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Trump and the Auto Industry: Update

Trump and the Auto Industry: Update

As he begins his term, President Donald Trump is focusing on U.S. manufacturing and, in particular, the automotive industry. We're following his comments and moves around this industry as they occur, so check back regularly to see what's new.

Feds Signal Intent to Review 2022-25 Fuel-Economy Standards

Six months after the EPA under then-President Barack Obama finalized the last chunk of federal vehicle-emissions standards, which run from the 2022-25 model year, the Department of Transportation under President Donald Trump announced plans to reexamine separate, though related, Corporate Average Fuel Economy rules. The National Highway Traffic Safety Administration, a DOT agency, said it will analyze the environmental impact of fuel-economy standards for 2022-25 under the current proposal, as well as "reasonable alternative standards," including a no-action possibility that would simply continue the 2021 model-year standards "without further change." Even those standards could change, however, as NHTSA also signaled that it may evaluate standards for the 2021 model year. What's more, other factors under review  like vehicle classification or flexibilities around the standards  might "affect model years prior to" the chunk under review.

The analysis will involve a period of public comment from various stakeholders, followed by a notice of proposed rules. The EPA's move in January won praise from environmental groups but criticism from the Alliance of Automobile Manufacturers, a trade group that represents 11 automakers, for its perceived rush to cement emissions targets before President Trump took office, given the agency had until April 2018 to do so. Some three months later, incoming EPA Administrator Scott Pruitt and Transportation Secretary Elaine Chao signaled their intent to reconsider the EPA's determination. The agency will make a new determination on the 2022-25 greenhouse gas standards before April 2018; NHTSA has another two years to issue a final CAFE standard for the beginning of that period.

What It Means to Car Shoppers: Today's move means little right now, but environmental standards  whether greenhouse gas or CAFE — have huge implications for the auto industry. Fuel-economy requirements date back to 1977, and the existing rules require 36 mpg in average window-sticker mileage on new cars by the 2025 model year. That's up about 10 mpg versus today's average, the EPA said earlier this year. Environmental regulations can prompt automakers to invest in certain cars or technologies or even sell low-volume electric models only in certain states. If the Trump Administration relaxes such standards, the effect on what you see at dealerships could be significant. But it could also take years to pan out. — Kelsey Mays

Trump Pulls Out of Climate Treaty; Musk Leaves CEO Panel

June 1, 2017: President Donald Trump announced that the U.S. will pull out of the Paris Agreement on climate change, so far ratified by 147 nations, saying it was a "bad deal" that is too costly for the U.S. in jobs and in payments to developing countries for cutting emission. He also said it does not require enough from other countries compared to the U.S. He said he would seek to begin talks for a "better deal." The nonbinding Paris deal aims to cut greenhouse gas emissions, such as carbon dioxide from vehicles and power-generating plants. He did so despite pressure to stay in from CEOs of many major U.S. companies that do business around the world. As for automakers, at the time of the deal in 2015, the heads of 13 major companies had signed a pledge to cut carbon emissions that presumed global public and private cooperation. Automakers may dislike regulation, but they hate inconsistent rules even more. California already signaled it would try to go its own way, with Gov. Jerry Brown leaving Friday for climate change discussions with Chinese leaders and members of an ad hoc alliance of countries, states and municipalities committed to climate action. And Tesla CEO Elon Musk, who lobbied Trump hard not to pull out of the Paris deal, is quitting the president's CEO advisory group, saying on Twitter, "Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world."

What It Means to Car Shoppers: Not much immediately (unless you live in low-lying coastal areas such as Miami where they already are raising streets and infrastructure to cope with rising sea levels driven by climate change). Longer term, it could foretell an easing of U.S. efforts for higher fuel efficiency, particularly past 2025, and a lessening of support for generous federal subsidies for battery cars. That's not good news for automakers, who are counting on consistent national regulation and on government support in developing new products and giving consumers incentives to buy them. It also could lead to the U.S. car market being out of step with the rest of the world's vehicle markets, particularly Europe and China, and complicate automaker efforts for global products, possibly leading to less selection and higher prices for U.S.-market vehicles. — Fred Meier

Trump Bashes Germans for Selling Too Many Cars in U.S.

Updated May 26, 2017: At a meeting of European Union leaders in Brussels on Thursday, President Donald Trump bashed Germany for the volume of cars it exports to the U.S., reports German publication Der Spiegel, citing unnamed meeting participants. "The Germans are bad, very bad ... See the millions of cars they are selling to the U.S. Terrible. We will stop this," Trump reportedly said.

