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Senate Votes to Set New Fuel Efficiency Standards

June 19, 2007 - by Donny Shaw

The Senate will vote today on how far their energy legislation will go to raise fuel efficiency standards for automobiles. Philip Clapp, president of the National Environmental Trust, has called the vote, “the most important vote the Senate will cast in terms of reducing the nation’s dependence on foreign oil and providing consumers with some relief at the pump.”

As it stands, the bill calls for the Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks to be raised from 25 miles per gallon to 35 miles per gallon by 2020, with a 4% a increase every year for the next decade. By decreasing fuel demand, the bill would lower prices at the pump and decrease America’s reliance on foreign oil. But an amendment supported by a bipartisan group of senators seeks to weaken these new standards that the bill proposes.

Specifically, the amendment would raise the standard for passenger cars to 36 miles per gallon by 2022 and the standard for trucks to 30 miles per gallon by 2025. No further increases would be required. The auto industry has been lobbying hard for this amendment:

>Automakers pulled out the stops Tuesday in Washington. Tom LaSorda, CEO of DaimlerChrysler AG’s Chrysler Group, made a surprise visit to Capitol Hill. He joined Mark Fields, Ford Motor Co.‘s president of the Americas; General Motors Corp. sales chief Mark LaNeve; GM environmental executive Beth Lowery; and dozens of auto dealers who crisscrossed the hill.
>"The bottom line is we are counting votes," said Sen. Debbie Stabenow, D-Lansing, another sponsor of the compromise bill. “It is very, very close.”
>Even Steve Feinberg, the reclusive head of the private equity firm Cerberus Capital Management LP, met with an undecided lawmaker, Sen. Jon Tester, D-Mont., last week at Tester’s Washington office.
>"They talked about CAFE," said Tester’s spokesman, Matt McKenna. Cerberus recently agreed to buy 80.1 percent of Chrysler in a $7.4 billion deal. Feinberg was joined by a Cerberus lobbyist, former Louisiana Sen. John Breaux.
>Chrysler may have the most to lose from a stiff fuel economy measure because its lineup is 70 percent trucks. In a letter to employees last week, LaSorda said the alternative legislation “will cost our company $11.2 billion over the first five years,” but that would be “far less than the tougher bill.”
>The current energy bill “puts us out of business,” LaSorda wrote. “For the first five years alone, it’s estimated to add up to a staggering $6,700 — almost a 40 percent increase — to the cost of every Chrysler vehicle.”
>Auto executives zeroed in on undecided senators such as Tester, Mary Landrieu, D-La., and David Vitter, R-La.

But senators who support the tougher requirements in the bill point out that it changes the law to allow automobiles to be divided into classes. Dianne Feinstein (D, CA), speaking on the Senate floor, pointed out how the new class divisions would assist manufacturers like Chrysler, who produce mainly trucks:

>Under the newly proposed system, the National Highway Transportation Safety Administration (NHTSA) would have broad discretion to divide vehicles into classes based on their attributes, such as size. So, a small car, in a small car class, is evaluated against other small cars. Not a small car evaluated against a Navigator or a Cadillac. So, class by class evaluations. This requirement would no longer apply to each automaker. This is additional flexibility. Different automakers will meet different standards, depending upon the mix of cars they choose to make.

>From 2011 to 2019, NHTSA must set fuel economy standards that are the maximum feasible, and ratchet these standards up at a reasonable rate.

>And by 2020, the total average must meet the 35 miles per gallon. The total average. Some cars will be below it, and some will be above it. As long as the total average meets the standard. This gives Detroit the flexibility they say they need. And I don’t know why they won’t understand it. This effectively gives the automakers 13 years to get the job done. And it means that fuel economy will increase across all classes – from the smallest sedans to the largest SUVs. It may be different by the class, but nonetheless it would increase, so that the average fuel economy would be 35 miles per gallon.

This is truly a vote that is too close to call. The outcome really does lie in the hands of the undecided senators who auto executives have been lobbying the most — Jon Tester (D, MT), Mary Landrieu (D, LA), and David Vitter (R, LA). We’ll update with the outcome as soon as the vote takes place.

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