The Energy 202: Four carmakers spurn Trump over mileage rules. Will others follow?

Source: By Dino Grandoni, Washington Post • Posted: Monday, July 29, 2019

A motorist fills up in his vehicle in Sacramento, Calif. (AP Photo/Rich Pedroncelli, File)

Four major automakers agreed this week to rebuff the Trump administration and apply stricter fuel-efficiency standards to their fleet of new cars and light trucks going forward. Now, the question is: How many more car manufacturers will go down that road, too?

Ford, Honda, Volkswagen and BMW of North America stunned many officials at other companies as well as Trump administration officials by striking a deal with California to produce more fuel-efficient vehicles.

Now rival car companies are in a pickle. On the one hand, joining the California deal would help ensure their fleets have high enough gas mileage should a Democrat win back the White House next year and reenact stricter federal standards. On the other hand, carmakers do not want to provoke the current occupant, President Trump, who is not afraid to direct his ire at individual companies.

“If [the deal] doesn’t spread, I think that will be a real problem for its impact,” said Severin Borenstein, a business and public policy professor at the University of California at Berkeley’s Haas School of Business. “If it does, it puts the Trump administration in a position with the auto industry lobbying for a set of regulations” different from what Trump officials want.

“The real test will be over the next month or two about which auto companies say they are in,” he added.

At stake is whether the United States can limit climate-warming pollutants from the transportation sector, which recently surpassed power plants as the nation’s top source of carbon dioxide emissions.

For months, California has been battling the federal government over its effort to undo Obama administration rules that would have steadily improved the average gasoline mileage of automakers’ fleets. The Trump administration is poised to finalize a freeze on mileage requirements for those cars and light trucks through Model Year 2026 and to revoke California’s ability to set its own standards. The move amounts to one of the biggest regulatory rollbacks of the last administration’s push to combat climate change.

The deal is the latest sign of the auto industry’s desire to avoid regulations that vary state by state and its frustration with the administration for paving the way to that regulatory patchwork. Seventeen car companies last month wrote a letter to Trump asking him to return to negotiations with California.

Yet altogether, the four firms part of the deal Thursday make up only about 30 percent of the auto market. Missing are two of the “Big Three” U.S. automakers: General Motors and Fiat Chrysler Automobiles. So, too, are several major foreign automakers with significant shares in the U.S. market, including Toyota, Nissan and Hyundai.

Many automakers were left out of the secret negotiations with California, which lasted for five weeks, out of concern that news of the deal would leak. Some of the companies conferred with each other Thursday to discuss the deal, according to multiple government and industry officials familiar with the matter, who spoke on the condition of anonymity in order to discuss private deliberations.

In a move that may entice GM, which is betting big on electric vehicles, California said it will reward companies that sell more electric cars with additional credits. (Those additional credits may have helped bring along one of the participants in the agreement, Volkswagen. The German automaker is also expanding its electric fleet after the company was found to have installed software in its diesel-powered vehicles meant to deceive regulators about its emissions.)

But GM is well aware of what it is like to be on Trump’s bad side. On Twitter, the president has chastised the company and its chief executive, Mary Barra, for closing plants in Maryland, Michigan and Ohio. “I am not happy that it is closed when everything else in our Country is BOOMING,” Trump tweeted in March.

Already, Trump’s Environmental Protection Agency, one of the two agencies writing the new mileage rule, has expressed its displeasure with the deal. “This voluntary framework is a PR stunt that does nothing to further the one national standard that will provide certainty and relief for American consumers,” agency spokesman Michael Abboud said of the agreement.

The White House also dismissed the deal in a statement. “The Trump administration believes strongly in a national fuel standard that promotes safer, cleaner, and more affordable vehicles,” said spokesman Judd Deere. “The Federal government, not a single state, should set this standard. We are moving forward to finalize a rule for the benefit of all Americans.”

Even amid that fracas, GM has tied itself closer to the Trump administration by hiring a former White House official, Everett Eissenstat, to serve as the company’s senior vice president of global public policy. Until July 2018, Eissenstat had worked at the White House as deputy assistant to the president for international economic affairs and as deputy director of the National Economic Council.

After news of the deal was made public, GM, Nissan and Toyota reiterated their desire for federal and California regulators to come back to the negotiating table to find a 50-state standard. So far, they are mum about whether they will join the agreement.

“Our focus remains working with all parties, and that includes the administration,” said GM spokeswoman Jeannine Ganivan in an interview.

But at least two other major automakers, Fiat Chrysler and Hyundai, suggested they were willing to consider the deal. “We look forward to reviewing the details of this agreement, as well as the federal rule later this year,” Fiat Chrysler said in a statement.

Rep. Debbie Dingell, a Michigan Democrat and proponent of the deal. (Photo by Alex Wong/Getty Images)

California officials and Democrats on Capitol Hill are now lobbying other automakers to join the agreement.

One of the main instigators of the deal was Sen. Thomas R. Carper (Del.), the top Democrat on the Environment and Public Works Committee who spent the past two years phoning auto executives, showing up at car shows and convening private meetings of industry, administration and California officials to save the stricter mileage standards. He plans to return to the phone in the coming days to rally automakers around the California deal.

“Over the past two years, I have spoken with almost every automaker on several occasions, including in person at the Detroit auto show,” Carper said. “Each and every one of those automakers told me they wanted to see a negotiated ‘win-win’ with California — not the years of costly litigation and regulatory uncertainty to which the Trump administration’s illegal proposal would inevitably subject them.”

Rep. Debbie Dingell (D-Mich.) has waged a similar campaign. While it has been difficult to bring all the sides together, she said, Thursday’s deal provides an opening for future negotiations.

“Now it’s up to the administration,” Dingell said. “We really have to see if everybody can get to the table and work this out. The industry needs certainty, we need to keep making progress, and ultimately, we don’t want to hurt the economic viability of this industry.”

In a call with reporters Thursday, Mary Nichols, chair of the California Air Resources Board (CARB), suggested state air regulators would be willing to work individually with companies to bring them into the agreement. Car companies, she said, are “not all in exactly the same position in terms of their product mix or their ability to comply.”

She added: “The agreement that is out there is available for any automaker that wants to sign up for it.”

Hours after the announcement, supporters of the deal had a few nibbles on their fishing lines. CARB spokesman Stanley Young said the state agency has received inquiries about the agreement from two other car companies, but did not disclose which ones. Similarly, Carper’s office said it has heard from three automakers and one trade group.