Fuel Efficiency Can Force the American Automotive Industry to Be Competitive

The automotive industry has been hurt by cheaper imports with higher quality. The Big 3 American makers are sliding fast on the international scene with Asian companies coming quickly to power. To make matters worse for the American auto industry Congress wants to increase fuel economy throughout the nation. In frenzy the American automakers are attempting to lobby Congress to relax these criteria. The automotive companies would rather save today and lose tomorrow.

Political Action:

The auto industry has been targeting both Senators and the American public in hopes of relaxing any fuel economy regulations. The tactics used by the auto industry have been called scare tactics that are designed to frighten the American people into believing they will lose their ability to produce cars within the U.S.

The Senate is calling for an increase in the Corporate Average Fuel Economy, or CAFÉ, in an effort to reduce green house gases and head off global warming. Likewise, the economy has become overly dependent on foreign oil and through the exploits of the Iraq war many Americans have become distinctly aware, through rising gas prices, of the need to minimize this dependency. One of the ways to do this is to increase oil efficiency.

Environmental groups have also been fighting to increase these fuel standards at the same time that the Auto Industry has been attempting to reduce efficiency standards. The environmental groups desire to raise the standard to 35 miles per gallon by 2020 which is approximately 10 miles per gallon over current criteria.

The Alliance of Automobile Manufacturers, a lobby group, has been airing radio and print ads in 20 states in order to pursue alternative legislation. Many of the automotive companies have been sending letters to their employees try to convince them to not support any new legislation raising fuel standards. The letters contained a hint that the worker's livelihood depended in part on not having the new legislation take effect.

Proponents like Senator Feinstein state, "The technology exists today to make major improvements in fuel economy," and "It can be done without sacrificing safety, and with significant benefit to our economy and the environment." To the pro-efficiency group it is believed that cheaper fuel could reduce the cost of products, reduce environmental pollution and increase overall independence of American industries.

The Automotive Proposal:

The automotive industry wants to relax some of these criteria as much as possible. They are threatening that if significantly higher fuel efficiency is required it will cost them thousands of jobs and potentially lose any competitive advantage in the market. The cheaper and smaller Japanese imports would win and it would spell the end for the American auto industry. The total cost for this increased efficiency would be in the billions of dollars.

They desire to require passenger cars to have an average of 36 miles per gallon by 2022 and 30 miles per gallon for pickup trucks, SUVs and vans by 2025. In exchange for the relaxed legislation the automotive industry would promote flexible fuel vehicles and alternative energy sources. The goal is to relax the criteria of fuel efficiency but start producing cars that can handle alternative sources of fuel.

The Scare Tactic:

If the automotive industry doesn't get what it wants there is a fear that the overall cost of producing these fuel efficient cars could cost America tens of thousands of jobs, raise the cost of cars by 40% and require a much small automotive industry to compete. That Americans will lose additional cars and have to pay much more at the dealer.

The United Auto Workers, which is aware of the additional $6,700 cost per vehicle, is also pushing its members to fight any proposed increase in fuel efficiency. To them a lost in jobs means a lost in UAW revenues and this would be a serious slide for unionization in the auto industry.

The Solution:

Green house gases are threatening to start having major impacts on the U.S. economy by 2020. Other companies not associated with the automotive industry have already begun to push government to enact serious emission control in order to avoid both the economic and environmental impact of pollution within the country. There will simply come a time when the U.S. can no longer keep polluting without damaging itself economically, politically and environmentally.

American cars are nearly half as fuel efficient as Japanese cars. For example, the Ford Escape Hybrid is gets only 36 miles per gallon while the Honda insight gets 60 miles per gallon. Japan is simply better at building more fuel efficient vehicles and can do so with a great level of expertise.

American companies are afraid they will become less competitive. The truth is that they are already non-competitive and are losing each and every year to foreign competitors. One of the reasons why the industry became less competitive is because management refused to change, American workers used unions to milk the industry for high wages, and we have not kept up on the latest manufacturing technology.

Drastically requiring the American automotive industry to raise fuel efficiency to 35 miles per gallon when the Japanese have already reached 60 miles per gallon on some vehicles is not excessive. If anything, it is giving the U.S. manufacturers a little too much wiggle room. We may have a smaller automotive industry in the future but those that can make the transition will be much more competitive. We need to jump both feet into the changes or bankruptcy is right around the corner.