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Thursday, Mar 28, 2024

Auto Industry in Dire Straits, Emissions Caps Not Helping

To say that last year was a rocky one for the auto industry would be an understatement. New car sales dropped to their lowest in years. American automaker Ford was particularly hard hit, finding itself unseated by Toyota from its No. 2 spot in U.S. sales for the first time. Moreover, on a state level, California’s efforts to impose greenhouse gas limits on new automobiles could have ramifications that ripple worldwide. In December, the U.S. Environmental Protection Agency denied the state a waiver it needs under the federal Clean Air Act to begin monitoring greenhouse gas emissions from new automobiles. On Jan 3, California filed a lawsuit against the EPA to obtain the waiver in question. If the suit is successful, the auto industry fears that California could further hamper sales, as the stricter limits may force them to downsize their vehicle offerings. Peter Welch, president of the California Motor Car Dealers Association, made no attempt to sugarcoat what a dire state the auto industry is in at present, calling 2007 “the worst year we’ve had in quite a while, both nationally and in California.” Because automobile sales are the single largest generator of sales tax revenue in the state, the decline in car sales has a direct impact on California’s economy, Welch said. He also believes there is an adverse environmental impact when people hold on to old cars. “Older, less fuel-efficient, higher-greenhouse-gas-emitting cars will remain on the road and will be driven more,” he said. While last year’s sales numbers won’t be finalized until March, thus far, the fourth quarter sales numbers indicate a dip to fewer than two million new units for the first time in four years, Welch said. The reason? “We’ve seen a tremendous shift in purchasing patterns to smaller, more fuel-efficient passenger cars away from trucks and SUVs. There was a 5 percent shift in one year,” Welch said. “And then there was the rapid rise of Toyota up to almost 28 percent market share in the State of California. That’s incredible. That’s a giant increase. Almost one in three cars is a Toyota.” With sales up 3 percent nationwide for the year, Toyota sold 2.62 million cars and trucks in 2007. Meanwhile, Ford’s sales dropped by 12 percent to 2.57 million vehicles. General Motors Corp. remained the country’s top-selling automaker but suffered a sales dip of 6 percent to 3.82 million vehicles in 2007. Bert Boeckmann, general manager of Galpin Motor Co., a Ford merchant, has said that its sales were largely unaffected by the auto industry’s dim performance last year. However, Boeckman said, “Ford, GM and Chrysler,all three,will need to provide a broader base of small vehicle products to compete effectively.” Welch, for one, believes that U.S. automakers won’t be down for long. “American automobile makers are very smart,” he said. “They have great engineers and great products.” A case in point is that all three American automakers plan to release plug-in hybrids in the next few years. But Toyota announced at the North American International Auto Show in Detroit Jan. 13 that it, too, planned to release such a hybrid. While the batteries of the hybrids currently on the market are recharged from the power made by its wheels, plug-in hybrids can be recharged from power outlets. Toyota’s venture into plug-ins indicates that the competition will remain fierce for American auto manufacturers. Competition from within the industry isn’t the only concern at hand, of course. Both foreign and U.S. automakers fear how they will be affected if California successfully obtains a waiver to allow it to limit greenhouse gas emissions from new automobiles. As if it is preparing to meet the challenge, General Motors announced at the North American International Auto Show that it was buying a stake in ethanol made from waste. Such an unprecedented move could drastically reduce carbon emissions per mile, allowing the automaker to meet California’s proposed greenhouse limits. Tom Rosdahl, professor of automotive technology at Pierce College as well as the school’s Academic Senate president, discussed the complexities of limiting such emissions. “All vehicles emit CO2,” he said. “Anytime you burn a fossil fuel you create CO2. The only way you can cut down on CO2 is to limit how much fuel you burn, which basically means you’re going to have to improve fuel economy. Cars will have to be downsized. You can’t get 35 miles to the gallon out of a 5,000-pound vehicle.” The problem a shift to smaller, more fuel efficient cars would present to the automotive business, especially dealers, is that their profits would likely decline. Dealers make the most money from selling large, luxurious automobiles. Whether the state’s proposed limits are enacted or not, the public will eventually be forced into small cars, Rosdahl continued. “This is going to have to happen for us to survive on this planet. That’s a fact because global warming is an issue. For mankind to survive on this planet, there’s certain things that are going to have be done.” Boeckmann and Welch have a different take on the issue, though. “I always get a little bit worried when legislators think they know more than people who are in the business,” Boeckmann said. “I understand how people are mistrustful of what California would be proposing. It would drive everyone into small cars almost immediately. I don’t think that, frankly, makes sense, though, nor would that fit everybody’s needs. It’s not conducive to benefiting California or the businesses here in California.” Welch said that consumers have gradually taken environmental factors into more consideration when purchasing vehicles, but he believes that mostly stems from their concerns about fuel efficiency and not greenhouse gases, calling it a “pocketbook issue.” He argued that people will still seek the vehicles that exceed the state’s limits, making them likely to hire a broker and drive to nearby states such as Arizona and Nevada and buy the vehicles there. That’s because the standards in question would only apply to cars sold in California. “Dealers would lose these sales and the state would lose taxes,” he said. “Strictly from a California consumer and a car dealer perspective, we favor a tough national standard rather than a patchwork separate standard for California. The reason for that is we do not want to see our dealers being disadvantaged by out-of-state dealers.”

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