Big automakers take risks in siding with Trump administration against California

Source: By Juliet Eilperin, Brady Dennis and Josh Dawsey, Washington Post • Posted: Sunday, November 3, 2019

Traffic in Lafayette, Calif., on Sunday. Automakers such as Toyota and Fiat Chrysler said they agreed that setting fuel economy standards is the purview of the federal government, not of the state. (Jose Carlos Fajardo/AP)
Traffic in Lafayette, Calif., on Sunday. Automakers such as Toyota and Fiat Chrysler said they agreed that setting fuel economy standards is the purview of the federal government, not of the state. (Jose Carlos Fajardo/AP)

The decision this week by several major automakers — including General Motors, Toyota and Fiat Chrysler — to back the Trump administration in a high-stakes legal fight with California over fuel-efficiency standards has fractured an industry that has long prided itself for speaking with a single voice in Washington.

It also represents a calculated political risk, sowing doubt about the industry’s climate commitments and potentially backfiring if Democrats take back the White House in 2020.

The move has sparked a backlash among congressional Democrats historically allied with the auto industry and has angered some consumers, one of whom tweeted, “Boycott time!” while another said, “GM to the planet: Drop dead.”

Meanwhile, the Trump administration, which last year said it wanted to freeze fuel efficiency at the 2026 levels required by Obama-era regulations, has decided to propose requiring auto companies to improve fuel efficiency at a pace of 1.5 percent a year, according to senior federal officials who spoke on the condition of anonymity because the rule has not yet been published.

That proposed rate is far slower than the 4.7 percent a year rate in existing federal regulations and is slower than the 3.7 percent rate that would be required in the deal struck between California and four other manufacturers.

The proposed rollback will probably deepen political divisions. In an interview, Rep. Debbie Dingell (D-Mich.) suggested that she and fellow lawmakers would push to impose stricter mileage standards on the industry through legislation.

“The action this week by some of the car companies means that Congress won’t ignore the transportation sector,” she said, “and something is going to happen in Congress on fuel economy standards.”

For the time being, President Trump would probably block such legislation. But Margo Oge, who directed the Environmental Protection Agency’s Office of Transportation and Air Quality from 1994 to 2012 and who helped negotiate Obama-era fuel standards, said the automakers’ decision to back the administration would have implications if Democrats take back the White House in 2020.

“When the Democrats come into the White House, they aren’t going to forget what these companies have done,” she said.

The companies that intervened on the Trump administration’s behalf this week insisted they were not taking political sides, but rather wanted to see the federal government and California compromise on a single national mileage standard — a compromise that has been nowhere in sight.

But the Obama administration had established a single standard in a 2009 deal among companies, the federal government and California. The Trump rollback is what will upset that accord.

The industry has been in a tug of war for months.

In July, California reached an agreement with Ford, Honda, Volkswagen and BMW of North America to raise their average fleet’s efficiency to about 50 miles per gallon by model year 2026. At the time, state officials expected that other major companies would soon sign on.

But Trump officials have actively sought to undercut that deal, according to several administration and industry officials, by reaching out to carmakers who had remained on the fence and launching antitrust probes of the four that did strike a deal.

Staffers from National Economic Council Director Larry Kudlow’s office repeatedly pushed several companies to side with the White House, according to two individuals familiar with the conversations. Trump himself brought up the matter with GM chief executive Mary Barra in September.

Foreign firms in particular had been wary of angering the president for fear of sparking retaliatory tariffs, according to four individuals familiar with the matter. Senior Toyota officials did engage in talks with California officials earlier this year, according to two individuals, but did not reach a final agreement.

Meanwhile, car companies are worried that California could make it difficult for them to sell in the state or could find other ways to punish them, one person familiar with the talks said. There was no explicit threat to the companies from the White House, this person said, “but Trump has a lot more power and can do a lot more damage if he wants to.”

Ultimately, the coalition of automakers siding with the White House on the litigation included Subaru and Nissan, along with GM, Toyota and Fiat Chrysler. They said they agreed that setting fuel economy standards is the purview of the federal government.

The outcome of the case could have major implications for the planet. The transportation sector accounts for more greenhouse-gas emissions than any other in the United States, having outpaced the electric power sector in recent years.

The administration has sought to reverse federal requirements raising the average mileage of cars and light trucks from 37 mpg to about 51 mpg by model year 2025, former president Barack Obama’s most significant climate rule. But the administration had yet to finalize the rollback because it was still trying to devise a formula showing that the benefits of the rule would outweigh the costs, according to two senior federal officials

But the White House is pressing ahead with efforts to strip California of its right to set tailpipe emissions on its own, authority the state has enjoyed for decades under an exemption in the Clean Air Act. California helped broker the first carbon limits on autos a decade ago, and its stricter standards have been adopted by 13 other states and the District of Columbia.

GM spokeswoman Jeannine Ginivan declined to comment on the meeting between Barra and Trump, but said in an email that the company remains committed to improving fuel efficiency and “an all-electric future.”

In a statement, Toyota insisted that it signed onto the legal action “not as a plaintiff or a defendant, and not to favor any political party,” but rather to have a say in how fuel standards are applied around the country. “That is why we decided to be part of this legal matter,” the company said. “Doing so does not diminish our commitment to the environment.”

Mary Nichols, who chairs the California Air Resources Board, said in an interview that she was disappointed that companies such as Toyota would side with the administration, given that her state accounts for 20 percent of the firm’s U.S. market.

“There are more Priuses on the road out here than the rest of the country,” she said.

Nichols is not the only one expressing disappointment this week. Numerous car owners have complained on social media and through emails to the companies.

“So much for an eco-friendly brand,” one person tweeted to Subaru.

“For a company that is supposedly committed to environmental safeguards, you fell far short,” another customer wrote to Toyota. “We have two Hondas, and I guess we’ll be getting a third.”