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