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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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I've said it before...
By Shadowself on 6/1/2011 7:52:08 PM , Rating: 2
The CAFE standards need to go away COMPLETELY -- both at the Federal and State levels.

If the governments want to get people to buy more fuel efficient cars start taxing gas guzzlers and start giving rebates/incentives on highly fuel efficient cars. Base this in a standard of ONE type of fuel and one method of economy rating (e.g., mid grade gasoline and miles per gallon) and convert all other vehicle efficiencies (e.g., electric) to that one standard (e.g., so many miles per kW-Hr equals so many miles per gallon).

If a company wants to only build and sell cars that get ONE mile per gallon and people want to buy it then they pay a hefty tax to do so. That is the buyer's choice. They are using up a resource and poluting at one mile per gallon. They can to pay because of that choice. However there is no one telling the car manufacturer that they can't produce that car.

If the buyer wants to buy a car that gets 75 MPG then they can get a rebate/incentive. They use less and polute less. No one is tellig the car manufacturer that they must produce these cars. If people want to buy them then manufacturers will build them.

In between there could be a band (could be as wide as 15 - 45 MPG) would have no additional taxes or incentives.

Now... if an individual state wants to have a different band (say make the zero tax or incentive band go from 25 to 55 MPG) then they could do that ON TOP OF the federal set of taxes and incentives. The state band (and taxes & incentives) would be 100% independent of what the Feds do.

Thus if you're in a very restrictive state and buy a vehicle that gets 10 MPG you pay additional taxes to both the Feds and the state. If you buy a vehicle that gets 20 MPG there is no tax or incentive from the Feds but there is a tax from the state. If you buy a vehicle that gets 50 MPG there would be an incentive from the Feds but none from the state. Buy a vehicle that get 65 MPG and you'd get an incentive from both the Feds and the State.




By Philippine Mango on 6/2/2011 3:42:36 AM , Rating: 2
quote:
If a company wants to only build and sell cars that get ONE mile per gallon and people want to buy it then they pay a hefty tax to do so. That is the buyer's choice. They are using up a resource and poluting at one mile per gallon. They can to pay because of that choice. However there is no one telling the car manufacturer that they can't produce that car.

That's how the current CAFE standards work you artard.. These federal fuel economy standards do not prevent any auto manufacturer from producing a vehicle that gets fuel economy worse than a certain figure.. all it does is "tax" them for every .1mpg under the designated figure they go. The more you go under the figure, the more you pay.. And then on top of that, we have the gas guzzler tax which is a penalty assessed on top of any CAFE penalties the company may or may not be assessed. If this wasn't true, why is it you can still buy a CAR rated at 14mpg today? (Cadillac CTS-V with the 6.2L engine and supercharger) or a Bentley (8mpg) or a Ferrari Scaglietti (11mpg)? Automakers obviously don't like CAFE standards because it forces them to make fuel efficient vehicles. If the fleet of vehicles they have gets below the designated figure, they get penalized and in a market that has very small margins, any cost increase is a big penalty to them which is why they do what they can to avoid them..(At least all the big manufacturers try to)


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