Last Tuesday, the CEOs of General Motors (Mary Barra), Ford (Mark Fields), and Fiat-Chrysler (Sergio Marchionne) met with President Trump to discuss the auto industry. On Thursday, we finally got some more details about what they discussed, and it’s pretty bad for everyone.
Ford signed on to rules and is now trying to back out of its commitment
As part of an overall deal on regulation of the industry, Mark Fields is seeking to weaken the federal vehicle efficiency standards finalized in 2012. These standards were supported at the time by all three Detroit manufacturers, as well as nearly all other automakers.
Included in those rules was a mid-term review of the EPA’s regulations. That comprehensive review was completed by the Obama administration two weeks ago, and its results surprised no one—those rules finalized back in 2012 are easier to achieve than anticipated and at reduced costs to automakers…so sayeth not just the EPA but the Department of Transportation and California Air Resources Board; the National Academies of Science, Engineering, and Medicine; UCS; and countless others.
Now, Mark Fields is jumping at the opportunity to stick it to the American public and back out of that agreement, despite Ford seeing record profits in 2016. And he wouldn’t just be harming the environment with this decision—he’d be harming American workers and American consumers.
Vehicle standards are good for American workers
Since bottoming out in the recession, the US auto industry has added nearly more than 300,000 jobs in manufacturing and assembly. It’s difficult to estimate exactly how many of those jobs are related to efficiency standards, but a recent report from the Department of Energy noted that nearly half of all auto manufacturing and assembly jobs are in technology that improves the fuel economy of the vehicle.
Ford themselves know quite well how these investments pay off—their best-selling vehicle is the F-150, and they just invested $1.1 billion dollars to its Kansas City Assembly plant to manufacture the new aluminum-bodied F-150, adding 900 workers in the process. Alcoa, just one of many suppliers to the F-150, added 200 jobs to provide the aluminum for the new truck. And this is just one of many examples—suppliers around the country are creating jobs as automakers invest in new technologies at unprecedented rates.
Instead of pointing out just how good these standards have been for jobs, providing certainty for the industry and sparking a series of strong investments in the United States, Mark Fields took a cue from the President by providing his own “alternative fact,” repeating a previously debunked claim that these standards could cost 1 million jobs.
(Please see here, here, and here for why this number is fundamentally flawed.) In fact, previous analyses have shown that these standards will lead to more than 50,000 jobs in automotive manufacturing alone.
Beyond the jobs impacts, there is also analysis that these standards help make the industry, and particularly the Detroit automakers, more resilient to shifting market trends. That benefits the workers directly, particularly under the profit-sharing agreements that many UAW workers enjoy. And it also insures the industry against a repeat of the disastrous plummet in sales that led to the bailout of GM and Chrysler and nearly bankrupted Ford when consumers turned away from pricey, inefficient trucks and SUVs and towards more efficient cars.
Should this situation repeat itself (and with gas prices such a volatile commodity, it no doubt could), fuel economy standards would help, leading to profits for the domestic automakers no matter what; if Mark Fields helps scuttle those standards by focusing on the short term, it could cost the Detroit Three about $1 billion annually in the long run.
Vehicle standards are good for American consumers
In addition to protecting workers, these standards protect consumers. More fuel efficient vehicles protect consumers from volatility at the pump. This is especially important for lower income individuals who purchase vehicles on the used car market—their choices are dictated by more affluent individuals who can afford to care less about fuel economy and generally spend more of their money on the vehicle versus the fuel. For low-income households, this is flipped: for this reason, fuel economy standards benefit lower-income individuals disproportionately.
This is one of the many reasons why fuel economy standards are so critical during times of low gas prices.
Moreover, saving money on fuel means more money that can be spent elsewhere in the economy—and that means more jobs for everyone. Taken together, we estimate that the 2012-2025 standards will add $25-30 billion to the economy by 2030, which means about 650,000 total new jobs across the economy.
Regulations aren’t “out of control”—they’re protecting Americans and holding companies accountable
On the same day as the Trump-Detroit Three meeting, Volkswagen approved a settlement with dealers over its Clean Air Act-violating diesel cars. One week before that, Fiat-Chrysler was served notice that some of their vehicles are in violation of the Clean Air Act, too. A month before that, General Motors appealed to the Supreme Court to try to wriggle out of some of the responsibility for an ignition switch defect that led to 124 fatalities.
Over the past few years, Ford, Hyundai, Kia, BMW, and Mercedes have all been forced to adjust their fuel economy labels because they were misleading to consumers. And obviously there is the disastrous Takata airbag scandal enveloping Honda, Toyota, Ford, and basically the entire industry, which has resulted in at least 11 dead.
All of this is to say that it’s pretty darn clear why the auto industry is regulated. And, frankly, it’s appalling that the CEO of Ford is trying to use a new administration to undermine government watchdogging of an industry with quite the history of skirting and combatting regulation.
Maybe Mark Fields would be better served using this as an opportunity to engage more constructively, as it appears his counterpart Mary Barra at GM may be:
“We had a very constructive and wide-ranging discussion about how we can work together on policies that support a strong and competitive economy and auto industry, one that supports the environment and safety. The U.S. is our home market and we are eager to come together to reinvigorate U.S. manufacturing. We all want a vibrant U.S. manufacturing base that is competitive globally and that grows jobs. It’s good for our employees, our dealers, our suppliers and our customers.”
Let’s hope GM is true to their word and Ford changes their tune. Our health, safety, and economy may very well depend on it.