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Rules Aim to Steer SUV, Truck Makers Toward Higher Fuel Efficiency Standards

Posted on: Wednesday, 24 August 2005, 09:00 CDT

Aug. 24--With oil prices hitting record levels, the federal government is nudging manufacturers of sport utility vehicles, pickup trucks and minivans toward higher fuel efficiency standards.

If the rules announced Tuesday go into effect in April as planned, those heavier vehicles should get a little cheaper to run, though perhaps a little more expensive to buy, automobile industry analysts say.

Conservation groups swiftly denounced the plan, saying the improvements were paltry, projected fuel savings a "fantasy" and complained that the heaviest SUVs, such as the Hummer H2, would remain exempt from any mileage standard.

Transportation Secretary Norman Mineta came to Atlanta to announce the rules at a news conference atop the parking garage of the Varsity restaurant. Pointing out the clogged Downtown Connector behind him, which he called one of "the worst congested stretches of road in the country," he said the changes would save Americans 10 billion gallons of fuel if fully implemented in 2011 as planned.

He said the rules would help the environment while reducing the nation's dependency on foreign oil.

While the transportation secretary stressed the money that drivers would save at the pump, he also said current high gas prices were not a factor in the new rule, which has been in the making for years.

In coming to Atlanta, Mineta and his advisers seemed acutely aware that gas prices matter to Georgians. The number of SUVs- registered in Georgia nearly doubled, to 892,000, from 1997 to 2002. And a study by the Surface Transportation Policy Project in 2003 ranked Atlanta sixth among the nation's big cities in the percentage of adults who drive to work.

The increase in mileage standards in the new rules announced Tuesday is slight, but the formula the rules are based on is getting its first shakeup since fuel economy regulations were implemented in the 1970s.

Under the current system, a manufacturer has to meet a miles per gallon target for its entire fleet of light trucks. Those targets are 21 miles per gallon for current-year light truck models, up to 22.2 mpg for 2007 models.

Under the new system, light trucks would be divided into six categories by vehicle size, with each category having its own mileage target. The smallest trucks would have the highest mileage targets, at 28.4 mpg, with the targets falling to 21.3 mpg for the biggest category.

Vehicles that weigh more than 8,500 pounds, such as Hummers and Ford Excursions, would be exempt from mileage rules. Two years ago the Bush administration proposed regulating those vehicles, but the Department of Transportation said the cost to manufacturers would be too great.

The mileage for passenger cars is set by Congress at 27.5 mpg and won't change.

"We don't see how we can" apply the standards to the larger SUVs, said Dr. Jeffrey Runge, head of the National Highway Traffic Safety Administration, who joined Mineta at the press conference.

Automobile industry analysts said the new CAFE standards, which stands for Corporate Average Fuel Economy, could help the industry, since sales of SUVs tend to react to gas prices.

While SUV sales have recently spiked along with manufacturers' promotions offering buyers "employee discounts," in general sales have been falling as gas prices rise, said Mike Chung, an auto industry analyst at Edmunds.com.

"We're definitely seeing an overall slowdown," he said, "especially as there is more interest in fuel economy." He said the new technologies needed to meet the mileage targets may raise SUV prices, but not by much. "If I had to ballpark it, I'd say 5 to 10 percent over the next three to five years," Chung said.

Analysts at Global Insights have concluded from anecdotal evidence that the threshold for consumers parking or trading in their SUVs and trucks is somewhere between $2.75 and $3 per gallon of gas. Some owners have parked their gas guzzlers and bought lighter cars, they've found, with the intention of going back to the larger vehicles if or when fuel prices fall.

Auto industry representatives said they were initially pleased, especially at the division of size categories. Manufacturers have complained that the old system favored foreign manufacturers, because they made lighter small trucks that brought the mileage averages up for their fleets.

Advocates for the environment said the administration's prediction on fuel savings was suspect because automakers would change the type of vehicles they produced, making the vehicles larger to get into easier mileage categories.

The calculation is "a fantasy number," said Brendan Bell, a lobbyist for the Sierra Club. He contended that the standards proposed were far lower than they could have been, given current technology.

The National Highway Traffic Safety Administration will take comments on the proposed rule for 90 days and is expected to issue a final rule in April.

Environmentalists agreed that better mileage standards were important for the economy, because consumers would buy vehicles that are cheaper to fill up.

Dan Becker of the Sierra Club said that if American manufacturers weren't forced to use fuel efficiency technologies, they would lose a competitive edge to Japanese manufacturers. "They're giving the Big Three enough rope to hang themselves," said Becker.

That played out for Bilal Mo, who owns a Citgo station in downtown Atlanta. He decided two months ago that he couldn't stand the fuel bills for his Hummer. "I mean, over $100 to fill up a tank," he said. "That's why I sold it. It gets like $8 per gallon. It's a good vehicle; I just couldn't drive it."

Jeff Nesmith of Cox News Service and staff writer Mike Tierney contributed to this article.

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Source: The Atlanta Journal and Constitution

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