The proposal by U.S. President Joe Biden’s administration to hike fuel economy standards through 2032 would cost General Motors $6.5 billion in fines and Chrysler parent Stellantis $3 billion, according to a letter seen by Reuters. The American Automotive Policy Council, which represents GM, Stellantis, and Ford Motor (F.N.), said in a letter to the U.S. Energy Department on Friday that the size of the expected penalties for not meeting proposed Corporate Average Fuel Economy (CAFE) requirements was “alarming.”
The Detroit 3 automakers also urged DOE to reconsider how it calculates petroleum-equivalent fuel economy ratings, arguing that the current methodology could result in disproportionately higher compliance costs than their competitors. They pointed to previous CAFE penalties they have paid that are based on past performance that occurred before electric vehicles and hybrid cars were widely available.
For decades, the federal National Highway Traffic Safety Administration (NHTSA) has set civil penalty rates based on the number of noncompliant vehicles sold in model years that fall short of specific standards. Until last year, the rate was $5.50 per vehicle or about $14 for a typical passenger car sold for the 2027-2032 model year. That is significantly more than the $11 per vehicle in the latest proposal by the Trump administration’s Environmental Protection Agency.
GM, Ford, and V.W. each faced about $1 billion in penalties under the current CAFE regime. Still, both G.M. and Stellantis have since been able to avoid paying them by purchasing credits from other automakers who were unable to meet the requirements. The letter said the Detroit Three had already paid about $363 million in fines for previous non-compliance with fuel efficiency standards.
The industry group’s letter added that DOE should consider the impact on consumers and manufacturers and ensure that the new policy is based on the best possible evidence to avoid costly compliance costs and unnecessary disruption to the automotive industry. It also urged the DOE to consider other ways to achieve the administration’s climate goals, including lowering barriers to oil exploration and reducing gas prices.
The letter came as the United Auto Workers union’s deadline for significant progress in negotiations with the Big Three neared. The union has threatened to call another strike if no deal is reached by noon on Friday. G.M. and Ford declined to comment beyond the letter, while Stellantis did not respond. V.W. and FIAT did not immediately respond to requests for comment. Reuters was the first to report the letter and its details. Copyright Reuters 2017. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. Reuters and Reuters are not responsible for any errors or omissions in this article. Reuters’ news and media divisions provide award-winning business, financial, national, and international coverage on various topics. Reuters’ news and media divisions comprise a network of bureaus in the United States, Europe, Asia, the Middle East, Africa, Latin America, Australia, and North America.
