Automakers Are Back to Fighting Better Mileage Rules, Even Though They Sell Cars

In 2009, automakers quietly acquiesced to an ambitious Obama administration plan to get car fleets to 35.5 mpg by 2016, and it looked like a new era of greener, gas-saving automobile design had begun. But hold the refrains of "Kumbaya" -- the car companies are reverting to their bad old ways, and even more stridently than before.

In other words, carmakers -- whose knee-jerk impulse is to reject any government interference -- are once again shooting themselves in the foot to avoid committing to the compact cars that people actually want to buy.

Auto CEOs don't usually directly bad-mouth the regulations themselves -- they have hired lobbyists at the Alliance of Automobile Manufacturers to do that for them. Former GM vice chairman Bob Lutz is safely retired, but he was pretty outspoken against the regulators even before that. Lutz, who has a new book to promote, calls even a 42 mpg federal standard "physically impossible."

He recently told a journalist visiting his Michigan lair that he expects a government cheering squad:

We're the only country in the world where the national government is hostile to its own automobile industry. The Korean government is in bed with the Korean auto industry, the Japanese government is in bed with the Japanese auto industry, as are the European governments....Why should we be the only auto industry that is competing not only against foreign competition but also the policies of its own government.

Auto lobbyists, meanwhile, are definitely going on the offensive. On Tuesday, the AAM announced a new "160" website. What's 160, you ask? Why, it's the number of cars on the American market that get 30 mpg on the highway or better. The only problem, the Alliance says on its new site, is that we're just not buying them. But that claim is outdated and wrong.

"Consumer demand has not kept pace with the industry's advancements," laments the trade group, which represents 12 major automakers. "Only four percent of consumers bought cars which had 30+ MPG Combined Milage (sic) in 2010." But citing figures only for 2010 ignores the tremendous sales leap that green cars have made in just the last few months.

All hands against 62 mpg
The Alliance uses the sad, sad fact of consumer intransigence to justify its wholesale opposition to a 62 mpg fleet average fuel economy standard for 2017-2025. The current standards, which run through 2016, produced a rare happy photo op between the Big Three, the EPA and the Obama administration. But now carmakers are retreating to their traditional oppositionism, just when they should be embracing it as a competitive advantage.
After all, the final number won't be 62 mpg but a compromise, probably around 50 mpg. And the three-cylinder engines Ford is already planning to introduce here will get that on the highway. Despite all that, the Auto Alliance's Gloria Bergquist told me:

Last year, there were 30 hybrid models on sale, and all combined they were outsold by one bestselling pickup, the Ford F-150. Hybrid sales are, in fact, a flat line. The uptake of conventional fuel-efficient cars is also not as high as we would like. There's the potential for a huge sales gap, and it's a big concern for the companies ?€" if they don't sell the cars, there will be huge economic repercussions.

Is Bergquist reading the same sales data I am? In May, Chevrolet's compact and fuel-efficient Cruze (42 mpg highway in the Eco edition) became the bestselling compact car, topping the Japanese heavyweights with more than 22,000 sold. This is the first time in five years that a U.S.-made car has held the top slot. GM vehicles in the 160 club, including the Cruze, Equinox and Malibu, are now over half of Chevrolet's retail sales, up from 36 percent last year.

Even big cars are downsizing
What's more, even people buying trucks or SUVs are opting for smaller engines. Half of Ford F-150 sales (the hybrid killer) specify the V-6 EcoBoost engine instead of the V-8. And more than half of Chevrolet buyers are going for the smallest available four. That's unprecedented in GM's history. And although May was worse, April sales set U.S. sales on a path to a 13-million sale year, up from 11.5 million in 2010.

The fact that the Big Three actually had compact cars to sell leveraged their ability to clean Toyota's clock as it suffered from earthquake-related production delays. What do consumers actually have to do to prove to Detroit's satisfaction that, yes, they really do want to buy small cars, especially if they're as good as the Chevy Cruze and Ford Focus?

Crossovers are still selling well, but they're a transitional security blanket as auto buyers shift to smaller cars, a move that is probably permanent. And why are Hyundai's sales up 14 percent in May? You guessed it -- they're selling econoboxes.

Ford betting the farm on small cars
Although it's apparently supporting the Auto Alliance's stance, Ford's growth strategy of eight million cars and trucks worldwide by mid-decade is solidly built on the smaller vehicles it now sells globally. By 2020, Ford said Tuesday that it expects small, fuel-efficient cars to be 55 percent of its product mix. Ford isn't selling many cars in Asia now (three percent of its output), but it expects that Asia and the rest of the Third World will total 20 percent of sales by 2020.

And you bet that Ford is making money on small cars, a huge problem for all the Big Three in the past. The Detroit News says:

Even though it's increasingly selling more small cars, their transaction prices -- the actual prices paid -- have been rising, and Ford's profits have grown. Last year, Ford earned $6.6 billion, its highest income in more than a decade.

The global auto industry is coming together around smaller cars. Detroit can do more than deal with that reality -- it can win with it.

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Photo:Flickr/Jason Pier