From the Office of Senator Kerry

Wednesday, March 13, 2002

Mr. President, I rise to discuss automobile fuel economy. Over the past several months, the Commerce Committee has reviewed the Corporate Average Fuel Economy or CAFÉ program. I should add that our review began with a joint hearing with the Senate Energy and Natural Resources Committee.

Our review of the program was instigated by a general concern for the program and its impacts on oil consumption, the environment, the industry and the industry’s workers. From the outset we recognized that the program is highly controversial, and that it has both significant costs and benefits. And we also recognized that the issue itself has become highly politicized. I don’t think its an exaggeration to say the industry has waged war against the CAFÉ program, sparing no expense to ensure more than a decade and a half of inaction. Fortunately, we had the benefit of Senator HOLLINGS’ input, who authored the original CAFÉ provisions in 1975 and who has, as they say, seen it all before.

Mr. President, over the past several months we have developed a bipartisan proposal that now has the support of Chairman HOLLINGS, our Ranking Member Senator MCCAIN, and Senators SMITH, SNOWE, FEINSTEIN, MURRAY, COLLINS and CHAFEE. I want to highlight some of the proposal’s major provisions and what they would accomplish.

• The proposal combines the passenger car and light truck fleets into one category for the purpose of calculating a manufacturer’s CAFÉ. The Secretary of Transportation is required to conduct a rulemaking that would set standards beginning in model year 2007 and ending in model year 2015 with a final standard of 36 mpg. The Secretary is required to promulgate those standards within 24 months of enactment of this Act. Failure to set standards within this period would result in establishment of a default standard.

• The proposal changes the definition of light truck to include passenger vehicles between 8,500 and 10,000 pounds gross vehicle weight. This definition provides an exemption for heavy duty pickups in this weight category.

• The proposal authorizes the Department of Transportation to allow transfer of CAFÉ credits into a new greenhouse gas registry and allows manufacturers to purchase verified greenhouse gas credits from the registry. These credits can be used to offset up to 10 percent of the applicable CAFÉ requirement. The greenhouse gas registry will be established by the Department of Commerce and allow for all industries to participate in the reduction, verification and trade of carbon credits. • The proposal includes important safety provisions. It directs the National Highway Traffic Safety Administration (NHTSA) to issue safety standards for rollover crashes, including roof crush resistance, improved seat structure, and safety belts, and safety standards for heavy vehicle compatibility.

• The proposal requires that the Secretary of Transportation, in consultation with the Administrator of the EPA, annually certify and report to Congress on the oil saving and the reduction in greenhouse gas emissions attributable to the CAFÉ program.

The proposal will achieve several important goals.

First, it will reduce U.S. oil consumption through efficiency. That is critical because it means that whatever might be happening in the Middle East or elsewhere in the world, whatever the price of oil might be, America will be less dependent on oil. And, as we have heard over and over again, the greatest step we can take to protect our economy from oil price shocks is to make our economy less dependent on all oil, foreign or domestic.

Second, it will reduce greenhouse gas emissions. Global warming is a threat to the environment for this generation and for many more to come. Passenger vehicles are a major source of global warming pollution, and greater efficiency will reduce emissions and help preserve the global environment.

Third, the proposal will also reduce local pollutants such as soot and smog, which can contribute to environmental and public health problems, including asthma, lung cancer and heart disease.

Fourth, the proposal will save consumers money at the pump. We acknowledge that developing more efficient technology will add cost to the purchase price of vehicles, but we believe that consumers will recoup that cost and more in gas savings over time.

I want to outline these benefits further.

The daily oil savings will be 1 million barrels per day in 2015, 2 million barrels per day in 2020 and 2.8 million barrels per day in 2025.

The cumulative oil savings will be 1.5 billion barrels by 2015, 4.5 billion barrels by 2020 and 9 billion barrels in 2025.

