White House Said to Offer 54.5 MPG Goal, Light Truck Deal

White House Proposes 54.5 MPG Goal for 2025
The new fuel-economy target is a reduction from 56.2 mpg sought in a proposal to automakers including Ford Motor Co. (F) and Toyota Motor Corp. (7203), last month. Photographer: Bradley C. Bower/Bloomberg

President Barack Obama’s administration altered its proposal for a 2025 U.S. fuel-economy average to 54.5 miles per gallon to make allowances for light trucks, people familiar with the negotiations said.

General Motors Co., Ford Motor Co. and Chrysler Group LLC are reaching an agreement with the White House on the framework for the 54.5 mpg rule, three people familiar with the talks said. Automakers are waiting for paperwork later today from the White House to formalize agreements, and the administration may announce a deal by the end of the week, one of the people said. The people declined to be identified because talks are ongoing.

The new fuel-economy target is a reduction from 56.2 mpg sought in a proposal to automakers last month. It may reflect the White House’s desire to reach agreement as soon as possible, the people said. The rule may include credits for some types of technology, said three people with knowledge of the talks, who declined to be identified.

“This seems to be how the game is played -- they put a big fuel economy number out there and then introduce loopholes,” said Jeremy Anwyl, CEO of Edmunds.com, a Santa Monica, California-based website that tracks auto sales and pricing data. “They want to try to keep everyone happy.”

The White House is pressuring automakers to agree to a framework for a rule to be released by Sept. 30, said two people, who asked not to be identified because the negotiations are confidential. The rule is to take effect in 2017.

Equipment Credits

The proposal includes credits for equipment that can reduce fuel consumption, such as technology that shuts off engines when cars are idling and louvered front grilles, three people said.

Greg Martin, a spokesman for GM, and Linda Becker, a spokeswoman for Chrysler, declined to comment. Christin Baker, a spokeswoman for Ford, didn’t immediately respond to a phone message and e-mail left after regular business hours.

The Environmental Protection Agency and National Highway Traffic Safety Administration are writing the rule with California’s Air Resources Board, which has the authority to write its own air-quality rules if it disagrees with U.S. rules. If California hadn’t agreed to the proposal, it wouldn’t have been offered to automakers, a person briefed on the negotiations said.

Pickup Trucks

Spokesmen for the EPA and NHTSA declined to comment on the negotiations. Stanley Young, an Air Resources Board spokesman, didn’t respond to an e-mail seeking comment.

This week’s proposal to automakers would allow pickups and sport-utility vehicles to improve fuel economy more slowly than cars for the first five years and would give manufacturers credits for hybrid trucks, said two people who declined to be identified. Under previous fuel-economy rules, light trucks have had lower mpg targets than cars.

The plan also includes different targets for so-called work trucks, which are heavier than most pickups, SUVs and minivans that count as light trucks, one person said.

Automakers may seek some relief on pickup trucks so they can still be built with engines powerful enough to handle the workload required by some customers, said Jim Hall, principal of 2953 Analytics Inc., a consulting firm in Birmingham, Michigan.

Working Vehicles

Pickup trucks need more powerful engines for hauling. Those larger V-8 engines are less fuel efficient and carmakers are concerned that meeting regulations will make it difficult to sell pickups in the volume that the market demands.

“They have to do it,” Hall said in a telephone interview. “This is a vehicle that has a specific function for working.”

Talks have slowed because of a midterm review proposal, favored by automakers, which would require regulators to assess the standard and potentially raise or lower it midway through the rule’s span, two people said.

Automakers have said one reason they want the review is because the time frame is double that of the 2012-2016 rule that takes effect next year. A midterm review would give regulators a chance to reassess assumptions that the needed engine technology will exist, Ellen Gleberman, a vice president of Washington-based trade group Global Automakers, said last week.

Initially, the administration wanted to allow regulators to decide if a review was needed. Automakers are pushing to establish a set of criteria that could trigger a midterm review, one person said. That would make it tough for regulators to refuse to do it, the person said.

Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, declined to comment on the details of the discussions. Members of the Washington-based association include Ford, Toyota Motor Corp., Chrysler and GM.

“Productive discussions are under way among the automakers and administration,” he said.

The Auto Alliance and Ceres, a Boston-based coalition that includes environmental groups, have been running competing radio ads across the U.S. saying, respectively, a tougher fuel-economy standard would cost or create jobs.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE