From now on, driving will be more fun in go-carts — or until they’re also outlawed.
Can you hear that? It’s the sound of the final nail being hammered down onto the coffin lid of the U.S. car industry.
President Obama wields the hammer — in the form of a massive uptick in federally required fuel economy standards that will require each automaker’s lineup of new vehicles to achieve an average of 35.5 MPG by 2016.
But what could be so bad about forcing the automakers to make cars more fuel efficient? Dig deeper and you’ll see.
Even the Obama people concede the new mileage standards will cost American consumers about $1,600 per vehicle by 2016 — in effect, a massive tax increase in the middle of a neo-Depression. The difference is this tax increase will be optional. People can avoid it by avoiding new cars — which will make it that much harder for the car industry to recover from the catastrophic state it finds itself in right now, with sales down anywhere from 30-50 percent depending on the make.
Boosters of the 35.5 MPG standard talk up the fuel savings (current cars must meet a 27.5 MPG average), but if the car costs $1,600 more to buy, the roughly 8 MPG uptick is probably a net wash, at least until the car is several years old and the fuel savings amortizes the considerably higher up front costs. Obama and Co. are millionaires, so this is small potatoes from their point-of-view. But ask most Americans whether they think $1,600 is chump change.
But all this is secondary. The real killing aspect of CAFE (the federal government’s cutesy acronym for the fuel economy standards) is that it will mean the summary execution of perhaps one-third to one-half of all the vehicles in GM, Ford, and Chrysler’s product lineups — including the best-selling and most profitable models, virtually none of which achieve close to 35.5 MPG.
The law doesn’t say an automaker can’t continue producing cars that don’t meet the 35.5 MPG cut. But it does impose “gas guzzler” fines on any automaker (and individual car) that doesn’t. And since the fuel economy standards represent average mileage — the presence of just one “gas guzzler” has the same effect on an automaker’s overall CAFE ratings as a D- has on a high-schooler’s overall GPA.
That means automakers (and not just American ones — Toyota makes many “gas pigs,” too) will be under tremendous pressure to cancel countless models — including models just now coming to market (or soon to be here) that represent huge sums of money in the form of R&D, tooling, assembly lines and so on. The 2010 Chevy Camaro is one example.
Normally, the huge investments in the development of new car lines would be amortized over the life cycle of the car “platform” — which is typically 5-8 years, on average. But at the stroke of Obama’s pen, a vast fleet of barely-born cars will be rendered economically untenable. All the money poured into them will be flushed straight down the pipes — adding to the vast ocean of red ink that’s already sloshing around.
The industry can only take so many hits below the waterline. This might be the coupe de grace. And if it’s not, the 35.5 MPG’s follow-up will definitely do the job.
Obama also wants to cut new car “emissions” by another 30 percent. Sounds good — except that it’s a hugely dishonest number. Most people innocently assume “cutting by 30 percent” represents a substantial cut. In reality, all 2009 and newer cars are already virtually pollution-free in terms of their exhaust emissions. Literally 98 percent of the gases coming out of the tailpipe are just water vapor and carbon dioxide. Only about 2 percent constitutes “emissions” — things like carbon monoxide and the remains of incomplete combustion (unburned hydrocarbons).
It is this remaining 2 percent that Obama wants to cut by 30 percent. Work that out. The number is very small.
But the cost will not be. These minor, incremental “improvements” in exhaust emissions grow increasingly expensive. It is the law of diminishing returns. The majority of the “easy” improvements/reductions have already been achieved. Getting at that last 1-2 percent will involved Herculean effort and huge sums — and probably will never fully be realized since the act of internal combustion necessarily is going to produce some unhelpful byproducts, however minor, no matter what we do.
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