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Published on May 10, 2005

Auto makers must face CAFE music



It was 30 years ago that Congress established a corporate average fuel economy (CAFE) standard for automobiles sold in the U.S.

Folklore reminds us that when confronted with the first fuel crisis that began in 1973, Ed Cole, then president of General Motors Corp., announced that GM would voluntarily raise its 10-12 mpg average by 50 percent to 18 mpg. Congress liked his idea so much that it called his 18 and raised it another 50 percent to 27 mpg—actually, 27.5 mpg. No one knows where the half came from.

It doesn't really matter whether that story is truth or fiction. What is true is that no car company has been willing even to suggest a number for CAFE since then. They are all afraid that their number might be raised 50 percent or 100 percent.

But that risk shouldn't be a concern today.

We might not be facing a crisis, but there is no doubt that fuel prices will continue to increase in this country. We've been lucky during the past 80 years. Now, the price of a barrel of oil is climbing, and we are seeing a lot of new competition for that barrel from China and India, and their consumption won't go down.

We have to realize that the world, including the U.S., has to start treating oil like it's going to disappear, which it will in the forseeable future.

We've squandered 30 years. We could have raised the CAFE standard a small amount each year, and by now we'd have a substantial increase. Instead, with no new taxes and no increase in CAFE, we've seen more than a quarter of a century of opportunity turn into consumer habits that will be difficult and expensive to break or even modify.

If someone in this industry doesn't stand up and act like a statesman, government will pick a number, and I guarantee you the auto industry won't like that number.

It's time for those in the automobile industry to realize that there will be a new CAFE standard. It makes sense for them to initiate the dialogue rather than just be a victim.

Mr. Crain is chairman of Crain Communications Inc., which publishes Tire Business.


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