The President's "40 MPG" Car Fiction
01-16-2011, 03:56 PM
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The President's "40 MPG" Car Fiction Mr. Obama called his “one goal” — having Detroit “lead the world in building the next generation of clean cars” — is nowhere near being achieved
By Edward Niedermeyer on January 14, 2011
Yesterday’s release of the Congressional Oversight Panel report[/U] on the auto bailout pointed out several fundamental problems with the government’s intervention in the auto industry, all of which stem from what the report termed the “mutually exclusive” goals of the Treasury in overseeing its investment in the industry.
But that report focused entirely on the post-bailout management decisions by Treasury, ignoring the decisions made during the bailout itself. And though the White House has, in recent months, redefined its goals in bailing out GM and Chrysler to focus on the improved financial performance of the bailed-out automakers, this is clearly a recent recalibration of its political message. As I pointed out in my latest New York Time Op-Ed,
what Mr. Obama called his “one goal” — having Detroit “lead the world in building the next generation of clean cars” — is nowhere near being achieved.
And, as it turns out, the Administration’s actions in the bailout will inevitably come up well short of that goal in at least one important respect.
When the White House’s Automotive Task Force bailed out Chrysler by forming an alliance between the struggling US automaker and the Italian industrial concern Fiat SpA, it gave Fiat some 20 percent of Chrysler’s equity. Fiat also received the right to another 15 percent of Chrysler’s equity in three five-percent chunks, each contingent upon the completion of three government-negotiated commitments. First, it required Fiat to begin commercial production of engines based on its Fully Integrated Robotised Engine family technology in the United States, a goal that was achieved earlier this week. The second commitment requires Chrysler to record $1.5b in revenue from outside the NAFTA zone, as well as Fiat’s
execution… of one or more franchise agreements covering in the aggregate at least ninety percent (90%) o f the total Fiat Group Automobiles S.p.A. dealers in Latin America pursuant to which such dealers will carry [Chrysler] products.
The final commitment of the Fiat-Chrysler alliance has been widely reported in the mainstream media using the language of the White House’s press release, which describes the commitment as
introducing a vehicle produced at a Chrysler factory in the U.S. that performs at 40 mpg
But nowhere in the mainstream media has it been reported whether that 40 MPG number refers to a city, highway or combined rating or whether it refers to an “adjusted” (i.e. what consumers read on the window sticker) or “unadjusted”EPA number. Having received a number of emails seeking clarification on this point, TTAC was heartened to find a link in a footnote of yesterday’s COP report, which put us in possession of the complete Fiat-Chrysler operating agreement [All 168 pages available in PDF format here]. Here we found what the “real reporters” never bothered to dig up: Fiat’s so-called “Irrevocable Ecological Commitment.”
This “commitment” is enshrined in the following “annex” to Fiat and Chrysler’s government-negotiated operating agreement, and reads as follows:
The addendum, as written, seems to be promising: after all, 40MPG combined is far better than, say, 40 MPG highway. But what the “Irrevocable Ecological Commitment” doesn’t specify is what test the government requires for compliance: adjusted EPA, or unadjusted EPA. For this crucial bit of information a little more digging was necessary. Way down, buried in the “definitions” section of the agreement, we finally get our answer:
Here is the dirty truth that neither the government, Fiat, Chrysler, nor the mainstream media has ever bothered to tell the American people: the “green car” that the White House secured US production of will get 40 MPG combined, but that number is to be measured by the “old” (pre-2008), “unadjusted” EPA methodology, which significantly inflates a cars mileage over the number consumers read on an EPA window sticker.
Now that we know the actual criteria for Fiat’s accomplishment of this commitment, the question becomes: did the government secure “the next generation of clean cars” as President Obama promised? The answer seems to be a fairly resounding “no.”At best, the government barely managed to negotiate a commitment to secure production of a vehicle with efficiency equivalent to the “current generation of clean cars.”
By Edward Niedermeyer on January 14, 2011
Yesterday’s release of the Congressional Oversight Panel report[/U] on the auto bailout pointed out several fundamental problems with the government’s intervention in the auto industry, all of which stem from what the report termed the “mutually exclusive” goals of the Treasury in overseeing its investment in the industry.
But that report focused entirely on the post-bailout management decisions by Treasury, ignoring the decisions made during the bailout itself. And though the White House has, in recent months, redefined its goals in bailing out GM and Chrysler to focus on the improved financial performance of the bailed-out automakers, this is clearly a recent recalibration of its political message. As I pointed out in my latest New York Time Op-Ed,
what Mr. Obama called his “one goal” — having Detroit “lead the world in building the next generation of clean cars” — is nowhere near being achieved.
