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Should the U.S. government cut subsidies for corn ethanol? Comments by Ford CEO Alan Mulally hint at that, saying the government should support "one technology" (electrification), rather than spreading funding.  (Source: Hollandtown: Holland Farm: Corn Harvest)

More controversial is the proposal to block states like California from self-governance when it comes to setting stricter fuel economy standards.   (Source: treehugger)

Alan Mulally saved his company from bankruptcy, while peers GM and Chrysler went through government takeovers and restructuring. Mr. Mulally warns that the auto industry is seeing slowing sales this quarter.  (Source: Bill Pugliano/Getty Images)
Executive would like to see states banned from setting their own arbitrary standards

Ford Motor Company (F) CEO Alan Mulally is one of the most respected figures in the auto industry today, having been the only head of a member of the "Big Three" U.S. automakers to save his company from bankruptcy in the 2007-2008 financial crisis.  However, his new comments will certainly be considered controversial by politicians, lobbyists, and citizens alike.

I. Block States From Self-Governance of Fuel Economy?

Mr. Mulally met early Tuesday morning with House Speaker John Boehner (R-Dayton, Ohio); Rep. Fred Upton (R-St. Joseph, Michigan), chairman of the House Energy and Commerce Committee; and Rep. John Dingell (D-Dearborn, Mich.), a key supporter of the Detroit automakers. 

Later in the afternoon he attended a meeting co-hosted by Reps. Dan Benishek (R-Crystal Falls, Mich.); Bill Huizenga (R-Zeeland, Mich.); and Jeff Duncan, (R-Laurens, S.C.); with Rep. Hansen Clarke, (D-Detroit, Mich.) also in attendance.  He also met with Bill Daley, the White House chief of staff, and David Plouffe, senior adviser to President Barack Obama in a separate session.

At the meetings Mr. Mulally urged lawmakers to take Congressional action to implement a single consistent fuel economy standard and block states from proposing their own stricter standards.  

Despite the fact that Congress is indeed preparing a new set of fuel economy standards, which would extend the Corporate Average Fuel Economy (CAFE) through 2025, the proposal to strip states of the right to regulate their own standards to a stricter threshold is controversial.  

First, opponents argue that it strips states of their right of self-governance.  This is a place where Republicans, in particular find themselves in a philosophical dilemma.  Their party has recently run on a platform of state rights, but they have traditionally opposed letting states regulate their own emissions, with former Republican President George W. Bush moving to block California and other states from doing so.

Second, the decision would run afoul of a 2007 Supreme Court ruling 
in the case Massachusetts v. EPA, which concluded that states had the right to set their own stricter mandates.  The ruling allowed California to effectively sue the federal government and force it to stop obstructing its standard.  In the wake of the suit, President Obama instructed the U.S. Environmental Protection Agency and Congress to allow states to set their own standards.

The issue will likely be pushed.  Even as the U.S. debates the future of CAFE, California, the nation's most populous state, is moving to set its own stricter standards for 2025.  It will likely be followed by several other states that adhered to California's previous emissions policy, adopted by President Barack Obama for the entire nation.

II. Ford: Back "One Technology"

Mr. Mulally also urged members of Congress to back "one technology" if they were serious about alternative energy vehicles.

Ford Motor Company officials did not specify what this "one technology" was, but most construe it to mean electrified vehicles.  Ford has been less enthusiastic than its peers about the "other" leading alternative vehicle technology -- ethanol fuel.

The potentially implied proposal to ditch federal subsidies of ethanol and corn farming is a controversial one -- among corn farming states, at least.  Farmers have grown fat off billions in yearly government subsidies, with a major chunk of it coming from ethanol grants and mandates.  In total corn farmers drew $73.8B USD from 1995-2009 from the U.S. federal and state governments.

The pull of the corn farmers is particularly strong in the U.S. Senate, where the numerous low-populous farm states have a much larger representation.

The proposal may also target other alternative fuel technologies -- such as compressed liquefied natural gas (CLNG), which some say could supplement traditional petroleum, much like ethanol.

III. Ford in Trouble?

One thing mentioned by Mr. Mulally may trouble Ford investors.  He would not comment on Ford's Q2 2011 sales, but did say that the market is "slowing down … it's a little less than what we hoped for at the beginning of the year", according to The Detroit News.  

