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UAW holding talks with Detroit 3 on new fuel-economy rules

DETROIT (Reuters) - The United Auto Workers, including its chief Bob King, is hosting executives from the big U.S. automakers this week to discuss future fuel-economy standards and their potential impact on union members’ jobs, several sources said on Tuesday.

The meetings to discuss the new corporate average fuel efficiency (CAFE) standards for 2017 through 2025 are taking place Tuesday and Wednesday at the union’s downtown Detroit headquarters, said people familiar with the meetings, who asked not to be identified.

In addition to King and other UAW officials, the meetings will include vice presidents from General Motors, Ford Motor Co. and Chrysler Group LLC, which is managed by Fiat, the sources said.

The sources initially said staff members from the Department of Transportation and the Environmental Protection Agency, jointly working to develop the new standards, also would attend, but later said that was not the case.

GM, Ford and Chrysler declined to comment on the meetings. Regulators and UAW officials could not be reached.

The push to boost fuel efficiency has forced automakers to redesign their vehicles and use lighter but more expensive materials. These efforts are likely to raise the cost of vehicles and may pinch automakers’ margins.

The interest of the UAW, which opens labor talks with the big U.S. automakers this month, is simple – protect jobs, said Jay Baron, chief executive of the Center for Automotive Research.

“As you go to a high level of CAFE, the demand for vehicles will go down and therefore production in the U.S. will go down,” he said. “If the government forces too high a level of fuel economy, beyond what the average consumer wants to pay for, that will be a problem.”

The union’s concern about the impact of the new CAFE standards on jobs echoes those raised by 15 Republican state governors last month. The governors urged federal regulators to take into account jobs and the weak economy in formulating the standard, warning against “overreaching.”

Companies and trade groups are sensitive to the economy, especially after Friday’s dismal report that showed job growth ground nearly to a halt in June.

“The administration needs to take extra special attention in preserving jobs as we improve fuel economy,” said Gloria Bergquist, a spokeswoman with the Alliance of Automobile Manufacturers. The trade group represents 12 automakers, including the big U.S. companies.

Federal officials have been meeting regularly with the automakers regarding the CAFE standards for 2017 and beyond.

In 2009, the Obama administration raised CAFE standards, requiring automakers to boost the average fuel efficiency of their vehicles to 35.5 miles per gallon by 2016.

Regulators are now considering lifting CAFE standards to 56.2 miles per gallon for the 2017 to 2025 time period, according to a source familiar with the plans. The Obama administration has publicly said it is targeting a range between 47 mpg and 62 mpg.

The CAFE standard in 2010 was 29.2 mpg.

Transportation Secretary Ray LaHood last month declined to say whether the U.S. government would consider sharing the cost of vehicle development with automakers and consumers. He said current talks with companies have focused solely on finding the right standard.

CAR, which recommends a new CAFE standard of 47 mpg, estimated that setting the level at 56 mpg would cause prices per vehicle to jump by about $6,700. The study has been criticized for overestimating the cost of the technology needed to boost fuel economy.

The National Automobile Dealers Association estimated that at under a 56 mpg standard the industry would lose 220,000 jobs, while another report by the U.S. Energy Information Agency estimated U.S. light vehicle sales would fall 14 percent at a 62 mpg standard.

The UAW has been losing membership since its peak in 1979, when it had nearly 1.5 million members. Last year was the first time the UAW gained members in six years.

The UAW had 376,612 members at the end of last year. That is still a fraction of its 2004 membership of about 655,000.

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I applaud the UAW for taking the initiative to discuss this difficult issue with the Detroit 3. If the union works with each manufacturer they may have a chance of making it work. I do agree that the 56 MPG fleet average in 2025 is at least ambitious and that it will raise the cost of a car dramatically. With the UAW jaw-boning the Democrats and the Detroit 3 doing the same to the Republicans, there is some hope that the fleet average can be moderated some. Teamwork does have its advantages.

Talking is better then the adversarial approach they use to do.

Talking is great until the real contentious subject of reducing costs is discussed. Based on preserving jobs, I suspect any discussions on improving manufacturing efficiency or reductions in pay/benefits will get shot down quicker than a Libyan military plane.

Personally, I don’t believe it will have as much impact as projected. People will have to buy new cars eventually. Similar to gasoline, you can hold out but sooner or later, you’re forced to buy it regardless of the cost. And if every manufacturer is forced to follow the same rules, the costs should be similar. Except that those with more flexibility from their workforce may have an advantage. And the increased fuel economy will have a pull through effect with the buying public even if the payback is questionable.

There was also a blurb about Obama backing off a bit on the truck/suv average, so it’ll be business as usual on that front

While the proposed 52 mpg standard is, as some said “ambitious” it’s not the union’s business. Management says “these are the cars we’re building” and labor builds them. Perhaps the union is less concerned with preserving jobs than with preserving new hires to replace those lost by attrition. New hires=cashflow.

The National Automobile Dealers Association estimated that at under a 56 mpg standard the industry would lose 220,000 jobs.

The UAW has been losing membership since its peak in 1979, when it had nearly 1.5 million members. Last year was the first time the UAW gained members in six years.
The UAW had 376,612 members at the end of last year.

Going by last year’s figure, they’d have a total of 156,612 members, so yeah, they’re concerned alright. Less members = less money for them to steal.

“Management says “these are the cars we’re building” and labor builds them.”

The UAW has a management, too. Not all members build cars, though most do. If they work with the auto companies on this issue they might justify their high pay compared to nonunion shops…

Yes, the UAW management makes $400K and up. All paid for by union dues.

And remember, for the rank and file, it’s less a matter of high pay than a matter of high over-all compensation, wages + pension + health insurance + other benefits I’m unaware of.

