U.S. Bows to Ford, GM, Eases ’89 Fuel Economy Standards

The Transportation Department, responding to pleas from Ford Motor Co. and General Motors Corp., today eased federal fuel economy standards for the 1989 model year to 26.5 miles per gallon.

The controversial decision, certain to raise the ire of environmentalists, is intended to “enhance U.S. global competitiveness and protect jobs in the automotive sector of the U.S. economy,” the department said.

The 1989 standard would have been 27.5 miles per gallon under a 1975 law that created the corporate average fuel economy program, or CAFE, to reduce fuel consumption and ease pollution.

Under the program, auto makers have had to meet progressively tougher fuel economy averages each year for their car fleets or face stiff fines.

Japanese Role Cited

But the 1975 law grants the Transportation Department the authority to lower the standards in a given year if it finds that auto makers have made a good-faith effort to reach the standard or if raising the standard would hurt the country economically.

The department has used that provision to set the standard at 26 miles per gallon since 1986.

GM and Ford testified at a September hearing that with the drop in oil prices, consumers are demanding larger, less fuel-efficient cars and that raising the fuel economy standard would let Japanese auto makers take over the profitable, U.S. big-car market.

Japanese auto makers do not have to worry about meeting the higher fuel average for their fleets since they produce large numbers of small, higher-mileage cars that offset low-mileage cars in calculating the average, Ford and GM said.

GM said it would probably have to shut down a Texas plant that makes its bigger models and employs 4,000 people if the standard were raised to 27.5 miles per gallon for 1989.

‘Economic Distortions’

In announcing the decision, Transportation Secretary James H. Burnley IV attacked the CAFE law and said higher gas prices, not federal law, have forced auto makers to build more efficient cars.

“It is all too obvious that CAFE standards cause serious economic distortions in the marketplace,” Burnley said.

Sen. Timothy E. Wirth (D-Colo.), who testified against lowering the standards at the September hearing, called the department’s decision “shortsighted.”

One-third of gases attacking the earth’s ozone layer and contributing to the so-called greenhouse effect come from automobiles, Wirth said. “It takes the United States a step backwards in beginning to address major environmental problems facing our globe,” he said.

Chrysler Corp. said it would exceed a 27.5 miles per gallon standard and complained that “a meaningful gasoline tax would eliminate the need for a CAFE-like regulatory system.”

Chrysler Chairman Lee Iacocca has taken the position that his company has successfully met the fuel-economy level set by Congress and federal regulators should not change the rules to help companies that have been less successful in making fuel-efficient cars.

The Center for Auto Safety, a consumers group often at odds with the auto makers and their regulators, said it intends to file a lawsuit seeking to force the National Highway Traffic Safety Administration to allow the standard to return to 27.5 miles per gallon.