Trump forces automakers to walk a fine line on fuel economy rules as Ford gets hammered

A visitor walks past a Ford Escape Titanium at an auto show last April.

Greg Baker | AFP | Getty Images

DETROIT – Automakers are walking a fine line of business and politics when it comes to President Donald Trump's efforts to roll back Obama-era fuel efficiency rules.

In tweets Wednesday, Trump turned up the heat on auto companies, particularly Ford, for not supporting his plans. He called auto executives "foolish," said the founders of Ford Motor and General Motors are "rolling over" at the "weakness of current car company executives."

The attacks came after Ford, Honda Motor, BMW and Volkswagen reached a voluntary agreement last month with California on fuel economy standards. The deal included relaxed standards instead of a freeze to the Obama administration's rules — something most major automakers have supported.

Trump's attacks shine light on an ongoing dilemma of automakers wanting to satisfy the administration as they try to do what's best for business. The industry has already invested billions in increasing fuel efficiency and reducing carbon emissions of new vehicles. That includes a litany of new all-electric, zero-emission vehicles that are in development and on U.S. roadways.

Abiding by California's rules is good business for the automakers. The state accounts for about 12 percent of U.S. vehicle sales. Not selling there and other states that adhere to California's regulations would be detrimental to business.

No major automakers has supported a freeze of the Obama-era standards, although many have supported a reevaluation of the rules to address current market conditions of lower gas prices, all-electric vehicles and increased sales of trucks and SUVs.

Ford, in response to Trump's tweets, said it remains "proud to lead the way in taking the right actions for the environment while at the same time protecting consumer affordability and the short- and long-term health of the industry."

Ford shares Thursday morning remained relatively unchanged from their opening price of $9.05.

'It's unbelievable'

Supporters of the Obama-era standards have noted that consumers are saving money at the pump and have pointed to environmental benefits such as lower carbon emissions as positives for the rules. The regulations, adopted in 2012, called for a fleetwide fuel efficiency average of 54.5 miles per gallon by 2025.

Opponents, including Trump, have criticized the rules as not being realistic to today's market conditions and adding thousands of dollars to the price of new vehicles. The Trump administration also has argued that by lowering the cost of vehicles, it will save lives as more people will sell older, less safe models.

"My proposal to the politically correct Automobile Companies would lower the average price of a car to consumers by more than $3000, while at the same time making the cars substantially safer," Trump "Engines would run smoother. Very little impact on the environment! Foolish executives!"

Jeff Alson, a former Environmental Protection Agency staffer who worked on the 2012 fuel economy and greenhouse gas standards, criticized Trump for not factually supporting his claims and ignoring gasoline savings at the pump for consumers.

"It's unbelievable," he told CNBC on Thursday. "There is no economic or common-sense rationale" for the administration's claims that a rollback would save lives.

Nonprofit watchdog Consumer Reports earlier this month also disputed Trump's cost increase claim. The publication said a rollback could cost American consumers $460 billion in additional fuel costs in the coming years and could cause a decrease in vehicle sales.

Trump vs. California

Trump and California regulators have been at odds since last August over the state's right to set its own standards. The administration argued that federal law preempts states from doing so.

California is allowed to set its own standards under the federal Clean Air Act of 1970.

GM and other major automakers have been reluctant to back California's standards. Instead, they have consistently supported one national standard to assist in product planning and eliminate regulation uncertainty.

"Our focus remains on working with all parties on a solution that would involve a 50-state solution and a national electric vehicle program," GM said in a statement.

The Detroit automaker also cited its initiative of a future with "zero crashes, zero emissions, and zero congestion" that includes "continuously improving fuel economy and our commitment to an all-electric future."

Ford on Thursday also reiterated its support of a national standard, despite agreeing to the deal with California: "We have consistently supported one 50-state solution for regulating fuel economy standards, and this agreement with California provides regulatory stability while reducing CO2 more than complying with two different standards. As always, we will continue to produce ever cleaner, smarter and safer vehicles."

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