U.S. regulators urged to scale back fuel efficiency fines

TRAVERSE CITY, Mich. (Reuters) - Two major auto trade associations want U.S. regulators to reconsider plans to more than double fines for failing to meet fuel efficiency requirements, saying it could increase industry compliance costs by $1 billion annually.

The Alliance of Automobile Manufacturers and the Association of Global Automakers, which represent nearly all major automakers, asked the National Highway Traffic Safety Administration (NHTSA) this week to reconsider its planned 150 percent increase in fines for automakers who fail to comply with the Corporate Average Fuel Economy (CAFE) program.

Congress last year ordered federal agencies to adjust civil penalties to account for inflation and, in response, the NHTSA proposed to raise fines to $14 from $5.50 for each 0.1 mile per gallon each vehicle is below required standards.

In an Aug. 1 request, the two auto groups said they “have serious concerns about the effects” of the increase and argue they should face only fines adjusted to account for inflation since 2007, when Congress revised fuel rules. The NHTSA proposed 1975, when Congress created the program.

NHTSA said the increases would potentially result in an additional $30 million in civil penalties being collected annually. The auto groups said the revision would dramatically increase costs since it would raise the value of fuel economy credits.

Mark Rosekind, the NHTSA’s administrator, said on Wednesday at an industry conference in Traverse City, Michigan that the agency had been ordered to raise the fines. “We didn’t come up with that idea,” Rosekind said, saying the agency needs to translate what Congress sought in a “fair, reasonable way.”

The regulation “would actually increase the annual estimated cost of compliance with the CAFE program by at least $1 billion based on NHTSA” forecasts, the automakers said.

Some automakers historically have opted to pay fines instead of meeting fuel efficiency requirements - including some small volume luxury automakers. Jaguar Land Rover and Daimler AG paid the most in fines in recent years.

The higher fines would apply retroactively to the 2014 and 2015 model years. "Applying the increased civil penalties in this manner is profoundly unfair to manufacturers, does not improve the effectiveness of this penalty, and does nothing to further" policies, wrote the groups, whose members include including General Motors Co, Ford Motor Co, Toyota Motor Corp, Volkswagen AG VOWG_p.DE and Honda Motor Co .

Reporting by David Shepardson