CAFE Bill Reveals Auto Industry’s New Political Irrelevance

By Brendan Moore

O6.24.2007

As most people that read this site are aware, the U.S. Senate bill to increase fuel standards on new cars through the mechanism of CAFE has passed. In fact, not only did it pass, but the bill came up for a vote without any debate and without a roll call vote, something that doesn’t usually happen in the Senate unless the amendment in question is considered a slam-dunk for approval. The auto companies and their friends in the Senate fought hard to get an amendment approved with easier fuel economy requirements and easier timelines for achieving those requirements, but they were swept aside in the Senate’s rush to look like they were doing something to reduce Americans’ expenditures for gasoline. The bill was approved 65-27 on Thursday, June 21.

The new CAFE requirement will require all auto companies to produce cars and trucks that average a combined 35 mpg by 2020. That’s a 40% increase form the current combined average. The bill goes to the House next, where it is expected to pass easily in its current form, and may, in fact, be toughened up considerably by the time it emerges from the House. So, there is no upside for the car companies in this scenario, only more downside.

The automakers did everything they could in an all-out effort to get the bill derailed or diluted, but it appears that the car companies no longer have anywhere close to the influence they’ve enjoyed for the past few decades. Almost every senator on both sides of the aisle turned a deaf ear to the industry entreaties, and the auto industry and its allies went down to a stunning defeat. It is not an exaggeration to say that the auto industry now matters very little in Washington. The politicians have determined that they will get more votes from the public going against the car companies than going with them, and from a government and regulatory perspective, it is now guaranteed that things are only going to get tougher for the auto industry going forward.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Share This Post On

4 Comments

  1. It will be interesting to see how this affects all automakers if the House passes a similar version and the President signs it into law. My guess is that we’ll see a greater push toward small cars, more diesels and hybrids, and more expensive cars than today.

  2. Ford and GM could meet these new CAFE requirements tomorrow if they could just magically swap out their American product line for their European lines. Both companies make excellent cars that get great fuel mileage and unfortunately, sell those cars only in Europe.

  3. I don’t feel sorry for the domestic auto corporations, because they’ve had a long time to get ready for this day, and they didn’t. Businesses that are run badly go out of business. That’s the way the market works.

  4. Personally I feel CAFE is rather stupid. Higher gas prices have done more for fuel conservation than CAFE could ever hope to do. It’s like trying to fight obesity by imposing serving size limits at restaurants.

    I see these increased CAFE requirements doing a couple things: 1) Forcing car makers to sell cars people don’t want, 2) Encouraging people to drive even MORE (i.e. “I drive everywhere now because it’s okay since my car gets way better gas mileage than my last one!”.

Submit a Comment

Your email address will not be published.