Meet Us in the Middle: Automakers Plead for Peace, Compromise Between White House and California

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The automotive industry is in turmoil. There’s an industrywide push toward electrification that has yet yet to prove itself as truly profitable, volume seems to be tapering off in the developed world, and emissions regulations aimed at improving air quality are operating counter to existing consumer tastes. As a result, automakers are scrambling to find the best path forward.

In 2017, that path involved encouraging the new U.S. president to roll back Obama-era fuel economy mandates, thus providing some breathing room and staving off fines as automakers began to realize they wouldn’t be able to meet tightening targets. The administration listened, leading to a proposal that would effectively freeze mileage standards at about 37 miles per gallon — rather than the previously decided 54.5 mpg — by 2025.

However, California and a coalition of supportive states claim they won’t be going along for the ride. This group says it will maintain the old standards, regardless of what the White House says. The staredown has automakers worried; they’ve now banded together to issue a letter asking both sides to calm down and keep talking. 

According to The New York Times, a letter signed by 17 manufacturers requests that President Trump return to the negotiating table and attempt to find some common ground. California also received a copy on Thursday, with automotive firms suggesting that a midpoint between the old standards and the proposed rollback could be best option for peace.

The letter purportedly warns of industrial upheaval and economic instability stemming from an American market fractured by disparate fueling rules.”We strongly believe the best path to preserve good auto jobs and keep new vehicles affordable for more Americans is a final rule supported by all parties — including California,” the letter states.

Not every major automaker signed the document. While most of the big names are there, notably absent was Fiat Chrysler. As for the receptiveness of governmental groups, neither side appears to be particularly interested in working with the other. While negotiations took place in the past, the California Air Resources Board (CARB) previously claimed it was having trouble making any headway. The White House similarly said that California seemed unwilling to compromise and pulled out of negotiations, along with the Environmental Protection Agency and Transportation Department, in February. Their responses to the letter appears to be more of the same.

From The New York Times:

A White House spokesman, Judd Deere, in an email put the blame on California, saying the state “failed to put forward a productive alternative.”

[California Governor Gavin] Newsom said he is not interested in a “midway” deal requiring California to loosen its rules. “A rollback of auto emissions standards is bad for the climate and bad for the economy,” he wrote in an email. “I applaud the automakers for saying as much in their letter today to the President. We should keep working towards one national standard — one that doesn’t backtrack on the progress states like California have made.”

The letters are the latest twist in Mr. Trump’s effort to roll back regulations on auto manufacturing, an industry he has vowed to support. Some industry chief executives and lobbyists have been privately telling the White House for months that the president’s efforts may do more harm than good, but Thursday’s action represents a particularly strong pushback.

We’re skeptical about forecasting the economic impact of either course. Forcing elevated economy mandates on automakers that now seem incapable of reaching them will result in massive fines or money-losing, low-volume electrics plunked into a unready market. However, rolling back targets could discourage manufacturers from seeking out new technologies and innovations, while effectively forcing environmental groups sound their war horns. Yet it’s hard to feel bad for an industry that got itself into this mess by promoting the rollback in the first place.

Automakers cling to the hope that California and the White House can still agree on one national standard, preferably one that splits the difference. That way, they’re not forced to cater to two domestic markets and can still enjoy some of the benefits of deregulation. That scenario doesn’t appear incredibly likely, as California is readying itself for battle. Xavier Becerra, the state’s attorney general, said recently that the region intends to sue over the automotive rules.

California’s fighting for its right to self-governance, something the most recent draft of the rollback would change — at least in regard to automobiles. But it’s also fighting for the right to set national automotive trends. Regardless of California’s intent, automakers would have to cater to it and its member states in a divided market.

The can of worms that concept would open is immense. Would California residents be able to cross state lines to purchase gas guzzlers? Would automakers have different lineups for different states? What happens if manufacturers fail to meet California’s guidelines? Couldn’t they just try to adhere to the more rigid economy laws they previously agreed to, regardless of whatever the government decides, and call it a day?

The White House previously called on the industry to choose a side. The EPA has basically said that the existing fuel economy targets are unsustainable (something the Golden State disagrees with) and the current administration says it can’t work with California. With all options seemingly exhausted, the federal government wants manufacturers to plant their flags somewhere so it can decide how to proceed. And yet the industry’s fence-riding hasn’t come to an end.

As litigation seems inevitable at this point, we’re not even sure why automakers bothered to issue the letter. Perhaps companies realized a long, drawn out legal battle inside the government was less appetizing than the difficult process of boosting fuel efficiency. Perhaps they just want to look impartial after setting this conflict’s wheels in motion. Regardless, it still seems too little, too late. Unless the White House simply drops the issue or California blinks under the pressure, this will only get uglier.

[Image: Nithid Memanee/Shutterstock]

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