Two of the nation's largest auto makers and a group representing foreign car builders are asking the federal government to relax fuel economy standards for 1986 and the rest of the decade.
At stake are hundreds of millions of dollars in potential penalties if the rules are not changed and the companies fail to comply with the law. But even more money may be put at risk if the U.S. manufacturers carry through with their plans to curtail large-car production -- which means shuttering plants and cutting jobs -- to reach compliance.
Chrysler Corp., the nation's third-largest auto maker, is opposing any reduction of fuel-economy standards on the ground that a rollback would give General Motors Corp. and Ford Motor Co. an unfair competitive advantage in the U.S. market.
GM and Ford are major marketers of big cars. So far, for example, about 50 percent of Ford's 1985-model production and about 56 percent of GM's production for the current model year are in the big-car category. Chrysler has spent an estimated $4.4 billion over the last six years to convert its product lineup to a mostly small-car fleet.
Reducing economy standards would give GM and Ford "enormous unearned advantages," thus rewarding manufacturers "that have ignored the law . . . and unfairly penalizing companies that have paid the price to meet it," a Chrysler spokesman, speaking on behalf of its chairman, Lee A. Iacocca, said yesterday.
At issue is the current corporate average fuel economy (CAFE) standard set by the Motor Vehicle Information and Cost Savings Act, which became effective in 1978. The law establishes an average fuel economy level of 27.5 miles per gallon for all new-car fleets sold in the United States in 1985 "and beyond."
Companies failing to meet the standard could be assessed $5 for each tenth of a mile per gallon they fall below it. That penalty is multiplied by each car in an auto maker's new-car fleet, regardless of whether an individual car's fuel consumption meets the standard.
In a petition filed with the National Highway Traffic Safety Administration on March 1, GM said its 1985 new-car fleet would have a CAFE level of 25.1 mpg, 2.4 mpg below current requirements. Based on a projected 1985 fleet of 4.5 million new cars, that means GM could wind up paying about $500 million in penalties, a company spokesman said yesterday.
Ford, in its NHTSA petition filed last week, said it expects a 1985 CAFE level of 25.9 mpg, 1.6 mpg short of compliance. That could mean a $150 million fine, based on Ford estimates yesterday.
Chrysler officials say they will be on target at 27.5 mpg. But European cars made by Bayerische Motoren Werke (BMW), Jaguar, A.B. Volvo and Saab-Scania A.B., all could fall below the standard, according to a spokesman for the Arlington-based Automobile Importers of America Inc. (AIA).
The petitioning auto makers would like to reduce the standard to 26 mpg for the rest of the decade.
The rule unduly punishes manufacturers of big family cars and similar models that are in strong demand in the U.S. market, the AIA said in its petition filed with NHTSA Feb. 28.
"There are three ways for manufacturers to remedy this [model] mix dilemma," the AIA said. "They can sell fewer large cars notwithstanding the demand," which "will result in auto makers either building cars which consumers do not want or charging a premium for popular models to artificially dampen demand.
"The second alternative is to sell more small cars," which means "a manufacturer would have to create drastic small-car sales incentives -- such as significant price cuts, rebates, et cetera.
"Third, manufacturers can try to induce the public to buy diesels by limiting the availability of gasoline vehicles," the AIA said.
Spokesman for Ford and GM yesterday offered another suggestion. Both said that their companies could cut large-car production, rather than risk continued non-compliance with the law.
"We're not going to march on selling Grand Marquis cars" and other big models, said Kenneth S. Brown, Ford's spokesman for regulatory matters. Failure to win relief "would have potentially severe economic consequences for us, which could entail the curtailment of parts of our production line and the loss of jobs," Brown said.
Both GM and Ford so far have managed to use "carryforward" CAFE credits to avoid paying any, or all, penalties for noncompliance in 1983 and 1984. That means they used credits awarded for exceeding CAFE requirements of 20 mpg in 1980 and 22 mpg in 1981. (CAFE credits are good for three years from the time earned.)
The petitioning auto makers also could escape all or part of potential CAFE fines by using "carryback credits" -- those awarded based on the CAFE levels auto makers expect to reach in future model years.
The carryback approach is a gamble, inasmuch as CAFE is based on the numbers and kinds of new cars consumers choose to buy in a new model year, GM and Ford officials said yesterday.
But Clarence Ditlow, director of the Washington-based Center for Auto Safety, said the auto makers were skirting the issue with that argument.
"The consumer-demand argument is wrong," said Ditlow, whose group is pushing for a 40-mpg CAFE by 1990. "There is a whole range of technological changes that car manufacturers can utilize, even on their popular big cars, to be more fuel efficient."