Markets

No Way: Auto Lobbyists Make Up a Scary Job-Loss Number Linked to Mileage Plans

By jim motavalli

Updated on: June 9, 2011 / 9:57 AM EDT / MoneyWatch

The surest way to kill a bill today is to tag it as a job killer. While is why auto lobbyists have taken it upon themselves to, let's say, creatively interpret some government data to make it look like a proposed 62 mpg federal fuel economy/greenhouse gas standard would spark an employment holocaust, deep-sixing a quarter million jobs.

If you're feeling charitable, you could say that the Alliance of Automobile Manufacturers is being willfully obtuse about the implications it draws from the data. If not, you might just conclude that the automakers are using unreliable, fudged numbers in a desperate attempt to link better mileage mandates to the Great Depression. Either way, they're way off the mark.

A correct reading of the Alliance's source material suggests that the auto industry would actually add jobs. According to Roland Hwang, transportation program director at the Natural Resources Defense Council:

The Alliance is either willfully mischaracterizing the numbers or it's just extremely incompetent in reporting on this. It does a real disservice to the issue of fuel economy. It's shocking that government data would get misused in this way.

A big jobs blow?
The Alliance sent a letter to the EPA and the National Highway Traffic Safety Administration in May claiming that the 62-mpg standard would cause a "loss of almost a quarter of a million auto jobs." The claim had a respectable provenance -- a recent report from the DOE's well-regarded Energy Information Agency. That report says:

Setting a Corporate Average Fuel Economy (CAFE) standard of 62 mpg by 2025 would reduce sales by 14 percent.

Seems straightforward enough -- a hit like that on what is now estimated at 1.7 million auto-related jobs would turn Motor City into even more of a ghost town than it already is (and take out parts of Indiana and Ohio, too). But Hwang says the numbers actually crunch quite differently, and that one sentence can't be read in isolation.

Read the whole report, and you see that the DOE is actually predicting that the 62 mpg standard would lead to a recovery in auto sales from 10.8 million cars in 2010 to 14.8 million in 2025 -- a 37 percent increase. And it also sees a 21 percent rise in employment between those two years, a total of some 280,000 jobs.

Juggling the numbers
So how did the Alliance get to a job loss of almost 250,000? That's because the DOE offered a second scenario with no new standards at all, and in that case car sales rise even more, to 17.2 million. The Alliance says the blow will come to "today's 1.7 million job base," but in fact it's just a lower rate of what still looks like fairly healthy job creation. That's something quite different. Hwang says there's only a 1.5 percent employment difference between the two scenarios.

Gloria Bergquist, an Auto Alliance vice president, says that this is an argument over semantics. She told me:

We really don't know what the manufacturing base and the sales base will be in 2017 or 2025. There are 1.7 million employees now, but we don't know how many there will be then. If you're one of the people who loses his or her job in Ohio because of the 62 mpg standard, you may not enjoy Mr. Hwang's nuanced point. The bottom line is that there will be displacement of workers, because the uptake rate of some of the green cars has been less than anticipated.

The industry believes high-mpg cars will sit on dealer lots, but there are other reasons why 62 mpg isn't going to hurt auto industry employment. Cars equipped with fuel-saving technology such as turbochargers and low rolling resistance tires will cost more, yielding greater per-vehicle profits.

The Alliance's strategy is sure to have impact among those who don't look at the numbers too closely. The last employment report showed the economy adding just 54,000 jobs (many of them wage-slave posts at McDonald's) in May, so what politician would want to be associated with legislation that would make things worse? But if you're going to bring up the specter of breadlines and double-digit unemployment in Detroit, as the automakers did, at least get your numbers straight.

The sky is falling
The automakers love crying wolf. In 2007 trial testimony, General Motors claimed that meeting California's higher fuel economy standards would cost $6,000 per vehicle, leaving the company unable to sell cars in states with those mandates. And the Center for Automotive Research said that meeting 62 mpg by 2025 would cost even more, $6,435 per car. Those numbers scare people!

But a synthesis of reports from the EPA, the California Air Resources Board and the Department of Transportation cuts those numbers in half, predicting $2,800 to $3,500.

That's still a lot of money when multiplied by millions of cars. But the auto industry has to be aggressive on fuel economy if it's going to stay competitive globally. And a new Citi Investment Research/University of Michigan report says that increasing fuel economy six percent a year would actually increase auto sales six percent by 2020. In that scenario, Detroit wouldn't be laying off thousands of workers -- it would be putting out "help wanted" signs.

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Photo: Flickr/John Lloyd