motors and Chrysler over the months ahead, a good chunk of money will also be dished out to suppliers. The federal government’s involvement in the industry won’t do much to help out, with the taxpayer left holding the bill.
There is something terribly wrong with this picture!
Related Reading — The Carnage That Is Called Detroit
Tags: autos, CAFE, CARB, cars, gas mileage
Politics | Matthew C. Keegan, 27 Mar 09
By Stacey Derbinshire, March 27, 2009 @ 3:45 pm
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.
By Matthew C. Keegan, March 27, 2009 @ 3:58 pm
Thank you, Stacey. I just now stopped over at your blog and I like what I see. I left a comment on your “How to Tackle the Economic Recession?” article and also wonder where all that money went. Economics isn’t water cooler conversation, but it should be explained in simple terms to the masses. Perhaps they wouldn’t dare do that as they’d have a full scale rebellion on their hands!
By LarryJackson, March 27, 2009 @ 8:02 pm
This seems to be a favorite practice of President Obama. I believe it goes right along with the cap and trade policies. If they are enacted, it will make our energy bills go up. Raising the standards on automobiles will raise their price. He seems to think that he needs to make anything energy related as expensive as he can, trying to force Americans to change. All he is going to accomplish is to bankrupt our country.
LarryJacksons last blog post..Obama’s Budget Blueprint–A New Era or A New Bust?
By Matthew C. Keegan, March 28, 2009 @ 4:32 am
This move will most certainly raise new car prices, Larry. But, consumers will not pay for these changes, at least not when the economy is down.
I stopped into my local auto parts store recently to pick up a new air-conditioning filter and asked the manager how business was doing. He told me that they were doing very well. This tells me that people will be holding onto their cars longer, doing what they can to keep their older vehicles on the road.
If consumers aren’t buying new cars, then they won’t help stimulate sales, or pay sales tax, or get better car insurance coverage, etc. That’s not a bad thing from the consumer’s point of view, but it does nothing to help move that part of the economy.
I’m actually not opposed to a “cash for clunkers” plan where the federal government would give new car buyers a $5000 rebate to purchase a new car. To me, this would be better than bailing out individual companies as the money would go into the hands of the consumer. Dealers would suddenly be busy again, tax money would flow into state coffers, old cars would be scrapped, etc.
By LarryJackson, March 28, 2009 @ 6:05 am
I help run the front office of an automotive repair shop and we have been fairly steady in our business. I can’t tell you the times I have heard the statement that it is cheaper to fix the vehicle than to buy a new one. A lot of people are deciding that it is better to fix the vehicle they have instead of buying a new one.
LarryJacksons last blog post..Obama’s Budget Blueprint–A New Era or A New Bust?
By Zerona Laser, July 29, 2009 @ 6:47 am
I can’t help being cynical about these projects. I think the main mistake that has been made is the rushing in part. We’re rushing in too much, and trying to do many things in too little time.
By Matthew C. Keegan, July 29, 2009 @ 6:56 am
Zerona, I couldn’t agree more. This rushing around means that mistakes will be made which means that additional government intervention (and control) will be necessary. Some problems will simply resolve on their own, while others will be exacerbated because we’ve foolishly rushed our decisions.