The annual reductions in greenhouse gas emissions will be 69 million metric tons in 2015, 127 million metric tons in 2020, and 173 million metric tons in 2025. We are changing the composition of our atmosphere at an unprecedented rate; the potential impacts will be wide-ranging and irreversible. Any reasonable step we can take to reduce emissions and begin a transition to efficient and clean energy technologies is worth doing.

The annual reduction in smog and ozone forming pollution is 101 million kilograms in 2015, 201 million kilograms in 2020 and 281 million kilograms. This is measured in million kilograms of hydrocarbons and nitrogen oxides. Research shows that these pollutants can cause or worsen respiratory disease such as emphysema and bronchitis, harm breathing and the respiratory system, damage lung tissue, and result in premature death.

The annual reduction in toxic emissions is 47 million kilograms in 2015, 93 million kilograms in 2020 and 130 million kilograms in 2025. These emissions, which include benzene, formaldehyde and particulates, have been linked to leukemia, heart attack, stroke and lung cancer.

The annual savings to consumers in reduced gasoline purchases is $7.1 billion in 2015, $28 billion in 2020 and $44.4 billion in 2025. This assumes gas is priced at $1.40 per gallon.

At the same time, we examined the costs of such a proposal. They include the cost to the industry and the cost to consumers. The National Academy of Sciences (NAS) examined the impact that CAFÉ has had on the industry in the past and what a new CAFÉ proposal might mean. This is what the NAS found:

∙ “General economic conditions, and especially the globalization of the automobile industry, seem to have been far more important than fuel economy regulations in determining the profitability and employment shares of the domestic automakers and their competitors.”

∙ That General Motors’, Ford’s, and DaimlerChrysler’s (the Big 3) profitability shows “no obvious impact of fuel economy improvements.”

∙ That Big 3 productivity shows “no obvious impact of fuel economy improvements.”

∙ The NAS looked at research and development costs of CAFÉ. This is an important economic question because it goes to the central question of whether developing more efficient vehicles raises design costs. The NAS concluded that R&D costs “have generally increased regardless of whether the CAFÉ requirements were increasing or constant. This pattern suggests that the R&D demands created by the standards did not unduly burden the domestic manufacturers.”

Does that mean CAFÉ has no impact on the industry? No. But according to the NAS, the overall impact of CAFÉ is small relative to other factors influencing the industry. And, we sought ways to minimize that cost in our proposal. First, the NAS and the auto industry concluded that costs could be reduced if manufacturers are given a 10 to 15 year lead time. That longer lead time would provide opportunity to turnover existing infrastructure. Second, the Administration has the flexibility to ramp up the CAFÉ standards, requiring smaller increases in the early years and greater increases in the later years to allow for planning.

The NAS also examined the impact of CAFÉ on the price of vehicles, and it concluded that CAFÉ is not the cause of rising car prices. The NAS found that “the average price of a new automobile has increased from just under $15,000 in 1975 to over $20,000 today. Virtually all of the price increase came after 1980, by which time, most of the increase in car fuel economy had already been accomplished.”

Despite the NAS assessment that CAFÉ did not appear to significantly increase the price of vehicles, we worked with outside technical experts, took lengthy testimony, and relied on the NAS’s forward-looking projections to determine an approximate cost of CAFÉ reform in our proposal. While no estimate is completely accurate and while I feel strongly that technology will reduce costs over time, I believe that implementing this proposal will add between $1,000 and $1,500 to the cost of a vehicle — however that cost will be completely recouped by consumers in fuel savings.

The NAS also looked at how CAFÉ impacts employment in the U.S. auto industry. While the NAS recognized that the domestic automakers have reduced employment, they made two key points. First, the “roots of this shift include domestic manufacturers loss of market share to foreign manufacturers, improved productivity in their own plants, and shift in parts production overseas.” In other words, CAFÉ is not the cause of employment declines. Second, the NAS also points out that the decline has been offset by increased employment at new facilities, particularly at domestic facilities owned by Toyota and Honda, assembly facilities and other areas.

