The auto industry hates regulations, and it loves to make dire predictions to fight them off. The catalytic converter was going to kill Detroit, as were seat belts and airbags. Car companies now accept all that technology as the cost of doing business, reserving their current ire for proposed hikes in federal fuel economy/greenhouse gas standards that could require cars to reach between 47mpg and 62 mpg combined by 2025. If you listen to auto execs, those regs are going to send the Big Three back to bankruptcy court.
Don't believe it. Here are five examples of auto industry overreaching, crying wolf in ways that turned out to be wildly unfounded. Four are historic, but one is as current as today's headlines:
- The death knell of air bags. In a private 1971 meeting with President Nixon (caught on the White House's legendary taping system) then Ford President Lee Iacocca and the company's chairman, Henry Ford II, squawked loudly about impending legislation. Ford: "We see the price of a Pinto, which now sells for $1,919, going [up] something like 50 percent in the next three years.... It's the safety requirements, the emission requirements...." Iaccoca: "We are in a downhill slide, the likes of which we have never seen in our business. And the Japs are in the wings ready to eat us up alive.... The citizens of the U.S. must be protected from their own idiocy, so we will put in a sophisticated device that will blow up on impact and package him in an air bag and save their lives."
- The catastrophe of catalytic converters. Former GM Vice President Ernest S. Starkman claimed in 1972 congressional testimony, "If GM is forced to introduce catalytic converter systems across-the-board on 1975 models--it is conceivable that complete stoppage of the entire production could occur, with the obvious tremendous loss to the company, shareholders, employees, suppliers, and communities." The damage to GNP would total $17 billion, and 800,000 workers would lose their jobs, they said.
- The apocalypse of California's zero emission rule. Faced with the prospect that California's law requiring two percent electric cars on state roads was actually popular, the auto industry advertised for -- and found -- a PR firm to create a grassroots campaign to change their minds and "create a climate in which the state's mandate requiring automakers to produce electric vehicles in 1998 can be repealed." The resulting blitz, which claimed that EV mandates would add $2,000 to the cost of conventional cars, was quite effective, dramatically weakening the standards (and killing off the electric-car requirement). Roland Hwang of the Natural Resources Defense Council said that the industry's wild exaggeration on the California law "overestimated the actual costs by a factor of about two to 10."
- The tragedy of unreasonable fleet averages. Former GM vice chair Bob Lutz said recently that we'll never get to 45 mpg, let alone 60. "Nobody knows how to do a full-line fleet with the equivalent of 42 miles per gallon," he said. "That's aintgonnahappen.com."
Looking at it another way, the Center for Automotive Research said that reaching 60.1 mpg might hike car prices 22 percent. It sees an apocalypse in the waiting, with sales down 25 percent and up to 220,000 jobs taking flight. The Auto Alliance, representing 13 carmakers, echoes these findings. According to spokeswoman Gloria Berquist, "If the cost of new technology goes up too high or too fast, sticker shock will scare a lot of customers away."
But a far bigger cost to automakers is what they'll incur if they don't start producing ultra-fuel efficient cars. One one level they get this, because the carmakers are all racing to build competitive cars that get 40 mpg on the highway. University of Michigan economist Walter McManus says that the 42 mpg by 2020 requirement...
could raise industry variable profit by $9.1 billion, or eight percent. Much of the added profit, $5.1 billion, could go to the Detroit Three.Can you imagine if today the Big Three failed to equip cars with air bags and catalytic converters, while every other company offered them? That's right, the loss of 10 zillion jobs and a $100 billion hit to GNP. With 62 percent of Americans supporting a standard of 60 mpg by 2025, according to the Consumer Federation of America's Mark Cooper, its time to crank up the PR machine again.
- 40 is the New 30 as Automakers Ramp Up MPGs Across the Line
- 60 MPG by 2025? It's Going to be a Big Fight