What It Means to Car Shoppers: Probably nothing. Not unless Trump decides to try to back up the dramatic rhetoric with a politically unlikely "border tax" on German-made cars, which would hike their prices. Even then, Mercedes-Benz, BMW, Audi and Volkswagen already make several of their most popular models in the U.S. or Mexico (though his promised renegotiation of NAFTA could separately affect cars from plants south of the border). — Fred Meier

Trump Backs Off Threat to Exit NAFTA, Will Renegotiate Deal

Updated April 27, 2017: Following his tweet preview this morning, President Donald Trump told reporters at the White House that he has backed off threats to withdraw from NAFTA. He said that after phone calls with the heads of Mexico and Canada, he decided to try talks to improve the countries' free trade deal rather than unilaterally withdraw, as some advisors wanted. "Let's see if we can make a fair deal" he said, adding, "NAFTA's been a horrible deal for the United States, it's been very good for Canada, it's been very good for Mexico." Before the change of heart, Trump said he had been preparing to end the deal, "I was going to terminate NAFTA two or three days from now." While he has backed down from that threat he said he still will consider it if the renegotiation does not produce a deal he likes.


What It Means to Car Shoppers:  By backing off, Trump has eased fears that the integrated auto production in the three countries will be disrupted and that prices for many vehicles, particularly lower-price ones, could quickly rise. A successful renegotiation could reset terms of the deal in an orderly manner. As Trump put it today with understatement, his threatened abrupt U.S. withdrawal would be "a pretty big shock to the system." — Fred Meier

Trump Budget Plan Would Slash EPA Car Emissions Testing

Updated April 5, 2017: President Donald Trump's proposed budget would cut most federal money for EPA testing for car emissions and fuel economy, but it also proposes to raise fees paid by automakers to pay for testing, according to a Reuters report based on an EPA document posted by the Washington Post.

The March 21 document outlines some ways the administration will reach its goal of a 31 percent cut in the EPA budget by cutting or eliminating programs and shifting more to states and industries. About half the employees tasked with the emissions testing and certification programs would be eliminated, and most federal money for testing -- which verifies results reported by automakers -- would go. But an unspecified amount of that would be made up by higher automaker fees.

What It Means to Car Shoppers: Stay tuned. Any president's proposed budget gets extensively redone in Congress. The administration plans to offer more details on its budget proposal in May. Also, increased industry fees are likely to be opposed by the auto industry. But if the cuts stand and funding is not replaced, a slimmed-down EPA staff could result in slow or delayed certification of new vehicles for sale. It also could hamper the backstop that verifies automaker testing on emissions and mileage, and has resulted in such actions as greater scrutiny of diesels in the wake of the VW diesel scandal and the restating of mistakenly inflated mileage ratings by Hyundai. — Fred Meier

California Defies Trump, Votes to Keep Obama Air Rules

Updated March 27, 2017: The California Air Resources Board voted unanimously on March 24 to keep the 2022-25 vehicle emissions rules that the Obama administration rushed to make final after the 2016 presidential election. The Trump administration has said it will reopen the review of the rules that call for 54.5 mpg (a high-30s combined mpg rating on the sticker) by 2025. The national rules were set in 2012 in a deal among California, the EPA and automakers, with a provision for a midterm review of the later years to be completed by April 2018.

Automakers have argued that the later rules are not consistent with what U.S. shoppers are buying. A Used Engine /midterm-evaluation-light-duty-vehicle-greenhouse-gas-ghg">report for the review by the EPA, Department of Transportation, National Highway Traffic Safety Administration and CARB said sales trends indicate automakers could fall short at an average of 50 to 52 mpg (mid-30s on the window sticker) by 2025. CARB also voted for an escalating percentage of zero-emissions vehicles — such as battery, plug-in hybrid and fuel-cell cars — that automakers must sell in California. Thirteen other states in the Northeast and West, plus the District of Columbia, currently at least partly follow rules set by California, which has a waiver to set its own rules independent of federal policy. That waiver is being reviewed as well.