We also looked at reduced safety as a potential cost—or more correctly, an unacceptable consequence—of increased CAFÉ standards, and we proceeded with particular caution on this point. The NAS warns in its report that the industry’s efforts to increase fuel economy in the ‘70s and ‘80s resulted in increased traffic fatalities. The NAS estimates that there were an additional 2,000 deaths caused by the down weighting of vehicles to increase fuel economy in 1993. I should note, that conclusion was contested in a dissenting opinion included in the NAS report by independent safety experts and by Honda Motor Corporation.

Looking ahead, the NAS concluded that CAFÉ standards could be increased without a negative impact on overall safety provided that certain precautions were taken. I want to be clear on this point because I have heard my colleagues and others say that the NAS concluded that you cannot raise CAFÉ standards without reducing safety—the NAS did not say that.

The NAS concluded: “It is technically feasible and potentially economical to improve fuel economy without reducing vehicle weight or size and, therefore, without significantly affecting the safety of motor vehicle travel.”

I will discuss this issue more as the debate proceeds, but, for now, I want to make clear that CAFÉ improvements do not necessitate a drop in auto safety, and our bill addresses safety.

First, we gave industry sufficient lead time in our proposal to help ensure that technology and not poor design would be the source of efficiency gains. The NAS panel told the Commerce Committee that to the extent auto safety has suffered from fuel economy improvements, it is likely because the auto industry chose to reduce the weight of vehicles instead of improving engine technology. The combination of down weighting and poor design, tragically, may have led to increased fatalities and injuries. Our proposal provides the needed lead time for automakers to employ engine technology and sound design to improve fuel economy.

Second, we include specific provisions to enhance safety. Some 10,000 people die each year in rollover crashes. Our amendment would require NHTSA to issue new rules to reduce these deaths. The proposal also includes provisions to make vehicles more compatible and to protect all drivers. This directly addresses the concern some have raised over the size difference between a large S.U.V. and a small car.

Mr. President, in short, I believe that the bipartisan proposal we have crafted will create far more benefits than costs. We have done all we can to maximize the benefits of oil savings, to lower costs to consumers and to reduce pollution. At the same time, we’ve included provisions to address safety concerns. And we have also provided sufficient lead time and flexibility for manufacturers to meet the standard.

Mr. President, I want to discuss some key issues that we considered and which have come to the forefront of this issue.

First, we need to understand why it is crucial that the federal government improve the CAFÉ program and why we believe CAFÉ is essential to a sound energy policy.

Personal vehicles account for 40 percent of all U.S. oil consumption and 19 percent of all U.S. carbon emissions. The nation cannot hope to address the issues of energy or climate change without addressing fuel economy.

Fortunately, the Corporate Average Fuel Economy program is one of the most successful energy policies ever undertaken by the federal government. The NAS estimates that CAFÉ saves more than 2.8 million barrels of oil per day, cuts pollution and saves consumers money.

However, we are now backsliding. Personal vehicle fuel economy is now at a 20-year low. Each new fleet of cars and light trucks is less efficient than the last. If we don’t act to strengthen CAFÉ, fuel consumption by personal vehicles is projected to rise 80 percent by 2030, from about 125 billion gallons per year to more than 225 billion gallons per year.

It is time to reform and strengthen CAFÉ.

Second, we need to understand the auto industry’s role in this debate. I say this because as this debate proceeds, I expect that we will hear the Kerry-McCain proposal described in near apocalyptic terms. The auto industry has run a scorched earth campaign against any proposal that increases CAFÉ, with ads and briefing materials claiming that the Kerry-McCain proposal, and just about any other proposal, will outlaw light trucks, S.U.V.s and minivans. And I’m sorry to say that many of my colleagues use that industry rhetoric almost verbatim.

For example, the Alliance of Automobile Manufacturers has said the following: "Make no mistake, the Senate proposals would eliminate S.U.V.s, minivans and pickup trucks. If these proposals pass, the only place you'll see a light truck is in a museum."

