Truck rules bring threat

GM says new goals for fuel efficiency may hurt van plant

`Jeopardizes our business'

Debate on standards has automakers defending SUVs

Auto industry

May 21, 2000|By Ted Shelsby | Ted Shelsby,SUN STAFF

New congressional consideration of an increase in fuel-efficiency standards for cars and light trucks poses a new threat to the already doubtful future of General Motors Corp.'s van assembly plant in Southeast Baltimore.

Raising the fuel standards known as Corporate Average Fuel Economy (CAFE) "jeopardizes our truck business," said William H. Noack, a GM spokesman. "It jeopardizes our business in Baltimore; in Janesville, Wis.; Wentzville, Mo."

David C. Prange, manager of the Baltimore van plant, declined to elaborate on the plant's future other than to point out that it is part of the truck group, and the fuel economy of the Chevrolet Astro and GMC Safari vans are pretty close to the CAFE limit.

Any increase in the federal fuel standards, Prange said, would put the 65-year-old Broening Highway assembly plant and the vans made here at a competitive disadvantage.

GM has already announced that it will end the second shift at the Chevrolet Astro and GMC Safari plant in July, with the elimination of up to 1,200 jobs, and has committed to making the Astro and Safari only until the third quarter of 2003.

Beyond that, the plant's future will depend on consumer demand for the vans, which have not undergone a major redesign since their introduction in 1984, or a GM decision to make another vehicle here.

GM is more concerned about the impact of an increase in CAFE standards on its fast-selling sport utility vehicles and pickup trucks.

The issue pits the auto manufacturers, who are trying to safeguard their biggest cash cows, against concerns about oil supplies, air quality and global warming. Since 1995, a rider on the transportation appropriations bill has frozen CAFE standards at an average 27.5 miles per gallon for an auto maker's new passenger cars and an average of 20.7 miles per gallon for its light truck fleet.

Some members of Congress want to increase the light truck standards to match that of the automobile. They could also raise the car standards.

"The whole idea [of boosting CAFE limits] makes the auto industry want to throw up," said David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation.

"It disconnects them from their customers."

Light trucks, with their big, gas-guzzling engines, are extremely popular, Cole said. They account for one of every two new vehicles sold in this country and have a high profit margin.

"Auto companies have to reward their shareholders," Cole said. "And they have to build vehicles their customers want if they are going to stay in business."

Lance Roberts, a spokesman for the Washington-based Alliance of Automobile Manufacturers, said CAFE standards force automakers to build vehicles that motorists don't want to buy. The Alliance represents 13 automakers, including the domestic Big Three, most of the Japanese auto companies and some European manufacturers.

Roberts said the Alliance would rather see dollars invested in research into advanced fuel technologies that could produce a quantum leap forward in fuel economy than trying to squeeze a mile or two a gallon from the existing automotive fleet.

Rather than increase CAFE standards, the trade group advocates a federal tax credit of up to $2,000 to encourage motorists to buy alternative vehicles such as the Honda Insight, powered by a gasoline-electric hybrid engine.

As an indication of the public's lack of interest in alternative fuel vehicles, Mark L. Kemmer, a GM government relations representative, said the company has sold only 900 of its electric-powered EV-1 car and S-10 small pickup trucks since they were introduced three years ago.

In contrast, Chevrolet sold nearly 62,000 full-size Silverado pickup trucks last month alone.

Seven of the 10 top selling vehicles in the U.S. last month were light trucks, including SUVs, pickups and vans."They are what our customers want," said Noack, adding that few consumers buy GM's 46-miles-to-the-gallon Chevrolet Metro, despite a $1,200 rebate.

Cole, of the University of Michigan, said the automakers are protective of their light truck production because they generate high profits.

While GM, Ford and Daimler-Chrysler make a tiny profit or even lose money on each sale of their small, high-mileage cars, they make "multi thousands of dollars" on each SUV rolling off the assembly line, he said.

Furthermore, Cole said, an increase in CAFE standards would hurt domestic manufacturers and benefit imports.

That's because the law has allowed foreign manufacturers, which traditionally have built smaller, more fuel-efficient vehicles, to bank fuel economy credits for future use.

Toyota, for example, would be able to "cash in" credits it has accumulated in the past and use them over a period of three years to sell its full-size pickup, the Tundra, even if it did not meet the new fuel standards.

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