Jan. 26 (Bloomberg) -- President Barack Obama, already overhauling automakers through a U.S. bailout, gains a stronger grip on their future with his move toward letting California set emission standards for the nation.

General Motors Corp.,Ford Motor Co. and Chrysler LLC. would have to shift their product mix to more cars and smaller trucks to meet California’s proposed standards, said Brian Johnson, an analyst for Barclays Capital, in a note today to investors.

Obama directed the Environmental Protection Agency today to consider approving California’s request for a state program aimed at cutting auto emissions tied to global warming by 30 percent by 2016. Automakers have said permitting California’s standards would add billions of dollars in costs to an industry struggling after auto sales plunged to 13.2 million in 2008 from the average of about 16 million annually in the past decade.

“I am fearful that today’s action will begin the process of setting the American auto industry back even further,” Senator George Voinovich, an Ohio Republican, said in a statement. “The federal government should not be piling on an industry already hurting in a time like this.”

To meet the new requirements, automakers would have to transform their product mix from half cars, half trucks to as much as 85 percent cars, said Michael Omotoso, a senior manager with J.D. Power & Associates in Troy, Michigan.

“The manufacturers would have to change their fleets completely,” Omotoso said in a phone interview. “They would end up with more of a European fleet.”

$17.4 Billion in Loans

Obama already has the power to remake the auto industry through oversight of $17.4 billion in loans pledged to GM and Chrysler last month under the Bush administration. The companies must report progress Feb. 17 on overhauling operations to cut costs and become profitable.

“Our goal is not to further burden an already struggling industry,” Obama said at the White House today. “It is to help America’s automakers prepare for the future.”

The action on auto emissions marks a departure from President George W. Bush’s environmental policies. Bush turned down California’s request for a waiver permitting it to regulate greenhouse-gas emissions from vehicles in December 2007.

“What the auto companies have failed to do is to make money making gas-guzzlers,” said Dan Becker, director of Safe Climate Campaign in Washington. “What they need to make are cleaner, more efficient vehicles that Americans want to buy.”

California’s Role

California has led efforts to impose air-quality rules tougher than national standards for more than 30 years. The state has sprawling development, limited public transportation and mountains that entrap vehicle emissions. The most populous state, its citizens also buy the most vehicles, accounting for about 11 percent of sales last year, according to the California New Car Dealers Association.

“It’s highly likely the California rules will be a template for a national policy,” said Aaron Bragman, a Troy, Michigan-based analyst at industry forecaster IHS Global Insight Inc. Additional federal loans and other programs would be needed for technologies to achieve that standard, he said.

Automakers sued to block California’s program, which was signed into law by Republican Governor Arnold Schwarzenegger in 2004. At the time, automakers said complying would cost at least $6 billion a year to modify vehicles for the state, or no less than $3,000 per vehicle.

Since then, at least 17 other states have said they would follow the California rules.

California expects to begin implementing the program by about June, said Dan Sperling, a transportation professor at the University of California, Davis, and a member of the state’s Air Resources Board, which crafted the rules.

Offering 4 Cylinders

“Manufacturers have a variety of options to comply, some as simple as offering a 4-cylinder engine instead of a V-6,” Sperling said in an interview. “This is one of those unequivocally good policies, and it leaves many options for compliance.”

GM, the biggest U.S. automaker, said in a statement today that the company is “ready to engage the Obama administration and the Congress on policies that support meaningful and workable solutions and targets that benefit consumers from coast to coast.”

Automakers hope the Obama administration will stop short of approving the California standards and instead seek an agreement with states and the industry on new emissions targets, said Gloria Bergquist, vice president of the Alliance of Automobile Manufacturers, a Washington-based trade group that lobbies on behalf of carmakers such as GM, Ford and Toyota.

‘Reset Button’

“You could call this a reset button,” Bergquist said in a phone interview.

California’s standard discriminates against U.S. vehicles with the same efficiency as certain imports, Senator Carl Levin, a Michigan Democrat, said in a statement. Companies such as Volkswagen AG, Hyundai Motor Co. and Kia Motors Corp. are exempt because they sell fewer than 60,000 vehicles annually in the state.

Obama, who campaigned on a vow to reverse the Bush administration’s decision barring California’s regulations, is likely to follow through, said Becker of the Safe Climate campaign.

“The auto companies could start complying with the law anytime they want,” Becker said. “They need to get out of court and get into the assembly line and start putting the better technology on their vehicles.”

To contact the reporters on this story: John Hughes in Washington at Jhughes5@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net;

Last Updated: January 26, 2009 18:44 EST