Obama's mpg rules force painful choices for automakers

ERJ staff report (AN)

By Rick Kranz, Automotive News

The numbers are eye-popping. The US government wants new vehicles sold in the 2016 model year to average 35.5 mpg vs. 25.3 mpg this year.

So does this mean that US roads will look like Europe's - a sea of small and smaller cars with hardly a pickup or SUV in sight?

No. The new-vehicle fleet in 2016 will look remarkably similar to today's lineup, with pickups, SUVs and large, medium and small cars. But plenty of changes are coming under the hood.

The next decade will be an era of painful cost choices: Automakers may remove content from interiors, for example, as they add hybrid technology and other fuel-saving devices to the powertrain.

A key question is whether automakers can persuade American consumers - who until now have equated small with cheap - to pay extra for small, high-mileage cars.

As the fuel-saving rules, announced by the Obama administration last week, take hold, here are significant changes that industry sources and analysts see in the next decade:

-- Supplies of V-8-powered cars and trucks will be limited - and their stickers may rise substantially.

-- Pressure to cut costs will intensify as automakers add equipment, such as turbochargers and hybrid powertrains, to reduce fuel consumption. Last week the White House said the average sticker will be $1300 (Euro 928) higher in 2016.

-- Expect more hybrids, electrics and perhaps diesels, as the government encourages alternative powertrains.

The good news is that technologies to reach the new goals are on the shelf. The problem is they add costs.

Obama plan in brief

Highlights of the Obama administration's plan to limit greenhouse gases and boost fuel economy.

• In the 2016 model year, the US new-vehicle fleet will average 35.5 mpg. The figure is 25.3 mpg in the 2009 model year.• Vehicles will be categorised by the size of their "footprints" - the rectangle formed by their four wheels. Larger footprints will have less stringent emissions standards.• The government proposes letting automakers earn credits for a fleet average better than the standard. A company might be able to apply credits in, say, its car fleet to offset debits in its truck fleet. Automakers also might be able to sell credits to other automakers.• Credits for flexible-fuel vehicles, which typically can burn ethanol, might be available until the 2015 model year only.• The government proposes additional credits for electric vehicles and plug-in hybrids and for new greenhouse-gas-saving technologies such as solar panels on hybrids, adaptive cruise control and active aerodynamics.• The new rules give the auto industry one national standard to regulate fuel economy and greenhouse gas emissions. California and other states were suing for stricter targets. One standard will reduce engineering and production costs for automakers.

Small cars need gains, too

John Krafcik, acting ceo of Hyundai Motor America, says his vehicles will achieve a fleet average of 35 mpg by 2015. Hyundai plans fuel cell and hybrid vehicles, smaller-displacement engines, turbochargers and gasoline direct injection.

"It will be a hard task," Krafcik said late last year, "but we think it's the right thing to do. Fuel-efficiency leadership is a great way to elevate the brand," said John Mendel, executive vice president of American Honda Motor Co.: "I see our fleet as not too dramatically different."

Mendel was one of 10 auto ceo's who stood with President Barack Obama in the White House Rose Garden to announce the new national fuel-efficiency standard.

For Honda, the goal is "more like 38 mpg," Mendel said. "It's more difficult for Honda or Scion or a small-vehicle manufacturer because we are not so dependent on trucks, so we have to move further along. But our fleet mix is not going to be too dramatically different."

Bob Lutz, General Motors' former product chief, says the successors of several GM models will be about a half-size smaller. For example, the next Impala could be closer in size to the current Malibu. And the next Malibu would be downsized accordingly.

Under the rules, vehicles with a small footprint - the rectangle created by the four wheels - will have high mpg standards. For this reason, Porsche is under the gun because it packs large engines in small cars.

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Obama's mpg rules force painful choices for automakers from Automotive News (a Crain publication)