As I usually do in the morning, I spent a few minutes browsing news and blogs. Not much going on in the political circle (other than FISA). I've been following auto news recently, because my ten year old Ford has cost me over $3,000 in repairs in the last few months, and died on me again on Friday. Last time I buy a Ford, by the way. Naturally, this has me thinking about replacing it, since it doesn't get great mileage anyway. This is a short roundup of a few articles, and a brief commentary on the state of the American Auto Industry.
Sometimes, the idiocy of modern life just jumps out at you. I mean, put aside the politics and the environmental concerns, and just look at the economics of the following.
Detroit's Big Three automakers, Toyota Motor Corp., Daimler AG and five other car makers urged federal regulators Tuesday to dramatically water down its proposal to hike fuel efficiency standards by 4.5 percent annually through 2015.
In a 77-page filing Tuesday morning, the Alliance of Automobile Manufacturers -- the trade group representing domestic automakers and some foreign companies -- blasted the April 22 proposal by the National Highway Traffic Safety Administration that would hike fuel economy requirements to a fleetwide average of 31.6 mpg -- including 35.7 mpg for passenger cars and 28.6 mpg for light trucks starting in the 2011 model year.
"This goes beyond what is technologically feasible and economically practical," the automakers said, calling the proposal "excessive."
That's from an article by the Detroit News.
So, did you get that? A 77 page filing "blasting" the NHTSA's recommendation to increase economy to 31.6 mpg starting in 2011 model year.
I thought I would take a look at the Alliance's objections, and see if they made their filing available on their website. All I could find was a press release, praising and supporting the NHTSA plan.
"Congress has set an aggressive, single, nationwide standard and automakers are prepared to meet that challenge. This proposal represents an important mile marker on the road to at least 35 miles per gallon by 2020."--Dave McCurdy, President and CEO, Alliance of Automobile Manufacturers
In supporting the Energy Independence and Security Act (EISA) the Alliance and its member companies acknowledge that we have a responsibility to increase fuel economy and limit greenhouse gas emissions from new automobiles.
• This proposed rule would require the industry to achieve fleet wide fuel economy standards of 35.7 mpg for cars and 28.6 mpg for trucks, vans and SUVs by 2015.
See the whole thing here.
Just to clarify: the NHTSA plan would increase the fuel standards by 4.5% per year, beginning in 2011 and ending in 2015. See the NHTSA press release here.
So, the Alliance is talking out of both sides of their allegorical face, surprise, surprise. Hypocrisy like that is so commonplace these days, it barely merits a yawn.
But then, there's this, again from the Detroit news.
The automakers said the proposal would eliminate up to 82,000 auto jobs and reduce auto sales by as many as 856,000 vehicles by 2015. It said the net cost to society -- based on a study conducted for the alliance -- would be $28.9 billion by 2015 -- and the regulations would hike the cost of light trucks by an average of $4,000.
Aha, there's the real issue: It's going to cost so much more for consumers to buy "light trucks" i.e., SUV's like my Explorer.
Because, you know, with gas between $4 and $4.50, the demand is so high for them now. Right?
Even with some factories running at peak capacity, auto companies cannot meet the surging demand for small, fuel-efficient cars. At the same time, manufacturers are slashing production of slow-selling pickup trucks and sport utility vehicles.
. . .
The Detroit automakers are temporarily laying off thousands of hourly workers as they idle plants making pickups and S.U.V.’s. Both Ford and G.M. are planning to add shifts to factories making small cars, but their additional production will not be available until the fall.
. . .
Chrysler drastically cut its production plans early in the year, but this week was forced to announce the closing of one of its minivan factories and the elimination of a shift of workers at a pickup plant.
. . .
The seismic shift by consumers to small cars from large vehicles has blindsided virtually every automaker. Only Honda Motor, where sales rose 1 percent in June, appears to have been prepared. The Japanese automaker’s Fit subcompact nearly doubled its sales during the month, and its Civic sedan set a June record. By contrast, Toyota executives said they could not meet demand for its Prius hybrid-electric car or its small, fuel-efficient Corolla and Yaris models.
Authors note: the above quotes have been re-arranged from the original NYT article, Car Sales at 10-Year Low. Once again, the formerly "Big Three" are on the cutting edge of automobile industry. The job-cutting, cost-cutting, stock-price cutting, benefits cutting edge, that is.
Now for the kicker: All of these forecasts, about how much money consumers will save (according to the NHTSA) or lose (according to one face of the Alliance of Automobile Manufactureres, the "BIG THREE", etc.), are all dependent upon a forecast of gas prices.
What kind of forecast?
When the government issued its proposal to raise vehicle fuel economy standards to a fleetwide average of 31.6 miles per gallon by 2015, the plan assumed that gas prices would be $2.42 a gallon in 2016.
$2.42 per gallon.
In 2016.
Eight years from now.
Hmmmmm. Not sure that's very realistic. What does the Chairman of the House Select Committee on Energy Independence and Global Warming have to say about that projection?
"When compared to today's prices at the pump, these numbers are nothing short of absurd," Rep. Edward Markey, D-Mass., who leads a House panel on energy independence and global warming, said Thursday.
Markey said a higher estimate put forth by the Energy Information Administration, which supplies the projections, included a range of $3.14 per gallon in 2016 to $3.74 a gallon in 2030. Using these estimates "found that technology is available to cost-effectively achieve a much higher fleetwide fuel economy of nearly 35 mpg in 2015."
That's from this Forbes/AP article.
Boy, those predictions about $3.74 per gallon gas in 2030 seem pretty unrealistic too, don't they? Can you imagine gas getting that high? Absurd, I tell you.
Okay, I suppose we can inject a little bit of politics back into this. After all the absurdity of these proposals comes from the NHTSA and the Energy Information Agency, both of which are part of the Bush executive branch. Of course, that doesn't explain Congressman Markey's remarks, which also seem a tad bit out of touch with real gas prices, as well.
All in all, a spectacular display of idiocy all around, if you ask me.
Tips and Rec's always appreciated. Thanks for allowing me to vent, Kossacks!