Automakers Face Fuel Efficiency Test

New mpg rules pose hurdle for profitable big trucks of Big 3.

Published: 05-Jan-2003

lass=byline>By Ted Evanoff

January 05, 2003

DETROIT -- The nation's best-selling automobile, the Ford F-series pickup truck, goes about 16 to 18 miles on a gallon of gasoline.

Now federal regulators have a new mandate in the works that would require a 7 percent average gain in fuel economy beginning in 2005 for all pickups, vans, minivans and sport-utility vehicles made that year.

The tighter standard, expected to save 2.5 billion gallons of gas a year, would be the first large upgrade in truck mileage since pickups and sport-utilities surged in popularity in the mid-1980s.

While environmental advocates contend a 7 percent increase in fuel economy is easily reached and ought to be set higher, auto executives insist they can't make those gains in full-size trucks in a few years at a price most consumers would consider affordable.

With the rule set to phase in during 2005 and reach the 7 percent goal in 2007, the automakers are considering other ways to satisfy the rule without having to resort to a wholesale redesign of their V-8 and V-6 engine programs.

"This regulation will not be easy for the industry as a whole to meet," said Jim Olson, a public affairs official in New York for Toyota Motor Corp.

"If you look at a regulation, it has to be planned for median companies and not the leaders" in truck sales, Olson said. "This regulation will be easier for us and Honda to meet."

As a result, Detroit automakers will tweak V-8 powertrains, install fuel-saving components and promote diesels.

A good share of their effort, though, will be devoted to moving buyers into fuel-efficient cars designed to look like sport-utes, industry analysts say.

Because the proposal doesn't single out full-size pickups and sport-utes, auto companies can satisfy the rule by upgrading the mileage of smaller trucks and achieving an average 7 percent gain across all of their truck lines. A car built to look like a truck can be classified as a truck for fuel-economy purposes.

But executives at the truck-producing companies are still concerned. The new federal rule would require an auto company's trucks made in 2007 to average 22.2 miles per gallon.

In reports filed with federal regulators, the Detroit automakers estimated average fuel economy for their particular truck fleets using available technology.

General Motors Corp. projected its 2007 trucks would average 19.1 mpg to 20.8 mpg. Ford Motor Co. projected 22 mpg and Chrysler Group projected 22.2 mpg.

If they don't satisfy the rule by selling enough fuel-efficient smaller models, production might have to be scaled back on the big pickups and sport-utilities, which provide the bulk of Detroit's vast profits.

"It's a fairly significant challenge for us" to meet the new rule, said Stuart Schorr, Chrysler spokesman in Washington.

Not meeting the fuel-economy standard also would result in penalties owed to the government along with the possibility of negative publicity.

Among the 15 automakers selling in the United States, the Detroit companies appear most vulnerable because their profits are concentrated in the larger pickups and sport-utes.

"The wild card is customer choice," said Mike Morrissey, General Motors spokesman in Washington. "If customers continue to choose full-size pickup trucks and sport-utility vehicles, it will make it increasingly hard to meet the standard."

Trucks account for half the new autos sold today, and the Detroit automakers along with Toyota Motor Co. make three of every four trucks.

Ford's full-size models account for about 53 percent of its truck business, while GM's full-size lines represent half of its truck volume.

Chrysler's Dodge Ram is its only full-size model, though the pickup is the company's single best seller and accounts for almost a quarter of Chrysler's truck business.

Toyota's full-size Tundra and Sequoia, built in Indiana, represent about a fifth of its truck volume.

"As we shift the mix toward the larger vehicles, which we are doing little by little, meeting the fuel economy standard becomes more of a challenge," said Toyota's Olson. "But we will meet the standard."

Auto companies say they will add fuel-saving components to V-6 and V-8 powertrains, and promote diesels and hybrid engines in midsize vehicles. Hybrids use a big electric motor backed by a small conventional engine.

Just as important, they will bring out more fuel-efficient cars designed to look like midsize sport-utilities. These so-called crossovers will be classed as trucks.

One such model already on the road, the 20- to 25-mpg Chrysler PT Cruiser, is made from car parts.

GM already has ushered in the crossover Saturn Vue sport-utility, and Ford has the Escape crossover and is bringing out another crossover built from the Taurus sedan.

Auto executives have faced the mileage issue before. Last winter, the industry fended off the legislative attempt by Sen. John Kerry, D-Mass., to boost mileage as much as 45 percent.

Although a fuel-economy measure was gutted from an energy bill, the matter was handed to the National Highway Traffic Safety Administration for study.

The safety administration, which sets fuel-economy standards for trucks, looked in private this summer at the abilities of the various auto companies to upgrade truck mileage.

Analysts at the agency concluded the industry had the technical ability to achieve a 7 percent gain by 2007.

In mid-December, the Bush administration backed the safety agency, saying the tighter rule from the safety agency, known as NHTSA, would save 2.5 billion gallons of gas a year.

"NHTSA assessed the period of time it would take, the technology that was available and struck a pretty good balance point that will stretch the industry but won't put a company in bankruptcy or cause excessive dislocation," Toyota's Olson said.

Now the 7 percent rule is set to become the standard following a 60-day public comment period that ends in mid-February.

Under the measure, the combined fleet mileage for every pickup, sport-ute, van and minivan made by an auto company in 2005 must average 21 mpg.

The average would rise to 21.6 mpg for 2006 trucks and 22.2 mpg for 2007 trucks. The current rule requires a truck fleet average of 20.7 mpg.

Cars are covered under a separate mandate set by Congress requiring a 27.5-mpg fleet average.

In the next few years, consumers are likely to see a variety of changes:

• Expensive fuel-saving components will be used.

A survey of powertrain specialists conducted by the think tank Center for Automotive Research in Ann Arbor, Mich., said electronic controls that turn off several cylinders when a truck is at cruising speed are likely in the next four years, along with variable valve lift timing and other components that reduce fuel consumption.

• Fuel-efficient transmissions are coming into play as well. For example, Ford and GM together plan to build a plant for production of a new six-speed automatic transmission available to both automakers.

Six- and five-speeds would save fuel compared with the common four-speeds.

• Tax credits for automakers and possibly consumers are being discussed.

These would help offset the price of the new technology. The safety agency estimates the cost to the auto industry of meeting the 7 percent rule will reach $702 million by 2005.

• GM is looking at whether it can meet the standard by factoring in flexible fuel vehicles. These are made to burn gas or ethanol.

• Diesel engines going 25 percent farther on a gallon of fuel compared with gas engines will be touted.

• More hybrid-electric power plants will be installed in conventional trucks.

Although the 7 percent goal would save gas, environmental groups long have contended the auto industry could push fuel economy into the 30-mpg range at a cost of about $2,000 per vehicle.

"It's a miniscule number compared to what's needed and what's technically achievable," said Daniel Becker of the Sierra Club about the 7 percent initiative.

But Toyota's Olson said the new rule is stern enough.

"This regulation will advance the application of the best available fuel technology to light trucks," Olson said. "Increasing mileage even 1.5 miles per gallon is not easy regardless of what the environmentalists say."

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