What it Means to Car Shoppers: The vote sets up the possibility of different rules in different states for what cars and powertrains are available for sale. There also potentially could be problems registering in a different state a car approved in your state. If California prevails, automakers also will have to convince shoppers to buy more electric vehicles -- particularly if other states following California stop giving automakers credit for selling EVs in California. — Fred Meier

Trump Will Reopen Review of Mileage Rules for a Year

Updated March 15, 2017: President Donald Trump announced to an audience of autoworkers and auto executives that his EPA will reopen the Obama administration's accelerated review of 2022 to 2025 fuel mileage rules that make final the goal an average of 54.5 mpg (high 30s combined mileage on the window sticker). Automakers have asked for more flexibility on the rules and timetable because of buyer demand for SUVs and pickups, moderate gas prices and limited demand for electric vehicles. Trump is giving carmakers another year to dispute the tougher standards. The original deadline for the review had been April 2018.

What It Means to Car Shoppers: The reprieve could mean more SUVs and pickups remain available, and that projected price increases would be delayed, though the reopened review also could result in no change to the rules. The National Highway Traffic Safety Administration estimates the rules as proposed would add an average $2,200 to the price of a vehicle, but it also says the owners over the life of a vehicle could save a total of $6,600 in fuel costs. While there might be fewer electric vehicles produced, fuel efficiency also is on track to keep increasing. Automakers are not lobbying for a drastic cut and a Used Engine /midterm-evaluation-light-duty-vehicle-greenhouse-gas-ghg">report for the review by the EPA, Department of Transportation, NHTSA and the California Air Resources Board said sales trends indicate automakers could be at an average of 50 to 52 mpg (mid 30s on the window sticker) by 2025. — Fred Meier

EPA Chief: Human Activity Not Main Cause of Climate Change

Updated March 9, 2017: In a CNBC interview, new EPA chief Scott Pruitt contradicted the current positions of the EPA and NASA — and lit up a Twitter storm — by saying he's not sure human activity is the main cause of climate change and that he believes Congress should weigh in on whether the EPA should even regulate carbon dioxide emissions as a pollutant. The Supreme Court ruled in 2007 that the EPA had authority to regulate CO2 emissions by cars under the Clean Air Act, and the EPA determined in 2009 that such car emissions were a threat to public health.

What It Means to Car Shoppers: Changing the finding regarding carbon dioxide could have broad implications for auto industry average fuel economy rules through 2025, which in turn may influence the type and price of vehicles offered shoppers by that time. Pruitt said the Trump administration soon will announce its plans for its promised review of the rules made final by the Obama administration. A new study commissioned by the Alliance of Automobile Manufacturers found the current rules could raise car prices an average of $1,800 as well as cut about 150,000 jobs. — Fred Meier

DOT Chief to Review Self-Driving Car Guidelines

Updated Feb. 27, 2017: New Secretary of Transportation Elaine Chao said in an interview with Reuters that she is reviewing autonomous vehicle research guidelines issued last year by the Obama administration. She expressed strong support for autonomous vehicles' safety potential but said she would seek to find the "right balance" for the guidelines, which include reporting and sharing of test data for a 15-point safety assessment. Chao said the administration aims to be "a catalyst for safe, efficient technologies, not an impediment," and also challenged autonomous-car developers to help educate "a skeptical public" about potential benefits. Some companies worry that the data sharing will reveal trade secrets, and others believe the guidelines favor large companies. GM, Toyota, Lyft and Volvo also recently urged the federal government to provide nationwide regulation of self-driving car technology, noting an emerging patchwork of state laws.

What It Means to Car Shoppers: The new administration may refine the guidelines but it appears to be on board with continuing to encourage autonomous car technology and speeding its deployment into cars you can buy. — Fred Meier

Automaker Group Appeals to New EPA Chief on MPG Rules

Updated Feb. 22, 2017: The trade group representing a dozen automakers, including GM and Toyota, wasted no time in appealing to new EPA chief Scott Pruitt to revisit the last-minute Obama administration effort to lock in fuel mileage rules for 2022-25 models at an eventual 54.5 mpg in the lab (high-30s combined mileage on the window sticker). In a letter to Pruitt, Alliance of Automobile Manufacturers CEO Mitch Bainwol said the Obama decision on mpg rules is "riddled with indefensible assumptions, inadequate analysis and a failure to engage with contrary evidence." The EPA had until April to complete a review of 2018-25 model-year rules agreed to in 2011 by automakers and the administration. An EPA study said in July that because Americans were buying fewer cars and more SUVs, vans and pickup trucks, automakers might miss the 2025 goal by 2 to 4 mpg, which could mean big fines. Automaker CEOs sent a joint letter with a similar appeal to President Trump last week and Pruitt indicated earlier he would be open to a review.

