Trump just gave automakers a huge win (F, GM, FCAU)


•Trump made the announcement after meeting with Detroit auto executives.

•A review of fuel-economy and emissions regulations will be reopened.

•Trump attacked imports of foreign vehicles and repeated his campaign attacks on NAFTA.

President Donald Trump went to the heart of the US auto industry on Wednesday to announce an executive order requiring the Environmental Protection Agency to reopen a review of fuel-economy and emissions standards that had been concluded last year in the waning days of the Obama Administration.

Trump made the announcement at an event in Michigan, a state that he won in the election.

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"There is no more beautiful sight than an American-made car," Trump said in a speech after meeting the Detroit auto executives.

"The era of economic surrender in America is over," he added.

During his speech, Trump again took credit for automaker hiring, citing jobs that Ford, General Motors, and Fiat Chrysler Automobiles had planned to add prior to his election.

"They're going to be building new plants," Trump said.

However, with sales at peak levels in the US, carmakers are reluctant to add new manufacturing capacity ahead of a downturn. In fact, if new auto factories are to be built, they're likely to be added in the US South, where numerous foreign automakers assemble cars.

Trump also unveiled something of a quid pro quo, maintaining that in exchange for regulatory rollbacks, he expects to see jobs added.

"They have to hire and grow in our country," he said.

The fuel-economy standards

In early 2017, the Obama administration EPA, as well as the National Highway Traffic Safety Administration, locked in fuel-economy and greenhouse-gas emission targets for the automakers, compelling them to achieve an average of 54.5 mpg by 2025.

Since the election, carmakers and their lobbying groups, the Alliance of Automobile Manufacturers and the Association of Global Automakers, have been pressing the new administration to reopen a midterm review of the EPA's Corporate Average Fuel Economy (CAFE) standards. The automakers sent a letter in February to new EPA head Scott Pruitt, arguing for a revisiting of the so-called "Final Determination" on the standards.

The AAM argued that the "standards threaten to depress an industry that can ill afford spiraling regulatory costs" and maintained that 1.1 million jobs could be lost due to the regulations.

Short-circuited review

Automakers have maintained that a midterm review of the standards, which were mutually established by car companies and the government in 2011, was "short-circuited," to use a term offered by Ford CEO Mark Fields. At White House meetings with Trump, Fields and the chief executives of General Motors and Fiat Chrysler Automobiles reportedly pressed for the review to be restarted.

Under the CAFE agreement, automakers would be compelled to achieve a fleet average of 54.5 mpg by 2025. They now argue that the high costs of developing unpopular hybrids and electric vehicles is damaging their business, while at the same time the rising standards disadvantage their hot-selling and highly profitable pickup trucks and SUVs.

Consumer groups and environmental organizations have stressed that the rising fuel-economy and emissions standards would put more money in drivers' pockets by reducing their costs at the gas pump, encourage technological innovation, and combat global warming.

"This change makes no sense," Rhea Suh, President of the Natural Resources Defense Council, said in a statement.

"Mileage standards save consumers money at the gas pump, make Americans less dependent on oil, reduce carbon pollution and advance innovation. The current standards helped the auto companies move from bankruptcy to profitability, and there is no reason they cannot be met. This is just another part of President Trump's retreat from action on climate change."

A rollback isn't a given

It's worth noting that although Trump's move is a big win for the auto industry — and that his EPA, under climate-change skeptic Scott Pruitt may be far more willing to adjust the CAFE timetable to neuter its existing regulations — a reopening of the midterm review may not lead to any major changes. The automakers are aware of this and have largely been arguing for an opportunity to present their case to the government.

A wrinkle in the Trump action is California, a state whose Air Resources Board enforces a waiver of the national EPA and NHTSA regulations that allows the state to set more stringent standards. The automakers have been pressing to see the waiver eliminated so a single national standard can be the law.

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