And, as it turns out, the Administration’s actions in the bailout will inevitably come up well short of that goal in at least one important respect.
When the White House’s Automotive Task Force bailed out Chrysler by forming an alliance between the struggling US automaker and the Italian industrial concern Fiat SpA, it gave Fiat some 20 percent of Chrysler’s equity. Fiat also received the right to another 15 percent of Chrysler’s equity in three five-percent chunks, each contingent upon the completion of three government-negotiated commitments. First, it required Fiat to begin commercial production of engines based on its Fully Integrated Robotised Engine family technology in the United States, a goal that was achieved earlier this week. The second commitment requires Chrysler to record $1.5b in revenue from outside the NAFTA zone, as well as Fiat’s
execution… of one or more franchise agreements covering in the aggregate at least ninety percent (90%) o f the total Fiat Group Automobiles S.p.A. dealers in Latin America pursuant to which such dealers will carry [Chrysler] products.
The final commitment of the Fiat-Chrysler alliance has been widely reported in the mainstream media using the language of the White House’s press release, which describes the commitment as
introducing a vehicle produced at a Chrysler factory in the U.S. that performs at 40 mpg
But nowhere in the mainstream media has it been reported whether that 40 MPG number refers to a city, highway or combined rating or whether it refers to an “adjusted” (i.e. what consumers read on the window sticker) or “unadjusted”EPA number. Having received a number of emails seeking clarification on this point, TTAC was heartened to find a link in a footnote of yesterday’s COP report, which put us in possession of the complete Fiat-Chrysler operating agreement [All 168 pages available in PDF format here]. Here we found what the “real reporters” never bothered to dig up: Fiat’s so-called “Irrevocable Ecological Commitment.”
This “commitment” is enshrined in the following “annex” to Fiat and Chrysler’s government-negotiated operating agreement, and reads as follows:
The addendum, as written, seems to be promising: after all, 40MPG combined is far better than, say, 40 MPG highway. But what the “Irrevocable Ecological Commitment” doesn’t specify is what test the government requires for compliance: adjusted EPA, or unadjusted EPA. For this crucial bit of information a little more digging was necessary. Way down, buried in the “definitions” section of the agreement, we finally get our answer:
Here is the dirty truth that neither the government, Fiat, Chrysler, nor the mainstream media has ever bothered to tell the American people: the “green car” that the White House secured US production of will get 40 MPG combined, but that number is to be measured by the “old” (pre-2008), “unadjusted” EPA methodology, which significantly inflates a cars mileage over the number consumers read on an EPA window sticker.
Now that we know the actual criteria for Fiat’s accomplishment of this commitment, the question becomes: did the government secure “the next generation of clean cars” as President Obama promised? The answer seems to be a fairly resounding “no.”At best, the government barely managed to negotiate a commitment to secure production of a vehicle with efficiency equivalent to the “current generation of clean cars.”
01-16-2011, 03:56 PM
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40 MPG combined unadjusted translates to almost exactly 30 MPG combined on the “adjusted” EPA test cycle which is used to produce window stickers for vehicles currently on the market. This is hardly a benchmark for a meaningful “Ecological Commitment” in the sense that a significant number of currently-available mass-market cars currently achieve this standard, and the cleanest vehicles on the market exceed it by dramatic amounts. According to the EPA, at least 11 2010 model-year “compact cars” currently achieve the 30 MPG combined adjusted standard. At least six “midsize sedans” achieved the magic number for the outgoing model-year, as did two “upscale sedans,” two convertibles, two station wagons and three SUVs (although the SUVs are all derivatives of the Ford Escape Hybrid).
The most efficient vehicles on the US market also achieve considerably more than 40 MPG on the unadjusted EPA test cycle; for example, the Toyota Prius scores about 70 MPG on the “unadjusted cycle” and the Ford Fusion Hybrid scores around 54 MPG unadjusted. Clearly, the standard for “the next generation of clean cars” should be considerably higher than 40 MPG combined unadjusted.
After all, five percent of Chrysler’s equity, the price taxpayers have paid for this uninspiring “Ecological Commitment,” would be worth quite a bit of money to Fiat if Chrysler’s IPO goes as planned. UBS analysts place a post-IPO valuation estimate on Chrysler of between $11.8b and $27.5b, which means Fiat’s reward for building this car could range from $590m to $1.35b. That’s at least half a billion dollars of taxpayer value going to a foreign automaker for building a car that performs at a level attained by such vehicles as the 2010 Kia Forte, Toyota Corolla and Chevrolet Aveo. And, if the Chrysler insider site Allpar has the correct information, the base model of the “40MPG” car will probably achieve even less-inspiring numbers with its Chrysler “world gas engine.” Consumers will likely have to pay extra for “40 MPG” models using Fiat’s 1.4 liter MultiAir engine.
