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Government CAFE Regulations: No Limits to the Loopholes

Charles Krome
by Charles Krome
July 29, 2009

When the new CAFE regulations came out earlier this year and they included the usual loophole for small-volume automakers, I thought about writing a column bemoaning the unfairness of it all, etc., etc. Maybe even pointing out that a 2010 Ferrari California gets exempted from the rules despite having a lower combined fuel efficiency number (15 mpg) than a '10 HUMMER H3 (16 mpg) '” and can you imagine the uproar if HUMMER were somehow able to avoid the CAFE regs?

But on the other hand, it wasn't exactly something new, and the number of companies and vehicles involved was pretty low. An automaker's sales have to represent less than .4 percent of the U.S. market for the company to reach loophole level. That translates into about 40,000 vehicles in a market with a seasonally adjusted annual sales rate of 10 million units, a mark to which the industry still hasn't returned.

Yet, on the other other hand, it was interesting to notice that this did represent a nice-sized jump in how many vehicles an OEM could produce and still find a loophole. The ceiling used to be at 10,000 sales, so this seemed a step backward for Team Green.

Well, now things have gotten worse '” by which I mean "even more hypocritical." The new CAFE rules also include provisions meant to limit greenhouse gases, and people are finally finding out that automakers that sell less than 400,000 vehicles in this country won't have to meet the same standards as the bigger companies. Now, when you start talking numbers that big, you're easily into the mainstream. In fact, just about the only OEMs that sell more than that number of vehicles here are General Motors, Ford, Chrysler, Toyota, Honda and Nissan.

Not Subaru, not Volkswagen, not Mazda and certainly not companies like Mercedes-Benz or BMW.

But why are the loopholes there in the first place?

According to a recent Wall Street Journal story, Jody Freeman '” counselor in the White House Office of Energy and Climate Change '” said, "We wanted to make sure that the entire proposal was something the industry could support."

Now, this first looks like a case of preemptively caving in to the pressure of auto lobbyists, but it actually makes even less sense than that. The loopholes seem like they'd be a competitive disadvantage to the biggest automakers, the ones with the most remaining clout in Washington. So, you'd think they would actually be against it.

Or not. After all, the same story also reports that, "A spokesman for GM '” now majority-owned by the federal government '” said the Obama administration's proposal 'creates fewer concerns' than California's policy because it is expected to exempt only a quarter of each qualifying auto maker's fleet, rather than all vehicles sold by those companies. It also would be in effect for only four years, compared with seven under the California program."

Oh, right, California's policy. It turns out that the greenest state in the country (the universe?) also carves out fuel-efficiency and emissions exemptions for low-volume auto manufacturers. Hey, maybe that's even the real reason Ferrari named a model after the Golden State.

Anyway, I'm sure none of the loop-holed OEMs '” nearly all importers, remember '” would consider lobbying the U.S. government for benefits, but they have let it be known that they consider the CAFE rules to be unfair. As a helpful Daimler spokesman implied in the Journal piece, the reason that vehicles from the small-volume, high-end companies get worse mileage and emit more emissions has to do with them being heavier, because they're just packed with all kinds of great safety equipment a buyer can't get from mainstream offerings.

I mean, I'm positive the reason a 2010 Mercedes-Benz S65 AMG gets 11 mpg city/17 highway is safety equipment and not the "need" to propel a couple tons of metal to 60 mph in under five seconds.

Further, it's not like Mercedes can offset the fuel consumption of its mechanized monsters with the sales of tiny gas sippers like the smart fortwo. Oh, wait '” M-B and Smart are actually owned by the same company, aren't they?

I guess we'll just have to chalk this up to the typical governmental opacity and confusion. I mean, it's not like someone went back and secretly changed EPA mileage numbers to "fine tune" Cash for Clunkers or anything.


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