New fuel economy rules issued to auto industry

updated 2:14 p.m. ET March 29, 2006

BALTIMORE - The government set tighter gas mileage rules Wednesday for pickups and sport utility vehicles, including bulky SUVs like the Hummer H2 and Chevrolet Suburban, responding to rising concern about the supply and cost of energy from abroad.

The new fuel economy rules, covering 2008 through 2011, would save 10.7 billion gallons of fuel over the lifetime of the vehicles sold during that period and take a more aggressive stance than a Bush administration proposal issued last summer, officials said.

“The new standards represent the most ambitious fuel economy goals for light trucks ever developed in the program’s 27-year history,” said Transportation Secretary Norman Y. Mineta, announcing the plan from a Baltimore football stadium that overlooked traffic near an Interstate 95 interchange.

The new regulations followed President Bush’s declaration in January that the U.S. is “addicted to oil,” and his call for a 75 percent reduction in Mideast oil imports by 2025. Manufacturers will begin implementing the rules as average gas prices exceed $2.50 a gallon and many consumers are seeking more fuel-efficient vehicles such as hybrids and flexible-fuel pickups and SUVs.

U.S. automakers, notably General Motors Corp. and Ford Motor Co., have struggled in recent months, outlining plans to reduce their work force as they deal with shrinking market share, higher costs for labor and raw materials and intense competition from Asian competitors.

Mineta said the plan was “pragmatic” and devised with jobs and costs in mind, along with the benefits of conserving fuel. Automakers will need to closely scrutinize their product lineup to meet the standards, which are the most sweeping to the Corporate Average Fuel Economy (CAFE) system in three decades.

“This is challenging and it won’t be easy to meet these standards but manufacturers are committed to being a part of the solution,” said Charles Territo, a spokesman for the Alliance of Automobile Manufacturers.

Transportation officials estimated the plan would add about $200 to the cost of each vehicle, but consumers likely would recoup that cost in fuel savings in four years, they said.

The rule would include SUVs weighing 8,500 to 10,000 pounds for the first time starting in 2011, but it would not include large pickup trucks in the weight class. Vehicles likely to be affected include the Hummer H2, Chevrolet Suburban, GMC Yukon XL, and the Ford Expedition EL, scheduled to be released this summer. DOT officials said they would require manufacturers to install fuel saving technology on all passenger trucks.

CNBC VIDEO New fuel rules March 29: The Wall Street Journal’s Detroit Bureau Chief Joe White examines the government’s new fuel standards. CNBC

Environmental groups found the plan disappointing after lobbying for months for higher gas mileage requirements and the inclusion of the largest pickup trucks and SUVs. Eric Haxthausen, an economist with Environmental Defense, compared it to “slowing down the Titanic as it steams ahead toward the iceberg.”

“After the Bush administration acknowledged our oil addiction, one might have expected a slam dunk, but this is an air ball,” said David Friedman, research director for the Clean Vehicles Program at the Union of Concerned Scientists. His group estimated it would only save two weeks of gasoline a year over the next two decades.

The new rules do not apply to passenger cars, which must meet a 27.5 mile per gallon average.

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