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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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RE: Why
By rbuszka on 6/1/2011 1:08:49 PM , Rating: 3
Apparently you're not even the doctor of 'crap', because nobody with a Ph. D would close their eyes to the fact that every major technology transition is a one-to-one move, not a one-to-many move. Eventually, consumers will demand that the industry standardize on a single technology before they will adopt it. We essentially have one vehicle technology right now, and a couple that are still (by the numbers) on the lunatic fringe. Hybrid vehicles aren't a true technology transition because they simply add another technology (batteries and electric motors) to the existing one (a gasoline engine and a mechanical drivetrain), which dilutes the effectiveness of the new technology. We need to move from one vehicle technology to another vehicle technology, and in order to do that, we need to pick the new vehicle technology that has the most technical merit.

The surest way to kill alternative fuel efforts is to spread those efforts among all available technologies so that customers and investors have no idea which one to invest in so they won't be left out in the cold when the entire industry standardizes on one technology. Because so many separate players (vehicle manufacturers, refueling stations, parking providers, car dealers, the federal government) all need to be able to cooperate for the whole system to work, we need one technology that we can agree upon as the way to go. I personally like the idea of compressed natural gas, simply because of its abundance and the minimal cost in adapting the existing technology, but I think that electric vehicles ought to get the investment so they can grab a larger amount of market share.

RE: Why
By wookie1 on 6/1/2011 2:27:25 PM , Rating: 2
Who decides what technology has the most merit? How will that person know
1) How to meet the diverse needs of 300M people
2) What business models will allow companies to be profitable to meet these needs

Technocrats suffer from the "knowledge problem".

RE: Why
By YashBudini on 6/1/2011 5:36:05 PM , Rating: 1
Technocrats suffer from the "knowledge problem".

And they think they resolve that by listening to lobbyists and often having them write the laws.

RE: Why
By Dr of crap on 6/2/2011 11:06:19 AM , Rating: 1
I disagee with your one tech statment.

I can see EV being used for in town traffic.
I can see CNG or pure ethanol for long haul driving.
Maybe these second fuel source cars as the second car.

Yes you need to standardize the way that the car is fueled up. And there might even be a dominant fuel, but there can also be the other fuels that have their area that works best for.
A RX8 has a different type of engine, yet it sells. We can have different types of engines and fuel to burn/use. The market will tell us which works and for whom.

This isn't the Dems against the Reps.
We can have more than two choices for the fuel that moves us around.
What I'm saying is lets give R&D money to all alternative fuel possiblites and see which ONES work out the best in the market they make the best choice for. Some will choose EVs, some will choose CNG, some gas.

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