Fuel Economy: it isn't just CAFE - The Business - Brief Article

Automotive Industries,  July, 2002  by Maryann Keller

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Last year served on the National Academy of Sciences panel that reviewed the effectiveness of the Corporate Average Fuel Economy (CAFE) standards. We concluded that technology existed that could increase fuel economy without prohibitive price increases with the largest benefit available in lightweight trucks. We also grappled with the fact that CAFE had become meaningless in improving the fuel efficiency of the nation's vehicle fleet. Today's law has so many loopholes that it is totally ineffective in achieving its goal. Its authors never contemplated vehicles weighing more than 8,500 pounds as personal transportation, relying on credits for multi-fuel engines (even if there was virtually no possibility of alternative fuel usage) and calling cars "trucks" because they had a flat floor.

We sat through many hours of sometimes-absurd testimony such as when a representative of an outdoor recreation group suggested that trucks were needed to help the nation's obesity problem. Getting us into the wilderness where we could sit in our bass boats was going to be compromised by higher fuel economy because we wouldn't be able to tow those boats. Or the representative of farming interests who said that farmers would have to make choices between dental work for their children and paying a higher price for a fuel-efficient pickup truck. There were, as one would expect, pleas from environmentalists to save the planet and from automakers who complained about the financial impact that they faced if forced to spend money on fuel economy. In the end I think the panel came to balanced and reasoned conclusions.

One of the troubling things for me was a gnawing feeling that while fuel economy wasn't important to shoppers today, it easily could be. It was amazing that Honda would break ranks with the rest of the industry and confidently predict that it could both achieve higher fuel economy and maintain vehicle safety, the ultimate weapon of the anti-fuel economy faction.

I have spent the last 30 years of my life watching the Big Three give up market share to the Japanese and European manufacturers. The reasons for the share erosion have been well documented and include superior quality, better engines, better resale values, interesting designs and model line expansion. Europe and Japan already have high fuel taxes to encourage less driving and more efficient vehicles. And both are imposing new regulations that will force technology development within their respective automotive industries.

The Europeans and Japanese, because of their desire to sell more cars in Europe, are developing cleaner diesel engines. In Japan, hybrid vehicles will become more commonplace along with fuel cells, even though no one sees them in a private garage any time soon. I hear nothing about direct-injection gasoline engines from American companies, nor is anyone in Detroit boasting of gasoline engines that could deliver the fuel economy of a hybrid, as is Honda While Japan is developing new engines, Detroit is developing bigger, bolder trucks.

It may be instructive to note that in a recent J. D. Powers study of 5,200 recent vehicle buyers, three out of five would consider a hybrid vehicle in their next purchase. The fact that they were aware of hybrids is in itself amazing. Since Honda and Toyota are the only makers selling hybrids today, shopper's awareness also means that they perceive these companies as being technologically advanced, a view that, enhances the brand as much as the appeal of a particular car.

My fear is that Detroit will get its wish to make minimal investment in fuel economy technology which ultimately results in further loss of market share as shoppers turn to what they think are more technologically sophisticated brands. This for me is a greater risk than revising CAFE to close loopholes.

MARYANN KELLER is a veteran auto industry analyst and author of the books "Rude Awakening: The Rise, Fall And Struggle To Recover At General Motors" and "Collision: GM, Toyota and Volkswagen And The Race To Own The 21st Century."

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