In his insider account of the auto bailout, Task Force member Steve Rattner writes that the government “struggled” to get Fiat CEO Sergio Marchionne to put up cash for his desired 35% stake in a bailed-out Chrysler, and that the attempt eventually failed. Rattner writes
Eventually, after hard bargaining, Ron [Bloom] succeeded in carving back Fiat’s initial ownership stake to 20 percent, requiring the company to meet meaningful milestones before receiving additional shares…
It’s not clear from Rattner’s account where the 40 MPG “meaningful milestone” came from, but he does relay one anecdote from the Oval Office meeting in which it was narrowly decided to rescue Chrysler which seems instructive:
The President rested his chin on his hands for a few seconds. Then he looked up and said, “I’ve made my decision. I’m prepared to give Chrysler thirty days to see if we can get the Fiat alliance done on terms that make sense to us.” He turned to me and Ron and added, “I want you to be tough and I want you to be commercial.” We took that to mean that we should insist that all our conditions be met in a way that was prudent from the taxpayer’s standpoint.
Not wanting the Chrysler discussion to end on such a down note, [National Economic Council member Brian] Deese -who is anything but shy- piped up from the couch. “I think it’s worth recognizing that there are positive attributes associated with the Chrysler deal if it gets done,” he said. “It’s not all negative, including the fact that while Fiat hasn’t committed money, they have committed themselves with their technology, including a commitment to build a forty-mile-per-hour car in the United States.” People began to laugh, and it took a couple of beats for Deese to realize what he’d said and started laughing along. Building a forty-mile-per-gallon car would indeed be significant — but a forty-mile-per-hour car probably wouldn’t improve Chrysler’s prospects very much.
The sad irony is that, as negotiated by the auto team, Chrysler’s forty-mile-per-gallon car won’t be anywhere near as “significant” as they thought. Just as Deese made a slip of the tongue, task force negotiators made the oldest efficiency calculation mistake in the book: confusing adjusted with unadjusted EPA MPG. Unfortunately, this time nobody will be laughing… except perhaps Fiat CEO Sergio Marchionne.
The most efficient vehicles on the US market also achieve considerably more than 40 MPG on the unadjusted EPA test cycle; for example, the Toyota Prius scores about 70 MPG on the “unadjusted cycle” and the Ford Fusion Hybrid scores around 54 MPG unadjusted. Clearly, the standard for “the next generation of clean cars” should be considerably higher than 40 MPG combined unadjusted.
After all, five percent of Chrysler’s equity, the price taxpayers have paid for this uninspiring “Ecological Commitment,” would be worth quite a bit of money to Fiat if Chrysler’s IPO goes as planned. UBS analysts place a post-IPO valuation estimate on Chrysler of between $11.8b and $27.5b, which means Fiat’s reward for building this car could range from $590m to $1.35b. That’s at least half a billion dollars of taxpayer value going to a foreign automaker for building a car that performs at a level attained by such vehicles as the 2010 Kia Forte, Toyota Corolla and Chevrolet Aveo. And, if the Chrysler insider site Allpar has the correct information, the base model of the “40MPG” car will probably achieve even less-inspiring numbers with its Chrysler “world gas engine.” Consumers will likely have to pay extra for “40 MPG” models using Fiat’s 1.4 liter MultiAir engine.
In his insider account of the auto bailout, Task Force member Steve Rattner writes that the government “struggled” to get Fiat CEO Sergio Marchionne to put up cash for his desired 35% stake in a bailed-out Chrysler, and that the attempt eventually failed. Rattner writes
Eventually, after hard bargaining, Ron [Bloom] succeeded in carving back Fiat’s initial ownership stake to 20 percent, requiring the company to meet meaningful milestones before receiving additional shares…
It’s not clear from Rattner’s account where the 40 MPG “meaningful milestone” came from, but he does relay one anecdote from the Oval Office meeting in which it was narrowly decided to rescue Chrysler which seems instructive:
The President rested his chin on his hands for a few seconds. Then he looked up and said, “I’ve made my decision. I’m prepared to give Chrysler thirty days to see if we can get the Fiat alliance done on terms that make sense to us.” He turned to me and Ron and added, “I want you to be tough and I want you to be commercial.” We took that to mean that we should insist that all our conditions be met in a way that was prudent from the taxpayer’s standpoint.
