Trump Track: Who's Blowing Smoke on Auto Exhaust?

The Trump Administration, which reversed course from the Obama Administration on the CAFE rules for automobile manufacturers and announced it would freeze the fleet mileage standards at 2020 levels, apparently will not promulgate its new standards until at least first quarter 2020.

News reports, based on unidentified insiders, also indicate that the new rule, unlike the original proposal, will not freeze the standard but set it to increase at 1.5% a year starting with model year 2021. That would put the standard for model year 2026 at 46 mpg, not the original standard of 37 mpg.

What It Means

The State of California loudly objected after the administration announced it would reverse the Obama standards and freeze the mileage standard at 37 mpg for the period 2021-2026. Despite strong pleading from the auto industry, which feared a split market if California set a separate standard, the federal government refused to negotiate a compromise.

California subsequently negotiated a separate arrangement with four auto manufacturers (representing roughly one-third of the U.S. market) for fuel standards at almost 50 mpg, somewhat lower than the Obama requirements, but well above the Trump proposal. The Trump Administration blew off that agreement as nothing but a "PR stunt," then sought to remove California's ability to set separate standards for its state under the Clean Air Act.

Litigation inevitably followed. Other auto companies aligned themselves with the federal government in court on the argument that a single national standard is required, but also stated that did not mean they would support the standard proposed by the Trump Administration.

Where Are We Headed?

So here we are, with the auto industry in a quandary. The industry sets its production requirements years in advance, and it is threatened with having one of its largest and most profitable markets operate with two separate standards.

It is difficult to see how a manufacturer could thrive in that segmented market. And of course the Obama standards might be reinstated if there is a new administration in 2021. Uncertainty is the bane of business.

The litigation will not end soon, and may well not end well for the Trump Administration or the auto companies. It appears that Trump is choosing to do quietly what he should have done all along instead of posturing: negotiate a compromise.

Will that actually happen? It's an election year, and with this president, anything is possible.