What It Means to Car Shoppers: As noted below, your stake in these rules is the vehicle choices you'll have available, as well as the prices you'll have to pay in those years. Automakers are caught between what the EPA requires and what shoppers are buying because compliance with the average fuel economy goals is sales-based: It's the average of what you buy, not the vehicles the automaker offers. If you decide a lower-mileage SUV best meets your needs, it doesn't matter how many higher-mileage vehicles the automaker also offers. — Fred Meier

EPA Foe Confirmed to Head the Agency

Updated Feb. 20, 2017: The Senate has confirmed Scott Pruitt, a foe of federal regulation, to head the EPA. As attorney general of Oklahoma, Pruitt challenged many federal rules, including suing the EPA 14 times, for treading on power he believed belonged to states. He is expected to try to cut the size and scope of the EPA. He also said in his confirmation hearing that he'll reopen the review of model-year 2022-25 gas mileage rules made final by the Obama administration. They fixed the 2025 mileage mandate at 54.5 mpg (a lab figure that would mean a high-30s combined mpg rating). Automakers have asked for flexibility, saying the goal has been made more difficult by shoppers' taste for SUVs.

What It Means to Car Shoppers: Pruitt is likely to be more receptive to flexibility. The final rules will determine what vehicles and powertrains you'll be able to buy by 2025 and how much you'll pay. Automakers already have rolled out more hybrid and electric cars to meet the rules. The current rule would add an average of $3,000 to car prices, according to the National Automotive Dealer Association.  The National Highway Traffic Safety Administration puts the increase at $2,200 but also says the various owners over the life of a vehicle eventually would save a total of $6,600 in fuel costs. Changing the rule won't be fast or easy; revising a rule made final requires a lengthy process to approve a new plan. Meanwhile, Pruitt's own agency is not likely to follow his lead: A group of current and former EPA employees held a public protest of his nomination in Chicago this month. — Fred Meier

Automakers Want Review of 2025 MPG Rules

Updated Feb. 13, 2017: Warning that jobs are at risk, leaders of major automakers have sent a letter asking President Donald Trump to reopen talks on corporate average fuel economy goals for 2022 through 2025. The Obama administration moved to lock in the rules in its final days ahead of the designated April deadline. The letter, seen by Reuters, was from the CEOs of GM, Ford and Fiat Chrysler Automobiles as well as the U.S. leaders of Toyota, Volkswagen, Honda, Hyundai, Nissan and others. The government and automakers agreed in 2011 to raise mpg standards from 2017 through 2025, but the deal called for a midterm review of the sales-based 2022-25 goals. Automakers asked for flexibility, warning that buyer tastes for SUVs would cause them to fall short of the 2025 target of 54.5 mpg (a lab figure that would mean high 30s combined mileage on window stickers). A joint report by the EPA, Department of Transportation, National Highway Traffic Safety Administration and California Air Resources Board for the midterm review also said sales trends mean automakers could fall short at about 50 to 52 mpg, but it also said they could meet the higher goal with more changes. Automakers face large fines for missing. 

Ford CEO Mark Fields told President Trump in a meeting in January that Ford, GM and Fiat Chrysler Automobiles believe a million U.S. jobs could be at risk if the rules are not aligned with the market. President Trump's nominee to head the EPA, Scott Pruitt, said in confirmation hearings that he would review the fuel efficiency rules.

What It Means to Car Shoppers: The final rules will affect the types of cars, SUVs and trucks, and powertrains still available by 2025. All automakers already have been introducing more gas-electric hybrid vehicles and battery electric cars to help meet the requirements. The final rules also will determine how much more shoppers will pay for vehicles. If there are no changes, an average increase of $3,000 in car prices is estimated by the National Automotive Dealer Association. NHTSA put the increase at $2,200 but also estimates that a vehicle's owners over the total life of the vehicle eventually would save $6,600 in fuel costs. — Fred Meier

D.C. Insider Confirmed as Transportation Chief

Updated Jan. 31, 2017: Veteran Republican bureaucrat Elaine Chao was confirmed by the full Senate 93-6 as President Trump's secretary of transportation after unanimous approval in committee. Chao, 63, was born in Taiwan and was secretary of labor under President George W. Bush. She also was a deputy secretary of transportation under President George H.W. Bush and has held other high executive posts; she's the wife of Sen. Mitch McConnell, R-Ky., the Senate majority leader.