Not wanting the Chrysler discussion to end on such a down note, [National Economic Council member Brian] Deese -who is anything but shy- piped up from the couch. “I think it’s worth recognizing that there are positive attributes associated with the Chrysler deal if it gets done,” he said. “It’s not all negative, including the fact that while Fiat hasn’t committed money, they have committed themselves with their technology, including a commitment to build a forty-mile-per-hour car in the United States.” People began to laugh, and it took a couple of beats for Deese to realize what he’d said and started laughing along. Building a forty-mile-per-gallon car would indeed be significant — but a forty-mile-per-hour car probably wouldn’t improve Chrysler’s prospects very much.
The sad irony is that, as negotiated by the auto team, Chrysler’s forty-mile-per-gallon car won’t be anywhere near as “significant” as they thought. Just as Deese made a slip of the tongue, task force negotiators made the oldest efficiency calculation mistake in the book: confusing adjusted with unadjusted EPA MPG. Unfortunately, this time nobody will be laughing… except perhaps Fiat CEO Sergio Marchionne.
01-17-2011, 06:57 AM
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It seems like bullshit...but, the Japanese have been called out on several instances for having or doing things that enforces the ideas of "better". I think it was Honda a few years ago that had odometers reading high right off the showroom floor, equating to increase MPG readings.
Additionally, based on the whole Toyota gas pedal issues and people attempting to purposely trip trouble lights attempting to trouble shoot it was found that their factory trouble codes systems are far less sensitive then their American counterpart. Which in my mind boils down to the point when people say "my import is more reliable", this fully enforces that idea, if the American car has a more sensitive system and sees a problem it alerts the driver. However when the import system senses a problem it may or may not trip a light until the problem becomes significantly worse. Everybody cheats the system to make things look better.
Additionally, based on the whole Toyota gas pedal issues and people attempting to purposely trip trouble lights attempting to trouble shoot it was found that their factory trouble codes systems are far less sensitive then their American counterpart. Which in my mind boils down to the point when people say "my import is more reliable", this fully enforces that idea, if the American car has a more sensitive system and sees a problem it alerts the driver. However when the import system senses a problem it may or may not trip a light until the problem becomes significantly worse. Everybody cheats the system to make things look better.
01-18-2011, 01:09 AM
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It seems like bullshit...but, the Japanese have been called out on several instances for having or doing things that enforces the ideas of "better". I think it was Honda a few years ago that had odometers reading high right off the showroom floor, equating to increase MPG readings.
Additionally, based on the whole Toyota gas pedal issues and people attempting to purposely trip trouble lights attempting to trouble shoot it was found that their factory trouble codes systems are far less sensitive then their American counterpart. Which in my mind boils down to the point when people say "my import is more reliable", this fully enforces that idea, if the American car has a more sensitive system and sees a problem it alerts the driver. However when the import system senses a problem it may or may not trip a light until the problem becomes significantly worse. Everybody cheats the system to make things look better.
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01-18-2011, 02:27 AM
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I wish that were true but I have to disagree. There's been literally no discussion of moving towards diesel in America. It seems this country is fixated on hybrids, what with the enormous popularity of the Prius, now the upcoming Volt, **** GM even makes a damn Silverado hybrid - how dumb is that - you can get a Silverado with a diesel but also as a hybrid? WTF GM!
01-18-2011, 03:24 AM
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I wish that were true but I have to disagree. There's been literally no discussion of moving towards diesel in America. It seems this country is fixated on hybrids, what with the enormous popularity of the Prius, now the upcoming Volt, **** GM even makes a damn Silverado hybrid - how dumb is that - you can get a Silverado with a diesel but also as a hybrid? WTF GM!
I have to agree with you on the Silverado thing, even though the technology that they used is cool, it's a waste imo. I think the 4.5L diesel they've been developing for years would be awesome to see in a half ton. Not sure when that will ever happen though.Anyways, quite a few research firms as well as Edmonds think that Diesel sales will triple in the next 4-5 years. Not drastic by any means nor does it compare to Europe's diesel love or Australia's recent "diesel fever" but sales in America for Diesels are climbing, in 2010 diesel sales jumped by 37% over 2009 sales. Nothing to whoop and holler about but it's still a noticeable jump IMO. Oddly enough Hybrid sales went down by 6%!
01-18-2011, 11:26 AM
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True. But safety regulations (and extra creature comforts) have driven up the weight of vehicles, and maintaining the same fuel economy has been no easy task. If you put a modern powertrain in an old Geo Metro chassis, you could see numbers that rival diesels in the 70mpg range. Now if you did the same with a modern diesel, I am confident that you would see numbers in the region of 100mpg.
