But the higher mileage should be a reasonable target for Ford, Chrysler
December 16, 2002

BY JUSTIN HYDE
REUTERS

General Motors Corp. might have to spend $678 million to meet new federal fuel economy rules, far more than any other automaker, according to a government analysis.

The National Highway Traffic Safety Administration found that GM's truck fleet would fall well short of higher fuel economy standards in model years 2005 through 2007, while Ford Motor Co. and DaimlerChrysler AG would meet or be just below the standard.

A GM spokesman said Friday the company was committed to meeting any federal fuel economy requirement, but warned that it would be "extremely challenging."

"We think it could be difficult to achieve given current and expected demand for large vehicles," said spokesman Mike Morrissey. "Obviously, we've not said we're on a plan to meet this standard as written. We're certainly considering changing product mix or limiting the availability of popular vehicle features."

NHTSA said on Thursday it was proposing an increase in fuel economy standards for average fuel economy of light trucks from 20.7 miles per gallon to 22.2 miles per gallon in model year 2007, rising to 21 m.p.g. in model year 2005 and to 21.6 in 2006. Early 2005 model year vehicles could go on sale in January 2004.

Automakers and other groups have two months to comment and suggest changes before NHTSA issues a final ruling, a period Morrissey said GM hoped was more than a formality.

Several automakers gave NHTSA detailed information about their truck plans over the next decade, along with their expected fuel economy, in part to keep NHTSA from suggesting a standard that was too far out of line with their plans.

NHTSA said GM projected its truck fleet would achieve between 18.7 m.p.g. and 20.0 m.p.g. in model year 2005, rising to a range of 19.1 m.p.g. to 20.8 m.p.g. for 2007. The estimates exclude GM's Hummer brand, whose SUVs are so large they are treated as commercial vehicles and excluded from fuel economy rules.

By comparison, Ford said its fleet, including all domestic and foreign brands, would achieve 20.9 m.p.g. in 2005, 21.6 m.p.g. in 2006 and 22 m.p.g. in 2007. DaimlerChrysler said its fleet would average 21.3 m.p.g. in 2005, rising to 22.3 m.p.g. in 2007. Daimler's estimates include Chrysler, Dodge, Jeep and Mercedes, and also Mitsubishi.

DaimlerChrysler and Ford warned that their estimates could be high, but NHTSA said their projections appeared reasonable. Federal fuel economy averages are based on vehicles sold, so if consumers reject high-mileage models or demand low-mileage ones, an automaker's average suffers.

The analysis excludes credits automakers get for vehicles that run on alternative fuels like ethanol, and for achieving fuel economy averages higher than the standards. Such credits have been key for automakers to meet current rules.

NHTSA also analyzed how the traditional Big Three were planning to improve fuel economy. Environmentalists have claimed Detroit has been slow to deploy such fuel-saving technology as engines with variable valve timing and more advanced transmissions.

While GM has used such technology in some vehicles, it prefers older, cheaper-to-build engine designs for most of its vehicles, contending many customers don't care how an engine works as long as it works well. GM's cost advantages have allowed it to spend an average of $2,400 in incentives per vehicle sold this year and still turn a profit.

The agency found that if GM's future trucks used technology equal to competitors' and eliminated engines larger than 6 liters it could improve fuel economy by as much as 1.5 m.p.g. in model year 2006. The $678 million cost would be spread out over three years.