Congress wants green trucks — do buyers?

updated 6:40 p.m. ET Oct. 17, 2007

As Toyota Motor Corp. joins the Big Three Detroit automakers in trying to soften up fuel economy legislation winding through Congress that would require a Corporate Average Fuel Economy standard of 35 mpg by 2020, what gets lost in the controversy is that the carmakers actually could achieve the target. They just want a little more time — and money.

Key to the fuel economy target in the likely bill: building pickups and sport-utility vehicles that average 27.6 mpg by 2020. Despite complaints from automakers, that goal is certainly attainable. But it's going to take a well-funded information campaign aimed at consumers to prime the marketplace for what amounts to a re-engineering of the U.S. pickup market. This is what automakers, even Toyota, are afraid of. Nobody wants to upset "Bubba" pickup buyer.

The automakers have the technology to make the shift happen. But to build pickup trucks that get almost 10 miles more per gallon than they do now will require billions in new investment. This is a legitimate concern on the part of the auto companies, since the three domestics are struggling mightily to make any profit at all these days. Research and consulting firm Global Insight recently studied the issue and concluded that technology and manufacturing investments would be about $12 billion, including $8 billion on eight new diesel engine plants. And those investments would have to be made starting now, says Phil Gott, Global Insight's director of automotive consulting, in order to achieve the ramp-up with consumers.

Building plug-in efficiency
So far, the U.S. government hasn't talked up any plans to subsidize the shift. That seems odd. The government spends billions a year subsidizing farmers. And even Republican lawmakers believe there is a direct connection between foreign policy and U.S. dependence on oil. In the foreword of a new book, "Freedom from Oil" by David Sandalow, Sen. Richard Lugar (R-Ind.) notes, "Oil is a magnet for conflict, a weapon for petro-states, and a stimulant for terrorism." Lugar adds, "We can build flex-fuel, plug-in highly efficient cars that get hundreds of miles per gallon of oil. It's time to get on the road to doing that." "Hundred of miles per gallon" refers to plug-in vehicles that can make a 40-mile trip without using gasoline.

The analysis by Global Insight goes like this: By 2020, nearly two-thirds of the U.S. vehicle fleet will have to be powered by a direct-injection engine (either gasoline or diesel), downsized from the current engine displacements on the market today, and be turbocharged. Diesel would have to comprise one-third of the market. Half of all vehicles would be one of the four forms of hybrid, and half of those hybrids would also be diesel-equipped. "To introduce such a stunning shift from port-injected gasoline engines (the vast majority of U.S. powertrains) to the new configurations would require a staggering amount of investment," says Gott.

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Buyers look at upfront costs
Toyota has made big investments in its new pickup truck plant in San Antonio as well as its Indiana plant where it builds SUVs. And even for Toyota, the move to much better truck/SUV fuel economy means not getting its planned return on investment in those plants, as well as its engine plants, if the energy bill goes through.

Toyota and its U.S. rivals support an alternative bill proposed in the House of Representatives that sets a goal of 32 to 35 mpg by 2022. It's not that much different from the stricter bill, but it reduces the size and speed of the investments that have to be made. "We believe this legislation sets a realistic and achievable deadline for all automakers to increase fuel economy standards," said Josephine Cooper, Toyota's U.S. head of government affairs.

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