U.S. automakers push for deal on fuel efficiency rules

By David Shepardson

DETROIT, Jan 16 () - Executives at the major U.S. automakers are pressing the Trump administration and California to agree on standards for fuel efficiency and carbon emissions through 2025, as risks increase that a deadline for setting national standards will pass without a deal.

Automakers are already entering the time frame when decisions should be made about what engines and fuel-saving technology, such as hybrids or fully electric cars, will be in use in 2021 and beyond, executives said.

A group of about 20 U.S. states, led by California, has challenged the administration proposal as unlawful and promised to sue if federal regulators move forward with the freeze.

Trump's proposed freeze would result in 500,000 barrels per day more oil consumption by the 2030s. The administration says it would reduce regulatory costs for automakers by more than $300 billion over the next decade.

At a hearing Wednesday, U.S. Senator Tom Carper, a Democrat, said he had "heard that the Trump Administration now plans to finalize a 0.5 percent annual increase in the stringency of the standards - a rate that is 10 times weaker than the current rules." Carper said that "will only lead to extensive litigation and uncertainty for automakers. That's not a win-win outcome. It's a lose-lose."

Several automakers said they have heard the administration could finalize an increase ranging from no increase to 1 percent per year, but nothing has been finalized.

EPA Administrator nominee Andrew Wheeler said at the hearing he was still pushing for an agreement. "Nobody wants a 50-state deal more than I do," Wheeler said.

The administration is supposed to finalize the new rules by the end of March in order for the softer requirements to take effect by the 2021 model year, but some automakers and officials question if it will meet that deadline in the wake of the partial government shutdown.

Most automakers oppose freezing the requirements, but also want relief from Obama-era standards that called for a roughly 5 percent annual reduction in carbon emissions - targets that translate to fuel efficiency requirements for various classes of vehicles.

"Pick the middle. Pick 2.5 percent and get on with life," Jim Lentz, chief executive officer of Toyota Motor Corp'sNorth America subsidiary, told at the Detroit auto show this week.

Lentz told last month he was concerned that automakers are stuck between California and the White House.

"I kind of feel like this is the OK Corral and we're the settlers walking across the middle," Lentz said.

Ford Motor Co, which floated a compromise proposal last year to other automakers, is still pushing for a deal, Executive Chairman Bill Ford Jr. told .

"We've been very clear and very open that we want one national standard, we want California at the table," Ford said. "We're not asking for a rollback, but we've got to get everybody at the table, especially California."

Detroit automakers have the most at stake. General Motors Co, Ford and Fiat Chrysler Automobiles NV generate most of their global profits from sales of fuel-thirsty large pickup trucks and sport utility vehicles in the United States. All three have discontinued or planned to drop small and medium-sized sedans from their lineups to focus on trucks and SUVs.

Trucks are front and center at the Detroit auto show, where Fiat Chrysler's Ram brand exhibit displays a gleaming Ram "Power Wagon" heavy duty truck on a pedestal, and GM's GMC brand features its newly redesigned Sierra Denali luxury pickup line.

But Asian automakers that have more efficient fleets are also seeking a middle ground.

Henio Arcangeli, a senior vice president at the U.S. unit of Honda Motor Co Ltd, said without a national deal "the consumer's going to lose."

Mitch Bainwol, who heads the Alliance of Automobile Manufacturers, a trade group representing major automakers, said a deal makes the most sense but "time is running out. ... A successful negotiation is a win for everyone - more carbon reduction for California, a stronger and pro-job economic context for the administration and common sense certainty for our industry."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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