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The Detroit News - Report Shows Bitter Fuel Rules Talks

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Location: Washington, DC

By David Shepardson

While the White House kept the deal to hike fuel efficiency to 54.5 miles per gallon by 2025 largely off the public radar, the issue roiled bureaucrats and automakers, according to documents obtained by The Detroit News.

The Obama administration "openly played automakers off of each other to gain a tactical advantage over the industry," said a report to be released today by the House Oversight and Government Reform Committee's Republican majority staff. "Theinevitable product of this reckless process was a pair of rulemakings that reflect ideology over science and politics over process. … Americans will be forced to drive expensive, unpopular and unsafe automobiles mandated by the Obama administration."

The documents and communications collected by the committee provide a peek behind the curtain of fuel standard deliberations. But Rep. Elijah Cummings, D-Md., rejected the report's findings. "Any allegations that the White House is seeking to weaken the auto industry are simply ridiculous -- this is the White House that saved the auto industry from its near-collapse," he said.

In the documents and notes, foreign automakers expressed unhappiness during the process, which they believed was tilted in favor of Detroit automakers, but most ultimately agreed to the deal.

Toyota Motor Sales U.S. chief Jim Lentz told then-White House chief negotiator Ron Bloom that the Japanese automaker thought the deal was unfair. "Japan is angry. Feel like they have been screwed," according to handwritten notes from Toyota.

Toyota wanted credits for hybrid vehicles -- like the credits that were granted for natural gas, flex-fuel and electric vehicles -- and sought more flexibility to use car credits for meeting truck standards. They also argued that the definition of a full-size truck had been written to exclude the Toyota Tundra.

Lentz said the deal was an "old Detroit tactic. It may hurt me, but it hurts my competitors more," Toyota's notes said.

Bloom was eager for Toyota to sign on. "It looks bad for me and bad for you if Toyota is not there," he told Lentz.

Toyota ultimately got little of what it sought, but signed on anyway. "Thank you for getting this done. I know how difficult this must have been in a culture where fairness is very important," Bloom said, according to Toyota's notes.

Bloom didn't return a call seeking comment Thursday. Toyota spokeswoman Martha Voss said the automaker's "overriding objective was to help achieve a true, single national standard with some certainty, clarity and flexibility."

The Obama administration has estimated the 2017-2025 rules will cost the industry $157.3 billion. White House spokesman Clark Stevens declined to comment on a report he hadn't seen, but defended the deal, saying it will save $1.7 trillion at the pump.

The administration is expected to unveil the final 2017-2025 regulation by Aug. 15.

The new requirements will add about $2,000 to the cost of an average vehicle by 2025 -- or $3,000, including added costs from the 2012-2016 rules finalized in 2010.

Automakers came to the table after becoming worried that California, joined by other states, would try to set higher state standards starting in 2017.

"At some point, we are going to have to try to wrestle this gun that California has to the industry's head out their hands, even if we risk getting shot in the process," Shane Karr, a lobbyist for an auto trade group, wrote in a February 2011 email.

Talks began in earnest in June 2011, with the White House proposing to hike standards for cars and trucks by 5 percent a year over the timeframe to result in a 56.2 mpg national standard

Initially, the White House wanted to win the support of U.S. automakers before convincing foreign companies to sign on. Smaller companies were essentially told to "take it or leave it," the report said.

Ultimately, the administration and California agreed to some concessions: primarily softening the requirements for light trucks from 2017-2021 to 3.5 percent per year, and giving automakers credits for some advanced technology vehicles. They also agreed to a "mid-term review" to determine whether the final years' goals are feasible.

The deal nearly came apart as Ford sought last-minute changes to the review.

"We should have ended this Monday morning, and this has cost me big time. You owe me," Bloom told a Ford lobbyist.

But they rejected other credits. German automakers unsuccessfully sought credits for diesels. Volkswagen and Daimler AG opted not to support the deal.

General Motors told the White House that as little as a 2 percent boost in fuel efficiency could cost the automaker $7 billion between 2017 and 2020. GM's talking points for the meeting said 56.2 mpg by 2025 "would be a profit- and job-killer for domestic full-line manufacturers ..." Plus, higher costs per vehicle could prod Americans to hold onto older cars and was "a bad recipe for union jobs," GM said.

Honda Motor Co.'s senior manager for environment and energy strategy, Robert Bienenfeld, questioned in an email why there were incentives for hybrid pickups and not other vehicles.

"Why not minivans? After all, there are no U.S. applications of this (hybrid) technology. … Can't there be a 'bonus' credit for any fleet of vehicles (minivans, CUVs, etc)," he wrote, saying the truck credits are "where domestic (automakers) dominate" and that they communicate "favoritism and an unfair playing field."

A Toyota executive said the truck provisions amounted to a "second auto bailout."

The report also suggested that the National Highway Traffic Safety Administration got slighted, and that regulators gave short-shrift to safety issues like downsizing vehicles to meet higher fuel requirements.


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