Blogs & Comment

Dreaming Obama style

According to Dan Becker, director of the American environmental group Safe Climate Campaign, U.S. President Barack Obamas new national fuel-economy standard is the “biggest single step to curb global warming” that has been taken to date. That boast, of course, is wrong. The financial crisis gets my vote. But either way, calling the U.S. fuel-economy plan a real step forward is as believable as support for the initiative given by General Motors CEO Fritz Henderson.
“GM is fully committed to this new approach,” Henderson said in a statement yesterday. “GM and the auto industry benefit by having more consistency and certainty to guide our product plans.” Wow. That sorta makes me wonder (not really) why GM fought the idea for years before it had to turn to Uncle Sam for a US$15-plus-billion survival loan.
Adopting the standard proposed by California’s greenhouse-gas Terminator, governor Arnold Schwarzenegger, who was once the most famous Hummer driver in the world, Obama’s plan calls for American automotive fleets in the 2016 model year to get, on average, 35.5 miles per gallon, equivalent to 6.72 litres per 100 km.
“For the first time in history,” Obama said in a Rose Garden speech, “we have set in motion a national policy aimed at both increasing gas mileage and decreasing greenhouse gas pollution for all new trucks and cars sold in the United States of America.”
“Everyone wins,” he added, noting Americans will pay less for fuel, “which means less money going overseas and more money to save or spend here at home.” Meanwhile, companies like GM “have new incentives to create the technologies and the jobs that will provide smarter ways to power our vehicles.”
The new standard, of course, will also supposedly help stop mankind from finding out if human activities are responsible for warming planet temperatures. According to the United Nations Intergovernmental Panel on Climate Change, there is at least a 10% chance human activities are not the problem. Others, and not just right-wing nuts, insist there is no cause for major concern. But planet saver or not, Obamas policy cant be effective if its goal cant be met.
Indeed, as Canadian auto sector analyst Dennis DesRosiers points out, the new fuel-economy standard for U.S. automakers “is near impossible to meet from a number of perspectives, with engineering and consumer acceptance leading the way.”
The only way to seriously attack auto-related emissions in the States, where only 30% of car purchases are currently in the small market segment, is to maintain high gas prices. Canadian drivers are greener. But to meet the U.S. target, DesRosiers says we would have to improve fleet efficiency by 3.25 litres per 100 km in seven years. Thats a huge undertaking when you consider fleet fuel efficiency in this country has improved to approximately 10 litres per 100 km from 11 litres per 100 km in the last 25 years. And in this time frame, the market share of small vehicles in Canada has actually improved to 60% from about 25%.
Obamas other problem, of course, is that his administration is reportedly saving GM to make it viable and save U.S. jobs, and building small cars in North America is not a profitable business. “So,” as DesRosiers says, “this sets up a classic dilemma for the [automakers]. They can work to meet the standard, and in the process resign themselves to ever-increasing losses, year in and year out. Or they can move their small car production to countries where they can be made profitably like Korea, China, India, etc.”
_____________________________________ DOUBLE TAKE:Aside from trying to promote myself while generating Web traffic that helps put bread and butter on my table, this blog aims to stir debate by taking a harder look at current news and events. I obviously enjoy voicing my own opinions, but I am a big boy and I welcome all comments that dont require R ratings. So let me have it via this blog or send me an email at tom.watson@canadianbusiness.rogers.com. I reserve the right to post email comments without disclosing the senders name. If you dont think I am a total twit, follow my DOUBLE TAKE posts via my NotSOCRATES Twitter site at http://twitter.com/NotSocrates. THOMAS WATSONis a Senior Writer and editorial board member at Canadian Business magazine. Since winning a community journalism award as a cub reporter with the Hamilton Spectator in the early 90s, he has covered business, finance, politics and technology for various news outlets. Prior to joining CB in 2001, he reported on the steel and automotive sectors for the Financial Post. Watson received his first magazine award nomination for exposing a stock manipulation plot aimed at Waterloo, Ont.-based Open Text in 2000, when he was head of investor relations for an international venture capital outfit in the City of London. Watson holds graduate degrees in journalism, international relations and public finance and undergraduate degrees in history and politics.