US: Politics Forcing Detroit to Back New Fuel Rules

Auto executives say they changed strategy partly because longtime
backers in Washington, who helped them defeat previous pushes to raise
fuel economy standards, made it clear that the political climate had
changed. If they did not back a proposal they could live with,
lawmakers told the automakers, they might face even more stringent
regulations.



Consumers played a role, too, since they are no longer clamoring for
those S.U.V.'s and trucks that Detroit had suggested they could not
give up.



Environmentalists also found new support from surprising quarters,
including a coalition of top corporate and former military leaders
called SAFE, for Securing America's Future Energy.



The group, led by Frederick Smith, the chief of FedEx, and Gen. P. X.
Kelley, a former Marine Corps commandant, argues that higher fuel
economy is among the steps needed to reduce the nation's dependence
on foreign oil.



"The world now has shifted dramatically from where we thought we
could take care of our own issues to having to worry about all kinds
of things," said Gen. Charles E. Wald, a member of the group's
board and former deputy commander of the United States European
Command.



With gasoline above $3 a gallon in much of the country, presidential
candidates from both parties are also pushing for increases in fuel
economy standards that could be even harder to meet than the plan the
automakers are now backing. The Bush administration wants higher
standards, too, under a plan Mr. Bush introduced during the State of
the Union address in January.



Some of Detroit's most loyal supporters, like Senator Carl Levin and
Representative John D. Dingell, both Democrats from Michigan, have
bluntly told the auto companies that there is little chance of
escaping an increase - and that it is better to propose one than to
have one imposed on them.

Mr. Levin, joined by a number of other senators, proposed last week
that automakers increase the fuel economy of their cars and trucks in
the next decade, but with easier targets than the original bill, which
may go before the Senate in the next few days.



The fuel economy standard for cars, 27.5 miles a gallon, has not
changed since 1983. Light trucks, including S.U.V.'s, pickups and
minivans, must achieve a minimum average of 21.3 miles a gallon over
each carmaker's entire fleet.



Under compromise legislation drafted by Mr. Levin, cars would have to
achieve an average fuel economy of 36 miles a gallon by 2022, while
trucks would have to reach 30 miles a gallon by 2025.



The original bill would require cars and trucks to reach 35 miles a
gallon by 2020.



As recently as two years ago, auto companies turned back a
Congressional effort to set fuel economy standards much higher,
warning that such a move would wipe out jobs and profits, and limit
their offerings of S.U.V.'s and pickups.



But the Detroit companies have lost billions of dollars and have cut
tens of thousands of jobs anyway. And sales of smaller S.U.V.'s and
cars have climbed.



Mr. Levin has used Toyota's reputation for building fuel-efficient
cars as a selling point for his proposal, pointing out that it is a
member of the Alliance for Automobile Manufacturers, the industry
group that has been most vocal against fuel economy increases.
"Toyota is known as a green car company," Mr. Levin said at a news
conference last week.



But officials at Toyota, which edged past General Motors as the
world's No. 1 automaker for the first time in the last quarter, were
alarmed by the group's negative lobbying strategy, people familiar
with their thinking said. It started running new ads that seek support
for Mr. Levin's proposal.



Capitol Hill was crowded on Tuesday with dealers from General Motors,
Ford Motor and DaimlerChrysler's Chrysler Group, along with Ford's
president for the Americas, Mark Fields.



Mr. Fields visited six members of Congress, including Senator Evan
Bayh of Indiana, to push for Mr. Levin's version of the legislation,
saying Ford sought "to advance aggressive - yet economically
feasible - fuel economy increases" as part of the energy bill,
according to a Ford statement. Debate could begin on
Wednesday.

Environmentalists say the Levin proposal is so weak that it will do
little good. The Sierra Club has referred to it as a "poison
pill."



Carmakers say the plan will probably cost the industry tens of
billions of dollars in development costs for new vehicles and
technology over the next decade. The United Automobile Workers union
is pushing Congress for tax breaks and job protections while
automakers retool their factories to produce higher-efficiency
vehicles.



Martha Voss, a spokeswoman for Toyota, said Mr. Levin's proposal
would still be challenging for the industry. "But we think it's a
more reasonable approach," she said.



House and Senate Democrats from Michigan have been telling automobile
executives for months that they would have to accept some increase in
mileage requirements.



"My message to them was that they should not be saying no, but
should be saying yes to what they could achieve," said Senator
Debbie Stabenow, Democrat of Michigan.



Two weeks ago, Senator Byron Dorgan, a Democrat from North Dakota,
told executives the discussion essentially was over. In what is viewed
by the carmakers as a political tipping point, Mr. Dorgan declared at
a hearing, "You've lost on this issue."



The debate also went beyond the usual environmental groups that have
fought for higher fuel standards for years. Members of the SAFE
coalition, an offshoot of the bi-partisan Energy Security Leadership
Council, realized they could use their corporate and military
influence with members of Congress who might otherwise turn a deaf ear
to environmentalists or individual companies.



"We concluded that the overall dependence of the United States on
oil was a great vulnerability, and by continuing it, that we were
helping the people who opposed us," said Herbert D. Kelleher, Jr.,
executive chairman of Southwest Airlines.

"The place we could make the greatest advances in the shortest
period of time was fuel economy."



Known for his political acumen, Mr. Kelleher expressed surprise that
Detroit companies initially did not sense a shift in public and
political opinion. But, he said, he believed that they got the
message.



"I think they recognize, too, that there is a problem and something
needs to be done about it," Mr. Kelleher said. "The debate is over
about what needs to be done. Now the issue is the legislation."