It was a tough day on Capitol Hill last Wednesday for the chief executives of Detroit's diminished auto industry—the group formerly known as the Big Three. In their fifth trip to Washington in the past year, the American auto bosses hoped to forestall proposed legislation to boost gas mileage regulations. But GM Chairman Rick Wagoner, Ford CEO Alan Mulally and Chrysler chief Tom LaSorda drove into a buzz saw. House Speaker Nancy Pelosi refused to meet with the car guys, while even old friends had harsh words for Detroit's perpetual opposition to tougher mileage standards. "You've lost," Democratic Sen. Byron Dorgan of North Dakota told them. "Your position is yesterday forever." By midday, LaSorda fell ill and had to excuse himself. Can you blame him?
Detroit is experiencing the sickening realization that its free ride on fuel economy is over. This week or next, the Senate is expected to vote on a bill to require automakers to achieve an average of 35 miles per gallon for all their vehicles by 2020, up from the current average of about 25 mpg. This might seem like an obvious move, given that gas prices have skyrocketed, global warming threatens the planet and American soldiers are dying in a region rich with oil and terrorism. But here in Detroit, where auto execs once bragged that a gallon of gas was cheaper than bottled water, fighting fuel-economy rules has long been a way of life. But after winning that battle for more than two decades, Detroit's influence in Washington is running on empty. There is no longer any question that mileage regs will change. It's just a question of by how much and when. Wagoner acknowledged as much after meeting with congressional leaders, but he made a plea that the coming changes be "responsible" so as not to "disadvantage the domestic industry."
Critics argue that Detroit has done plenty to disadvantage itself, with its fixation on outsized SUVs like GM's Hummer. American automakers' overreliance on big rigs helps explain why the Detroit Three combined to lose more than $16 billion last year and now are shedding tens of thousands of workers. Conversely, the more fuel-efficient fleets at Toyota and Honda explain why each is in ascent in America. Federal statistics show that Toyota's 2006 model cars averaged 34.7 mpg, while Honda's averaged 33.3 mpg. GM 2006 model cars were the best in Detroit, with an average of 29.7 mpg, while Ford's '06 cars averaged 28.9. (Chrysler is lumped with Daimler, so it's hard to get a clear reading on its corporate-mileage average.) The disparity is also wide on SUVs, minivans and pickups, with Toyota averaging 23.6 mpg and Honda averaging 24.5 mpg, while GM averaged 21.7 mpg and Ford averaged 21.1 mpg.
And yet, even as Detroit accepts its inevitable mpg reckoning, it can't help but continue to argue against the government regulating the mileage of its models. The day after Detroit's Washington summit, I interviewed GM's top R&D executive, Larry Burns, who said he doesn't need the government regulating what the free market is already telling him. "With gas up at $3.50 a gallon," he said, "of course we'll improve fuel economy, because that's what customers say they want." Indeed, he said, GM is rapidly retooling its lineup with green vehicles like the Chevy Volt plug-in hybrid that's expected to hit the road in 2010. And he castigated the federal government's three decades of fuel-economy regulations, which go by the French-sounding acronym CAFE (for corporate average fuel economy). "CAFE has not accomplished what it set out to do," he said. "The fact is we're importing dramatically more petroleum and using dramatically more petroleum today."
That's true, but the auto industry had a hand in that because it lobbied so successfully against any changes in those regulations over the decades. Even now, the industry is running an ad campaign warning that the new regs threaten to take consumers' pickup trucks away. That scare tactic drew the ire of Dorgan, who had supported Detroit in the past. "He said, 'We protected you from CAFE and you lost market share, jobs and money anyway'," says the Sierra Club's Dan Becker, a frequent critic of Detroit. "Congress is not afraid of Detroit anymore. Their constituents are screaming about prices at the pump, their kids being sent to fight a war for oil, and they're concerned about global warming."
For years, Congress heeded Detroit's persuasive argument that consumers didn't care about mileage and that forcing the issue would throw a wrench into America's economic engine. And Detroit still has a couple powerful hometown allies in veteran Michigan Democrats Sen. Carl Levin and Congressman John Dingell, who each are floating legislation that gives automakers more time to boost their fuel efficiency. But the fact is Congress has not toughened mileage regs on cars since 1985.
Yes, that's right: the mileage rules intended to curb our oil addiction have remained essentially unchanged since the Reagan administration. (Trucks, SUVs and minivans recently received slightly tougher standards.)
Is it any wonder that average fuel economy in America has been running in reverse? Back in the 1987 model year, all the new cars, minivans, SUVs and pickup trucks sold averaged 26.2 miles per gallon, according to federal statistics. By last year, the average had fallen to 25.4 mpg. And with no changes in the laws regulating gasoline consumption, we're guzzling more than ever. Every day in America, drivers burn through 380 million gallons of gas, up 18 percent from a decade ago. We're also racking up record mileage. On the road last year, all the odometers in America combined to turn over three trillion miles for the first time. That's nearly 15,000 miles for every driver on the road in 2006, up from 11,314 miles per driver back in 1985, federal highway statistics show.
Those dismal stats put us on a highway to hell in this age of petro-terrorism, melting polar ice caps and $3.50 gas. And consumers—known as voters in Washington—are finally waking up to that fact. That's why SUV sales are tanking and Toyota just sold its one-millionth hybrid. Detroit's classic formula of horsepower and heft has fallen out of fashion, and mileage misers from Japan are now all the rage. It kind of feels like a throwback to the '70s when the CAFE regulations were first put in place. But this time, if Detroit doesn't get in front of the new mileage regs that are coming, it could be closing time for Motown.