01-18-2011, 12:12 PM
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True. But safety regulations (and extra creature comforts) have driven up the weight of vehicles, and maintaining the same fuel economy has been no easy task. If you put a modern powertrain in an old Geo Metro chassis, you could see numbers that rival diesels in the 70mpg range. Now if you did the same with a modern diesel, I am confident that you would see numbers in the region of 100mpg.
01-18-2011, 02:42 PM
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True. But safety regulations (and extra creature comforts) have driven up the weight of vehicles, and maintaining the same fuel economy has been no easy task. If you put a modern powertrain in an old Geo Metro chassis, you could see numbers that rival diesels in the 70mpg range. Now if you did the same with a modern diesel, I am confident that you would see numbers in the region of 100mpg.
Vehicles got better and lighter and more efficient without our rules and regulations. Point is, regulations don't always help.
As to the diesels... while they'd be more efficient without the added trash our government requires them to haul around, the problem is... it's required trash... The most efficient versions don't have all the crap on them and from the looks, get nearly double the mileage those with all the crap.
Exactly! Don't leave out emissions either; added safety and comforts means more weight, more weight means more power is needed, more power means more emissions to make it clean. I think a lot of people are ignoring the fact that he wants this as the average for a company, so you have to add in the sports cars, luxory cars, and trucks. That makes that 40mpg number pretty hard to hit when you have many cars average in the high teens/low 20s.
01-18-2011, 02:53 PM
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Without "intervention," I think our vehicles would have all the ammenities they do now for comfort/luxury... and weigh even less. Would we have the airbag? Sure would... It was around long before required. Crumple zones? I'd think so, as they were also invented before being mandated... And the list goes on.
Vehicles got better and lighter and more efficient without our rules and regulations. Point is, regulations don't always help.
As to the diesels... while they'd be more efficient without the added trash our government requires them to haul around, the problem is... it's required trash... The most efficient versions don't have all the crap on them and from the looks, get nearly double the mileage those with all the crap.
Vehicles got better and lighter and more efficient without our rules and regulations. Point is, regulations don't always help.
As to the diesels... while they'd be more efficient without the added trash our government requires them to haul around, the problem is... it's required trash... The most efficient versions don't have all the crap on them and from the looks, get nearly double the mileage those with all the crap.
Fixed that for ya.
01-18-2011, 03:36 PM
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It's NOT widely known(so it seems) that vehicles were getting safer long before the government got involved. They just saw it as a massive income creator... for the government.
If you want to make cars & driving safer, replace airbags with a machete pointed at the driver's neck. That'll really cut down on the number of accidents.
Fixed that for ya.
01-19-2011, 09:57 PM
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If Chevy had made a diesel car I might not have bought a Jetta TDI instead. Oh well, I'm happy and since I work 5 miles from home I fill up once ever other month unlike the hybrid owners I work with who live 50+ miles from work.
01-19-2011, 11:13 PM
#18
And that's part of the whole issue. They want 40+ mpg, but they also want hundreds of pounds of safety equipment, and everyone wants all the gizmos and the really comfy plush interiors, and all that. Not that there is anything wrong with nice interiors, or safety equipment (within reason, some of the stuff they are/want to mandate is just stupid), but at some point something has to give. And I can promise you that physics always wins.
01-19-2011, 11:33 PM
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A geo metro wouldn't even come close to meeting current safety standards.
And that's part of the whole issue. They want 40+ mpg, but they also want hundreds of pounds of safety equipment, and everyone wants all the gizmos and the really comfy plush interiors, and all that. Not that there is anything wrong with nice interiors, or safety equipment (within reason, some of the stuff they are/want to mandate is just stupid), but at some point something has to give. And I can promise you that physics always wins.
And that's part of the whole issue. They want 40+ mpg, but they also want hundreds of pounds of safety equipment, and everyone wants all the gizmos and the really comfy plush interiors, and all that. Not that there is anything wrong with nice interiors, or safety equipment (within reason, some of the stuff they are/want to mandate is just stupid), but at some point something has to give. And I can promise you that physics always wins.
01-19-2011, 11:43 PM
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The Ford model T got 25 mpg.
Cars today get an average of 21 mpg.
I got that off of a poster at school that could be a couple years old, i dont know the average mpg that cars get in 2011
Cars today get an average of 21 mpg.
I got that off of a poster at school that could be a couple years old, i dont know the average mpg that cars get in 2011