The Two Fleet Problem With Fuel Economy Standards
From the EPA CAFE website:
"Nissan North America, Inc. Petition for Exemption from Two-Fleet Rule Affecting Compliance with Passenger Automobile Fuel Economy Standards
Nissan filed a petition requesting exemption from the two fleet rule for the 2006-2010 model years. The two fleet rule, which is contained in the CAFE statute, requires that a manufacturer divide its passenger automobiles into two fleets, a domestically-manufactured fleet and a non-domestically manufactured fleet, and ensure that each fleet separately meets the CAFE standards for passenger automobiles. The CAFE statute requires NHTSA to grant such a petition unless it finds that doing so would result in reduced employment in the U.S. related to motor vehicle manufacturing. NHTSA’s analysis does not support a finding that granting the petition would reduce automotive manufacturing employment in the United States. Accordingly, in this notice, NHTSA is granting Nissan’s petition."
If I'm translating this to plain English, it sounds like this:
The United Auto Workers have pressured Congress into writing Federal fuel efficiency standards in the above manner. In other words, every year auto manufacturers have to meet a certain MPG for their entire production line averaged together. They must meet the MPG standard SEPARATELY for their domestic made lines and their imported lines.
Meeting the standard is easy with small cars produced overseas that have low labor costs, and tend to be small, fuel efficient vehicles. HOWEVER, the Big Three make most of their larger vehicles in the US. In order to offset the lower MPG of the larger vehicles, they are forced to produce small cars here, but because of US labor costs, they cannot produce a small, high quality car profitably. Sooooo...they must continue to produce small cars here, at a loss, and cut corners to make them as cheaply (read "crappily") as possible.
If they were allowed to simply outsource their small car production to their overseas affiliates, and average their higher MPG ratings into their entire fleet, they could meet the CAFE standards and sell good quality small cars, with American brand names, but produced overseas. The UAW doesn't want that. They want to keep the jobs here, despite the huge competitive disadvantage to foreign competitors. It's a no win situation for Ford, GM and Chrysler. The Wall Street Journal proposal makes perfect sense.
Don't hold your breath that a Democratic Congress will risk angering their bosses in organized labor to do it, however.
