Automakers warm to new fuel savings proposal

By John Crawley

WASHINGTON (Reuters) - Automakers reluctantly said on Thursday they could live with a proposal in the U.S. House of Representatives for stricter vehicle mileage standards even though it would cause financial pain, while the industry's major union fully endorsed it.

Dave McCurdy, president of the chief U.S. trade group for the biggest American and overseas auto companies, told an Energy and Commerce Committee hearing the proposed goals were "extremely aggressive" and would be difficult to achieve.

But he did not dismiss them and seemed to accept the possibility of them becoming law -- a first for the industry battling congressional efforts to craft new standards.

"The proposed increases in fuel economy requirements would present major technology challenges for automakers, requiring tremendous investments over a sustained period of time," McCurdy said.

The industry did not detail the financial impact of the mileage standard plan that would require fuel economy for new passenger cars (compacts, sedans and wagons) to rise 8.5 miles per gallon to 36 mpg by 2022. The standard for light trucks (sport utilities, pickups and vans) would rise by 7.8 mpg to 30 mpg by 2025.

Alan Reuther, legislative director for the United Auto Workers (UAW), was more succinct in expressing support for the leading fuel savings proposal in the House, which is part of a larger bill to reduce oil imports and cut greenhouse gasses.

"We believe this is technologically and economically feasible for the auto manufacturers," Reuther said.

The UAW and General Motors Corp., Ford Motor Co. and Chrysler Group have united in opposition to stricter proposals in the U.S. Senate and are trying to get them changed.

Chief executives of those companies were on Capitol Hill on Wednesday to lobby against the leading plan in that chamber, which would increase fuel standards by 4 percent annually beginning in 2011.

Under the Senate proposal, a carmaker's fleet of passenger cars and light trucks, including sport utilities and pickups, would have to average a combined 35 miles per gallon by 2020.

Major auto companies, including Japan's Toyota Motor Corp. and Honda Motor Co. Ltd., have consistently resisted attempts by Congress to set new mileage targets under the Corporate Average Fuel Economy (CAFE) program, which proponents say is the quickest and most effective way to reduce U.S. fuel consumption and increase energy independence.

The auto companies have said they would embrace higher standards only if lawmakers adopted the industry's preference for how the changes would be structured. Automakers have also urged Congress to let them improve fuel efficiency by accelerating development of electric cars and alternative fuels, like ethanol-gasoline blends, on their timetable.

The House proposal adopts a Bush administration initiative that requires the use of 35 billion gallons of alternative fuels by 2025. It would also mandate that nearly half of new cars be capable of running on two types of fuel by 2012, a timeframe McCurdy said was too demanding, especially for Japanese manufacturers.

Key Democrats said the measure spearheaded by Energy and Commerce Chairman John Dingell of Michigan said the overall bill fell short.

"This doesn't step up to the urgent challenge facing us. It blinks and steps back," said Rep. Henry Waxman, a California Democrat.

Waxman and Massachusetts Democrat Edward Markey said they would offer tougher proposals when the committee begins considering amendments next week.