Auto Companies Press States on California Emissions

by John Crawley

WASHINGTON - Automakers and their allies have stepped up lobbying to convince states that a proposal by California to cut tailpipe emissions sharply to fight global warming could further depress the struggling U.S. industry.

There is concern among General Motors Corp, Ford Motor Co, Chrysler LLC -- and supporters in Congress and at state level -- that the California initiative may survive court challenges and possibly be adopted by New York, Pennsylvania, and more than a dozen other states.

Adding pressure is a fresh U.S. Senate proposal that would force the administration of George W. Bush to let California enforce its plan, which has been in federal legal limbo since 2002.

Prospects of the bill becoming law are uncertain, though it illustrates that powerful lawmakers, including leading Democratic presidential candidates, want stronger environmental protection than industry is prepared to deliver.

The California proposal calls for a 30 percent reduction in car emissions over eight years beginning in 2009, equal to a fuel efficiency target of 43 miles per gallon for cars and some light trucks. A new U.S. energy law, reluctantly backed by Detroit as the "devil you know," requires a 35 mpg average by 2020 -- 40 percent better than today's performance.

Industry executives and their allies said in interviews that a federal standard alongside a more challenging policy for certain states would wreak havoc with design and production plans and increase costs exponentially.

U.S. automakers, sandwiched between sliding sales and a softening economy on one side and a new mandate on the other, are scrambling to respond with more efficient engines and research on alternative fuels. The impact of December's energy law alone at GM is $6,000 per vehicle, the company estimates.

Dave McCurdy, chief executive of the Alliance of Automobile Manufacturers, said in an interview that the industry's lead trade group would redouble efforts to "educate" states that have committed to or are thinking about adopting the measure.

McCurdy said the California-inspired initiative would result in a "patchwork quilt of inconsistent and competing fuel economy programs" that would lead to "confusion, inefficiency, and uncertainty for automakers and consumers."

Automakers have reason for worry after they and the Bush administration lost key court decisions last year in suits related to mileage improvements and the California case.

Moreover, Environmental Protection Agency documents released by a Senate committee last week showed agency staff concluded the EPA would probably win a suit by automakers if it granted California a waiver from current law to proceed with its plans, but that the agency would likely lose if it denied California's bid and the state sued. That is exactly what happened after the EPA in December rejected California.

The appeals court in San Francisco has no timetable to rule on the challenge but carmakers hope for a change of venue.

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Executives interviewed prefer to let McCurdy speak for them. But some said privately their best hope may rest with the Supreme Court. They agreed all bets were off if Democrats widened their majority in Congress and won the White House.

Hoping to boost their influence if that occurs in November, financial contributions to Democrats by manufacturers are about even with Republicans for the first time in years. In 2006, automakers gave to Republicans by a 2-to-1 margin, according to federal campaign finance data compiled by opensecrets.org.

U.S. automakers are in the midst of severe restructuring, closing plants and slashing jobs as they battle the loss of market share to Japanese rivals.

Michigan Attorney General Mike Cox warned of new pain if California wins. "I would urge all concerned to move cautiously, especially with respect to an industry that contributes significantly to GDP," Cox said last week.

Cox said industry estimates show net auto-related job losses of between 60,000 and 100,000 if California were to impose its standard and other states were to follow suit.

Michigan, which would be hardest hit, has lost more than 350,000 manufacturing jobs since 2001, mainly in autos. The state's 7.5 percent jobless rate is the nation's highest.

Shares of Ford and GM have fallen by just under 20 percent in the past year, though GM has regained some value. Chrysler is privately held.

Although industry warns of steep job losses in the politically important states of Michigan and Ohio, Democratic presidential candidates Sens Barack Obama and Hillary Clinton signed on to the Senate bill proposed by California's Barbara Boxer. Explaining their support, Clinton and Obama touted the benefits of tough measures to fight global warming.

Gov. Edward Rendell of Pennsylvania is skeptical of Detroit's claims on emissions. The Democratic governor told Congress that carmakers previously dismissed safety mandates as too tough and then made millions of vehicles at huge profits.

"It's baloney," Rendell said. "It's what the auto industry has been telling us for years and years."

Editing by Braden Reddall
© 2008 Reuters