What It Means to Car Shoppers: Better roads and bridges; also, likely continued Department of Transportation support for development of self-driving cars. Chao is expected to lead Trump's promised effort to pass a huge infrastructure bill; spending on infrastructure also has support from many Democrats. She also indicated in her Senate committee questioning that she favors continuing DOT promotion of autonomous car research and development. Her department will participate in Trump's promised review of the Obama administration's last-minute approval of 2025 fuel mileage standards, but the EPA will lead that review. Trump's nominee to head the EPA, Scott Pruitt, has yet to be confirmed. — Fred Meier

MPG Fine Rollback Delayed by Trump Freeze

Update Jan. 27, 2017: The National Highway Traffic Safety Administration has held up for at least 60 days a rollback of automaker fines for missing fuel economy targets for 2017 models and beyond. The fines were more than doubled in July, but automakers said they were "blindsided" by the action and NHTSA in December agreed to delay until 2019 models. But responding to a Jan. 20 Trump administration memo freezing new regulations, NHTSA put the rollback on hold, according to The Detroit News. Many other federal agencies are broadly interpreting the order.

What It Means for Car Shoppers: If it's not fixed, the fine increase could be passed along in higher prices for some or all models in a carmaker's lineup. The July action would have raised from $5.50 to $14 the fine for each 0.1 mpg by which an automaker's average fuel economy misses the target, which rose to 35 mpg for the 2017 models. That fine is multiplied by the total cars an automaker sells that year, so it could add up to big bucks. Jaguar Land Rover, for example, paid $46.2 million in fines at the old rate for the 2010-14 model years, according to Automotive News. —Fred Meier

Trump Meets With CEOs of U.S. Automakers

Updated Jan. 24, 2017: The president met Tuesday with the CEOs of Ford, Fiat Chrysler Automobiles and GM, and discussed ways in which environmental regulations might be lowered in an effort to help the automakers increase U.S. production. It was the first time the CEOs of the Detroit Three had met with the U.S. president as a group since 2011, CNBC reported, when the automakers and then-President Barack Obama announced a deal to reduce emissions.

What It Means to Car Shoppers: It's unclear at this point, but labor costs are higher for U.S. auto workers than they are for auto workers in Mexico and overseas. It's possible that a boost in U.S. production could raise the labor cost for automakers, an increase that could be passed onto new-car buyers. —Patrick Olsen

Trump Meets With Automaker, Manufacturing Chiefs

Updated Jan. 23, 2017: President Trump offered both carrots and a stick in a meeting with a dozen CEOs, including those of Ford and Tesla, to promote U.S. manufacturing jobs. He promised the leaders he would lower corporate taxes and cut regulations so that companies could expand U.S. plants faster, but he also repeated his threat to put large tariffs on products they make elsewhere and import into the U.S., according to a report on the meeting by Reuters.

What It Means to Car Shoppers: In the short term, it might not mean much. Decisions about plant usage and capacity typically take years to make and implement. Still, the use of tariffs (essentially a large percentage tax on a car, truck or SUV) could make foreign-built cars unattractive to U.S. buyers. The "chicken tax," implemented in the 1960s, imposes a 25 percent tariff on pickup trucks not built in North America. That led Toyota, Nissan and Honda to build plants to produce their U.S. pickups in San Antonio, Mississippi and Tennessee, and Alabama and Canada, respectively. —Fred Meier

Trump Says No to Trans-Pacific Partnership, Says He'll Renegotiate NAFTA

Updated Jan. 23, 2017: President Trump formally withdrew the U.S. from the TPP, saying that he was going to focus trade talks more in a one-on-one fashion with individual countries. In addition, he said he was planning to renegotiate the North American Free Trade Agreement with Mexico and Canada. The 23-year-old pact with those countries was a favorite target of Trump on the campaign trail.

What It Means to Car Shoppers: Ending the U.S. involvement in the TPP has little effect; the agreement had not yet been approved and its impact on the auto industry was very drawn-out. Replacing or rescinding NAFTA, on the other hand, could have a big impact if it means that vehicles built in Canada and Mexico will be subject to tariffs.

Many automakers, U.S. and foreign, have plants in Mexico in particular to lower labor costs. Many models manufactured there are less-expensive models from which automakers have low profit margins on. Tariffs could be painful for those automakers to endure, and the extra cost would be passed on to the consumer, which could reduce demand for those vehicles. —Patrick Olsen