Detroit Free Press: Detroit automakers have the technology, creativity for 54.5 mpg
On Tuesday, Washington will come to Detroit to talk about how many miles per gallon American drivers will soon be getting.
Officials from the National Highway Transportation Administration and the EPA will hold a hearing on a proposal — announced last year by President Obama, flanked by leaders of the major car companies in a show of support — to require a fleet average of 54.5 miles per gallon by 2025.
Since that announcement, voices of doubt have grown louder, even from those who might benefit from it like the National Auto Dealers Association. Some are fearful that the new mileage goals will hurt Detroit’s signature industry. And especially in tough times like these, that’s the last thing anybody wants.
But as I will testify at Tuesday’s hearing, the truth is that higher fuel economy standards will boost the bottom line for American automakers. In fact, I believe the Detroit Three need exactly this sort of ambitious but doable national mileage goal to help keep them from repeating mistakes that have proved so costly in the past.
Research shows that when automakers boost fuel efficiency, their profits actually rise. They sell more cars and trucks. And they create more jobs across the board — from manufacturing and marketing, to developing new and cleaner technologies that make their vehicles more competitive on the world stage. Add it all up, and economic models predict that the 54.5-mpg mileage standard now being considered would boost auto industry profits by billions of dollars per year.
On the other hand, we in Michigan know only too well what can happen when automakers ignore driver demand for more fuel-efficient cars. A few years back, Detroit stayed focused on SUVs and gas-guzzlers even as oil prices rose. By 2009, two of the Detroit three had declared bankruptcy. Government bailouts cost taxpayers billions. Here in Michigan, our friends, families and our neighbors lost their livelihoods. From 2000-2010, we were the only state in the country to lose population.
Now gasoline prices are rising again. In 2011, the price of gasoline (all grades and formulations) averaged $3.58 per gallon, according to the U.S. Energy Information Administration. That is 74 cents per gallon higher than in 2010, and 28 cents per gallon higher than in the crisis year of 2008.
Against this backdrop, vehicle manufacturers are deciding on the mix of vehicles they will be offering for sale; some highly fuel-efficient, some very inefficient. A strong national mileage standard will help ensure vehicle manufacturers make better choices this time around, while giving American drivers what they want: cars, SUVs and light trucks that go farther on a gallon of gasoline.
Consumers have confirmed their preference for more efficient vehicles in poll after poll. A recent Opinion Research poll commissioned by the Consumer Federation of America shows that 75% of Americans believe it is important to increase fuel-economy standards. And in a recent Mellman Group poll of likely voters here in Michigan, 76 percent said a national 60-mpg standard would encourage American carmakers to innovate, boosting sales and protecting US jobs.
Sixty miles per gallon is not on the table, but 54.5 mpg by 2025 is. Michigan’s automakers can do it. They have the technology and the creativity. They can give American drivers what they want. Along the way, they can make more money, sell more cars, and rebuild one of America’s great industries.
Economist Walter McManus is research professor of decision and information sciences at Oakland University. He is the former director of automotive analysis at the University of Michigan's Transportation Research Institute, and spent nine years working in the automotive industry, focusing on forecasting, marketing analysis and new product development.