MPG Is Going To Cost Us
for the car industry that the government regards it as too
big to fail because its going to fail again.
Because of the government.
This will be
third time, actually.
The first time
was back in the late 1970s, when Chrysler rolled over like a mortally
wounded battleship to a great extent because it wasnt
able to turn a profit selling the cars it had anticipated the market
would want but was stuck trying to sell cars the government
told Chrysler it wanted. Cars that met the first round of federal
Corporate Average Fuel Economy (CAFE)
standards, which stipulated 27.5 MPG at a time when the typical
American car was as large as the current-eras largest cars,
with a big V-8 under the hood instead of something Toyota Corolla-sized,
with a four under the hood. The Japanese at that time made nothing
but small, four-cylinder cars so Uncle handed Toyota,
Datsun (Nissan now) and Honda an artificial leg up in the market
while kicking Chrysler, et al, in the soft parts.
the American cars of that time were not of primo quality. And its
true the first round of Japanese imports were also just good little
cars that sold on the merits. But its also just as true that
CAFE imposed ruinous costs on the domestics, who were forced to
prematurely retire entire vehicle platforms (and engines) long before
the investment in designing, tooling and so on had been amortized
(paid off) over the course of these vehicles otherwise natural
life cycle. It almost killed Chrysler which was (and still
is) the weakest of the Big Three, with fewer resources to fall back
on. But it also hurt GM and Ford.
never fully recovered and staggered through the 80s
and into the 90s, with too many brands (GM, especially) and
a business model that didnt mesh with the realities of the
market the government manipulated market. CAFE
the original law provided an artificial incentive
to mass produce the kinds of vehicles GM, Ford and Chrysler had
been building back in the 70s big, heavy, with powerful
V-8s only now they rode higher off the ground and were marketed
as SUVs which were not required to meet the (much
stricter) 27.5 MPG CAFE standard for passenger cars. For
light trucks, the CAFE standard was 22.5 MPG. But when the
real estate bubble popped and Wall Street collapsed in 08
and gas prices suddenly soared to $4 a gallon, GM, Ford and Chrysler
were left holding the bag.
taxpayers were left holding the bag for the subsequent
bail-out of these too big to fail companies, who found
themselves in the economically impossible position of trying to
please their customers and placate the government at the same time
and turn a profit doing it. This dynamic has been getting
worse and worse ever since the first major interferences in the
car market happened in the late 1960s.
Well, the stage
has been set for what may prove to be the final implosion of the
car industry. Caesar oops, President Obama has finalized
his decision that CAFE will be upticked from the merely outrageous
(by economic and engineering standards) 35.5 MPG in 2016 to the
economically catastrophic 55 MPG average by model
year 2025. (See here for Caesars decree.)
The Great Law
Giver who apparently also holds the title of Chief Engineer
saith this will save Americans $8,000 a year.
He does not telleth them, of course, what it will cost.
There are exactly
two 2013 model non-hybrid cars on the market that meet just
barely, or not quite the pending 35.5 MPG CAFE edict that
goes into effect only three years from now (and thats only
two short model years from now): The Scion iQ (37 MPG; see
here for an in-depth story about it ) and the Smart car (36 MPG).
They are microscopic in size the iQ, all of ten feet long,
end to end; the Smart having room for just two people.
call them Obama Cars are the kinds of cars all of
us can expect to be driving within the next few years.
[send him mail] is an automotive
columnist and author of Automotive
Atrocities and Road Hogs (2011). Visit his
© 2012 Eric Peters
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