That could be a trouble sign as Ford and other automakers had seen strong sales over the past couple quarters.

If the American automakers are indeed starting to struggle once more, that could make the debates over ethanol and emissions even trickier.  After all, the automakers say that a strict 62-mpg standard could "kill" the American auto industry.  And any money in ethanol subsidies will likely come at the expense of government funding of electrification efforts, which the automakers will likely need to satisfy CAFE.



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States Rights
By Reclaimer77 on 6/1/2011 12:31:56 PM , Rating: 4
I'm usually a supporter of states rights, but on this issue, this guy nails it. It's absurd to me that the whole nation has to follow the standards set by 1 of it's 50 states. I'm looking at YOU, California. It effects industry and the quality of lives of EVERY citizen, because it becomes a de-facto nation wide standard.

Of course I'm also against giving the Federal Government exclusive power over these standards.

There is only one solution. Keep Federal emissions standards, but completely REMOVE fuel economy standards. That way pollution is held in check, but WE can choose what we want to drive and auto-makers and scientists can do their jobs, not people in Washington who don't actually have to live with these mandates. Or faceless people 3,500 miles away in California who do NOT represent me, but think they can sway me on what vehicle I should drive. We have emissions standards AND we have the EPA. CAFE seems redundant and irrelevant.

It's not the 1970's anymore. The age of passenger cars getting terrible mileage is NEVER coming back.

quote:
Mr. Mulally also urged members of Congress to back "one technology" if they were serious about alternative energy vehicles.


With all due respect Mr. Mulally, it's not the role of Congress or the Federal Government to pick winners and losers in industry or "back" one technology over the other. Reading between the lines, one can only assume the "one tech" he's wanting backed just so happens to be the one his company is invested in. That's nice, but what about those who are not providing the "one technology"? I guess they get paved under the road to 'progress'.

I appreciate the position he's in. But it seems he's all too willing to hand over more power to the Fed as long as it benefits him and his investors.




RE: States Rights
By ketchup79 on 6/1/2011 12:44:31 PM , Rating: 2
I was about to reply but you stole my thunder. Nice post.


RE: States Rights
By BernardP on 6/1/2011 2:40:49 PM , Rating: 2
States wanting to set their own standards is mainly a reflection of too many politicians wanting to look greener than their neighbors.


RE: States Rights
By YashBudini on 6/1/2011 7:20:54 PM , Rating: 2
quote:
States wanting to set their own standards is mainly a reflection of too many politicians wanting to look greener than their neighbors.


quote:
States wanting to set their own standards is mainly a reflection of too many politicians trying to get in the limelight or to justify their useless existence.


Fixed it for you.


RE: States Rights
By ender21 on 6/1/2011 3:15:37 PM , Rating: 2
"It's not the 1970's anymore. The age of passenger cars getting terrible mileage is NEVER coming back."

What constitutes "terrible mileage"? Or is that a matter of opinion? All the H2s I see on the road are pegged at about 8MPG, and most of the other SUVs I see are anywhere from 12-17.

In my *opinion,* anything less than 20 is "terrible mileage."

I don't see too much legislation coming out of CA Reps requiring you to buy one car over another. Or to even buy one at all.


RE: States Rights
By Reclaimer77 on 6/1/2011 3:26:15 PM , Rating: 2
quote:
What constitutes "terrible mileage"? Or is that a matter of opinion?


Why is public opinion any less valid than Washington?

By the way, the H2 is NOT a "passenger car". It's an SUV.

quote:
I don't see too much legislation coming out of CA Reps requiring you to buy one car over another. Or to even buy one at all.


Are you an idiot? If California sets a standard, than everyone has to meet this standard or they aren't allowed to sell cars in that state. That's DIRECT market manipulation no matter how you slice it.


RE: States Rights
By Targon on 6/3/2011 8:00:05 AM , Rating: 2
Auto makers make different engines for those states, though they would prefer to make one engine that will work for all states. That is the problem here, and the big thing is that not only do you have emissions standards, you also have gas formulation requirements that are different for different states. If an engine has been designed with 10 percent Ethanol as the target, one or more states forcing E20 down our throats will reduce our fuel economy while the cost at the pump will stay the same.

Fuel economy went to hell when states started to convert from MTBE to Ethanol, and even now, there are questions about what gas formulation a given car is really designed for.


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