Big 3 lose with fuel rules, analyst says

Big 3 lose with fuel rules, analyst says http://www.detnews.com/apps/pbcs.dll/article?AID=/20070626/AUTO01/706260340/1148
WASHINGTON -- A Senate bill to raise fuel economy mandates by 40 percent
would force Detroit's Big Three automakers to dramatically reduce sales of profitable larger sport utility vehicles and pickup trucks, according to one Wall Street analyst.
Under the Senate bill, which passed 65-27 last Thursday, fuel economy mandates would increase to 35 miles per gallon for cars and trucks by 2020. Automakers have said such a mandate would require them to add costly technology, reduce the size of some vehicles and stop selling some larger vehicles.
"We estimate the Big Three could meet the 35 mpg standard only by dramatically reducing sales of large SUVs and pickups by 60 percent, while improving car fuel economy by about 34 percent and truck fuel economy by 25 percent," Brian Johnson, an auto analyst with Lehman Brothers in New York, wrote in a report Monday.
Automakers say the Senate bill, which would be the first passenger car fuel economy increase in 25 years, would cost them tens of billions of dollars. DaimlerChrysler AG's Chrysler Group has said it could bankrupt the company.
Environmentalists and others in favor of tougher mileage standards have argued there would be no need for automakers to downsize vehicles to meet the requirements.
What isn't disputed is that SUV and pickup truck sales have been the bread and butter of General Motors Corp., Ford Motor Co. and Chrysler for years. In 2007, 34 percent of GM sales have been large SUVs and full-size pickups. At Ford, it's 31 percent, and for Chrysler it's 20 percent.
By comparison, large SUV and full-size sales have accounted for just 10.5 percent of Nissan Motor Co. sales so far this year and 8 percent of Toyota Motor Corp. sales.
One major area of concern for GM and Ford is their reliance on large and powerful but less efficient engines, Johnson said.
While about 60 percent of Honda Motor Co.'s and Toyota's 2006 production was four-cylinder engines, only 14 percent of Chrysler and Ford engine production was four-cylinder and only 21 percent of GM's.
The Alliance of Automobile Manufacturers, a trade group that represents the Detroit Three and Toyota among others, said the report shows there are real impacts to a dramatic increase.
"Fuel economy standards need to be increased, but at reasonable levels so workers around the country do not lose their jobs or pensions or other benefits," spokeswoman Gloria Bergquist said. "As this reports shows, the economic threat is real and it is serious."
In May, Standard and Poor's issued a report arguing that tough fuel economy and vehicle emissions legislation would "pose a real risk to global automakers' financial performance, particularly as some are already under pressure from razor-thin margins."
Dingell steps in
With the Senate bill passed, the legislation now moves to the House, which isn't expected to address raising Corporate Average Fuel Economy mandates until the fall.
On Wednesday, the House Energy and Commerce committee is expected to approve a package of six bills to improve fuel efficiency.
U.S. Rep. John Dingell, D-Dearborn, chairman of the committee and an ally of the auto industry, on Friday called the CEOs of GM, Ford and Chrysler, along with the United Auto Workers president, to talk about the fuel economy bill, the Detroit News has learned. He urged the companies to be more aggressive in emphasizing what they can agree to do to improve fuel efficiency.
Dingell also held a closed-door meeting with automakers' top Washington officials late Monday.
House Speaker Nancy Pelosi will have an event Thursday to tout the Democrats' energy package -- including the six bills from Dingell's committee -- but she does not plan on including fuel economy as part of this package.
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Park a 70's era half-ton pickup next to one of the new Dodge half-tons.
Allegedly same capacity, in fact, the Dodge may have a smaller bed. But the Dodge has damn near twice a much sheet-metal.
Gotta move the auto industry away from building road-locomotives.
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