• by Karl Greenberg , July 29, 2011

The debt ceiling debate seems stuck in neutral, but at least the Obama administration has reached an agreement with the auto industry. It's hard to believe, given the fact that only days ago an industry group was about to launch an ad campaign designed to scuttle the miles-per-gallon goal. Yet on Friday there was President Obama, standing with leaders of the major auto brands at the White House, agreeing to more than double the corporate average fuel economy (CAFE) standards that were in place when he took office.

Starting in 2017 when the current standard expires, the deal will increase CAFE at 5% annually for cars and 3.5% for light trucks through 2021, with an overall target of 54.5 miles per gallon by 2025. The current timeline is 35mpg CAFE by 2016.

Said President Obama, speaking at the White House in front of vehicles like Dodge Ram and Ford F-150 pickups: "This agreement on fuel standards represents the single most important step we've ever taken as a nation to reduce our dependence on foreign oil ... so as we look to close the deficit, this agreement is a reminder of why it's so important that we have a balanced approach. We've got to make serious spending cuts while still investing in our future; while still investing in education and research and technology like clean energy, which are so important for our economy."

The fact that Dan Akerson, CEO of General Motors, Alan Mulally of Ford, Jim Lentz of Toyota Motor Sales USA, and John Krafcik, who heads Hyundai Motor America, stood with Obama for the announcement is a lesson in compromise that Congress might want to study. Earlier this year it seemed unlikely that this deal could happen, since studies showed it would cost consumers big bucks for vehicles the automakers would have to produce to meet such standards. Last month, politicians and lobbyists were lined up against the proposal. Fourteen state governors, including Michigan's Rick Snyder, united to warn that stringent new standards would kill any chance of sustained rebuild of auto-manufacture employment.

In June, the Detroit News quoted a letter the governors had signed: "If fuel economy standards are increased too quickly, resulting in more expensive vehicles, many consumers can be expected to hold onto their older vehicles longer and defer buying a new car, which could put auto jobs across the country at risk," they wrote to the heads of the Transportation Department and the Environmental Protection Agency.

But the public, slammed by fuel prices, begs to differ. A poll from the Pew Clean Energy Program by the bipartisan polling team The Mellman Group, Inc. and Public Opinion Strategies between July 8 and 12, found that 91% of Americans believe dependence on foreign oil is a "very serious" or "somewhat serious" threat to U.S. security, and those opinions pretty much cut across ideological lines.

Eighty-two percent of respondents said they support 56 mpg by 2025, with 68% saying they favor it strongly. The polls showed that "overwhelming majorities" in every demographic subgroup support increased fuel efficiency to 56 mpg, including 70% of Republicans, 87% of Democrats and 88% of independents. The "pro" vote also cut across geographical regions.

And the automakers on Friday put out their formal responses: Said Nissan: "The Obama Administration has committed to continuing on the path of a harmonized national greenhouse gas and fuel-economy program for passenger cars and light-duty trucks. Nissan endorses this 'one national program' approach as essential to future technical innovations across the automotive industry."

A statement from Chrysler Group said the company supported, in principal, the agreement on proposed fuel economy standards from 2017 through 2025. "We remain committed to the goal of a single, national, and coordinated program that will reduce greenhouse gas emissions, and enhance our country's energy security." The company said it "appreciates the Obama Administration's leadership in bringing together stakeholders to reach agreement on a set of principles.

While the proposed targets are ambitious, the agreement provides a flexibility in achieving CO2-reduction goals." Jim Lentz, president and COO of Toyota Motor Sales, said the long-term objectives "are very ambitious, and we intend to meet the challenge. Toyota has embarked on the most aggressive expansion of hybrid, electric and hydrogen fuel cell cars of any automaker ... obviously, there is still a great deal of uncertainty as to how the market will respond and what vehicle technologies consumers will embrace, which is why we are rolling out and testing a range of alternative fuel options."

John Mendel, American Honda executive vice president of sales, who also was present at the White House Announcement, said the company welcomes "the competition from other automakers that will result from these new standards, because it will benefit both our customers and the health of the planet."

One of the more interesting arguments against the proposal comes from a group called the American Road & Transportation Builders Association. The Washington, D.C.-based group argues that the new standards would cut infrastructure funding because better fuel economy means consumers pay less at the pump, which means they pay lower excise taxes -- and there's less money to fund road, bridge and transit projects since the less motor fuel used by drivers, the less revenue generated for improvements. Which is a bit like a manufacturer of body casts lobbying for repeal of the mandatory seatbelt law.