Personally I believe the new standard will cause a rise in prices significant enough to seriously affect the ability of the average working person to buy a new car and to9 seriously affect the overall economy. If the theory that “they’ll need them eventually so thay’ll buy them anyway” is the effect, that money used to do so will come out of other potential purchases.

The average person has a finite amount of discretionary income, and it’s actually dropping. Lots of people have taken cuts in pay, lots have taken lesser paying jobs, and lots have been long-term unemployed. If it becomes necessary for those people to buy a car and the price has skyrocketed, they’ll need to buy used…at a price elevated by the demand created by the sktrocketing new cars prices…and that money will mean something else will NOT get purchased and THAT industry will suffer.

Car prices cannot be discussed as if they were disconnected from other industries and/or from the economy as a whole. I believe this mandate will have a serious adverse effect on not only car sales, but also on the economy as a whole. A depressed economy is not the time for “pie in the sky” emissions mandates. The industry cannot support it and neither can the economy.

Mark my words on this.

The rate at which the USA consumes resources, especially energy, is not sustainable, so I am not sure anything can prevent the continued erosion of our standard of living. I don’t see how we can afford not to increase efficiency standards. If we don’t, we will pay higher fuel prices instead of higher vehicle purchase prices. I believe the fuel efficiency standards are the lesser of the two evils, and it doesn’t hurt that I like to breathe clean air and drink clean water, and I prefer my beaches sans dead oil-covered wildlife.

One of my colleagues converted his small VW convertible to all electric, using conventional batteries. I bet his car meets the proposed future fuel efficiency standards, and it didn’t cost that much to build.

“Mark my words on this.”

I agree.

I think that people will keep their cars a lot longer. Maybe we will no longer be the source for imported used cars that we are now for less wealthy countries. Many of those 15 year old beaters will stay here and continue to run for many more years. The only way to stop that is to force primary and secondary manufacturers to stop building spare parts.

contradiction much?

DETROIT (Reuters) – A coalition of eight unions and environmental groups, including the UAW, asked President Barack Obama to push for higher fuel-economy standards for light-duty vehicles.

The BlueGreen Alliance, a national partnership between labor unions and environmental organizations, said in a letter to Obama that it strongly supports his efforts to create new fuel-efficiency and greenhouse gas emissions standards for light-duty vehicles sold in model years 2017-2025.

“We encourage you to propose standards that maximize oil savings and reductions of GHG pollution, strengthen the U.S. auto industry, increase the deployment of advanced technology, protect U.S automotive jobs, and create more opportunity for American workers,” the coalition wrote.

Higher gas prices and a still-shaky economic recovery – paired with competition from foreign automakers – have left U.S. companies and trade groups looking for new ways to support their members.

The United States sends about $1 billion per day to foreign countries to pay for oil, according to the letter. Higher fuel economy standards could be a relief to consumers and also create jobs for workers to redesign vehicles and retool factories, the letter said.

The changes could also pinch automakers’ margins. The UAW, which is concerned about protecting union jobs, hosted executives from the big U.S. automakers last week to discuss future standards.

The U.S. government has been meeting regularly to consider options for new corporate average fuel efficiency (CAFE) standards for 2017 through 2025. Regulators are considering lifting CAFE standards to 56.2 miles per gallon for the 2017 to 2025 time period, a source told Reuters. The Obama administration has publicly said it is targeting a range between 47 mpg and 62 mpg.

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“contradiction much?”

Maybe. But the first article quotes the chief executive of the Center for Automotive Research, not a UAW representative. Neither he UAW nor the Detroit 3 would comment on the talks. I’m not saying there isn’t a contradiction. I would think that the UAW would believe that higher costs would result from significant increases in fuel mileage. But it wasn’t the UAW that said it.

I stand corrected then.

Believe it or not…In many ways Auto-manufacturers want this to be mandated. They have idea’s they want to pursue to see the worthiness of them. But there’s so much they can spend on R&D each year. Buy the government mandating this then ALL manufacturers will have to do R&D to make this happen. This then puts them all on the same ground…Easier to justify to their stock holders that this R&D is necessary. If it’s NOT mandated then it would be very very difficult to justify several more BILLIONS of dollars to be set aside for R&D.

I do like the idea of mandating it…Mainly because the manufacturers have done NOTHING on their own. Manufacturers are building cars right at the Cafe’ numbers. I’m a bit concerned about the 56mpg…that’s awfully aggressive…

Don’t believe it. Why would the manufacturers care about mileage other than to gain a competitive advantage?

Because they know that OIL is finite. They aren’t making it any more (at least not at the rate it’s being used). If manufacturers just keeping making cars without thought to MPG improvements or alternatives to ICE vehicles…they’ll be out of business.

A couple more reasons that auto companies might like it:

  1. They can make more money in the long run. The price will rise to pay for the non-recurring engineering (NRE). But after the NRE is paid for, it is unlikely that the price will drop dramatically. If the average car costs $25,000 to day and the average car cost $50,000 in 2025 (today’s dollars), then they could earn twice the dollar amount at the same percentage return on investment. I think that they are also willing to bet that they can make a higher ROI.

  2. The engineers on the task will think of it as a fun new puzzle to solve. Work will be fun again. And happy employees translates into better productivity.

Engineers find challenges everywhere they look. That’s one of the curses of being an engineer, the “you know, that could have been designed better” thought that applies to everything an engineer looks at. It’s been said that an engineer will spend an entire three day weekend and hundreds of dollars fixing (and improving) something that could be replaced for $29. It’s true.

But I wouldn’t want to be a marketing manager trying to figure out how to sell these new high-priced bottom-end vehicles to the public in a depressed economy.