Judge Puts 43 MPG in View

By Justin Hyde
The Detroit Free Press

Thursday 13 September 2007

Detroit Three Setback: States get boost in push to make rules.

Washington - The U.S. auto industry suffered a major legal setback Wednesday when a federal judge in Vermont rejected its attempt to block states from setting tough new fuel economy rules, saying the industry failed to show the rules were illegal, unsafe or unattainable.

Environmental groups hailed the ruling as a historic victory, saying it decimated the industry's arguments in Congress against higher federal fuel economy standards and would pressure the Bush administration to let California and 14 other states put the rules into effect.

Given that the states involved account for more than half of all new vehicles sold, the laws could become a de facto national standard if they stand. The rules would require automakers to meet by 2016 an average fuel economy of about 43 miles per gallon in vehicles that weigh less than 3,750 pounds and an average of about 26 m.p.g. in heavier vehicles - higher targets than in any of the fuel economy bills under debate in Congress.

"At the trial they wanted, that they demanded and they put all their resources into, the judge looked at it and said, 'I don't believe you,' " David Bookbinder, an attorney for the Sierra Club, said of the automakers. "We're going to show this to every member of Congress."

Detroit's automakers warned the judge during a 16-day trial in April of steep job cuts and financial pain if the rules stood. General Motors Corp. said it would have to abandon some states or risk missing the targets even if it spent $25 billion upgrading its vehicles.

But Vermont U.S. District Judge William K. Sessions said the industry failed to prove that the standards were too tough, would endanger drivers, or that Congress had forbidden states from setting their own fuel economy rules.

"In light of the public statements of industry representatives, history of compliance with previous technological challenges, and the state of the record" of the trial, "the Court remains unconvinced automakers cannot meet the challenges of Vermont and California's" greenhouse gas regulations, Sessions wrote in his opinion released Wednesday.

Automakers said little about the ruling. The Alliance of Automobile Manufacturers, the trade group that includes GM, Ford Motor Co., Chrysler LLC and Toyota Motor Corp., said it would consider an appeal.

The industry's best hope for stopping the rules lies with the U.S. Environmental Protection Agency, which has pledged to decide by the end of the year whether to grant California's request for a waiver to put the rules into effect. The Bush administration is working on its own greenhouse gas controls for vehicles, but California has told the EPA it will sue if the waiver isn't granted, and the EPA has never declined similar requests by the state.

Under federal law, California can set its own air quality laws with the EPA's approval, and other states can adopt them if they make no changes. As other states began passing the California rules, automakers sued in California, Vermont and Rhode Island, arguing that only the federal government had the power to set fuel economy standards.

In the Vermont case, which was the first to go to trial, automakers argued that the rules were impossible to meet by 2016. The industry's top expert testified that to hit the standard, GM, Ford and Chrysler would have to build hybrid versions of up to 60% of their new vehicles by 2016 - a level that would make it easier for Detroit's automakers simply to stop selling most car models in those states instead.

GM went even further, testifying that its models would fall short of the standard by 2016 even if at least 80% of its vehicles were gasoline-electric hybrids. Chrysler, still part of DaimlerChrysler during the trial, testified that the only car models it could sell by 2016 would be the Smart micro-car from Europe and its upcoming subcompact from China's Chery Automobile Co.

But Sessions rejected those claims as inaccurate and too conservative. He said the industry's expert was overly cautious in his estimates because he excluded hybrids and diesels as possible technologies and expected no improvement in fuel economy from 2004 to 2009.

Sessions also said the industry's testimony was contradicted by the automakers' public statements on several new technologies, such as direct-injection engines, and that they had downplayed ways to meet the standards with vehicles that could burn biofuels.

"It is improbable that an industry that prides itself on its modernity, flexibility and innovativeness will be unable to meet the requirements of the regulation, especially with the range of technological possibilities and alternatives currently before it," he wrote.

Although the industry argued the rules would trigger the loss of 65,000 jobs, including 7,000 jobs from automakers, Sessions said that estimate assumed Detroit's automakers would not lose any market share. He also said any possible losses were dwarfed by the cuts already under way at GM, Ford and Chrysler.

Citing the ruling, the governors of 13 states sent a letter Wednesday to GM, Ford, Chrysler, Toyota, Honda Motor Co. and Nissan Motor Co., urging them to drop their legal challenges to the state laws.

"We do not believe it is productive for your industry to continue to fight state implementation of clean tailpipe standards," the governors wrote. "We would prefer to follow a path that encourages innovation, not litigation."

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