But, Mr. President, the scare tactic the industry uses today to threaten our constituents are no different the scare tactics they used 25 years ago: they were wrong then and they are wrong now.

I want to read some of the claims that the auto industry has made over the past few decades in opposition to fuel economy and safety standards—as you will hear, they are nearly identical to the threats made today.

Here’s what they said about fuel economy proposals:

∙ Chrysler, 1974: “In effect, this bill would outlaw a number of engine lines and car models, including most full-size sedans and station wagons. It would restrict the industry to producing subcompact-size cars, or even smaller ones, within 5 years, even though the nation does not have the tooling capacity or capital resources to make such a change so quickly.”

∙ General Motors, 1975: “If this proposal becomes law and we do not achieve a significant technological breakthrough to improve mileage, the largest car the industry will be selling in any volume at all will probably be smaller, lighter, and less powerful than today’s compact Chevy Nova, and only a small percentage of all models being produced could be that size.”

∙ General Motors, 1977: “Our 1985 plans call for our largest car to be a weight class of 3,550 pounds. That is midway between a Nova and a Chevelle.”

Here’s what they said about safety:

∙ General Motors, 1965: “[F]rom a commercial standpoint in a competitive marketplace [safety devices must be optional until] a very high proportion of the customers select the item or unless there are compelling reasons for standard installation.”

∙ Ford, 1966: “Many of the temporary standards are unreasonable, arbitrary, and technically unfeasible. ... If we can’t meet them when they are published we’ll have to close down.”

∙ Ford, 1971:“[T]he shoulder harnesses, the headrests are complete wastes of money ... and you can see that safety has really killed all of our business.” “[W]e are in a downhill slide, the likes of which we have never seen in our business. And the [Japanese] are in the wings ready to eat us alive.”

Here’s what they said about emissions:

∙ General Motors, 1972: “It is conceivable that complete stoppage of the entire production could occur, with the obvious tremendous loss to company, shareholders, employees, suppliers, and communities.”

∙ Ford, 1973: “Our industry has been backed to the cliff edge of desperation, and time is running out. ... As far as the even tougher 1976 requirements are concerned, nothing seems to describe our situation as well as that clincher by Sam Goldwyn is supposed to have remarked: ‘In two words: IM...POSSIBLE!’”

∙ Automakers, 1990: “Now as Congress attempts to strengthen the Clean Air Act, Detroit's ability to take another big slice out of tailpipe pollution is a major issue. Once again, automakers and their powerful political sponsors in Washington insist that it is not feasible or necessary and that congressional dictates to do so would be financially ruinous.”

We invited Ambassador Stuart E. Eizenstat to testify before the Commerce Committee. In 1975, Mr. Eizenstat was Domestic Policy Advisor to President Carter and was part of the team that developed the first CAFÉ standards. His testimony speaks directly to the threats the auto companies are making:

In 1975, in large measure spurred by the Arab Embargo, Congress passed the Energy Policy and Conservation Act (“EPCA”). The EPCA included provisions that established the CAFÉ standards for new passenger cars. Given the oil crisis at that time, it appeared that the CAFÉ standards would be quickly implemented. However, in spite of the obvious merits of the standards, the American automobile manufacturers were opposed to the regulations. I remember their opposition well. In my role as Domestic Policy Advisor to President Carter, I was part of the team that developed the first CAFÉ standards. Those standards set the necessary fuel economy levels for the period from 1977 to 1985, starting at 18 miles per gallon (“MPG”) in 1977 and rising to 27.5 MPG in 1985. I specifically remember a meeting in the Cabinet office with President Carter and the heads of the big three automobile manufacturers -- Ford, General Motors and Chrysler -- in which all three strongly opposed the imposition of fuel economy standards. They claimed that their companies lacked the technology to reach the standards that the Administration had in mind. And yet, once the CAFÉ standards were implemented, all three companies met and exceeded the standards.

I can imagine the pressure that you are under from those same companies and others as you consider raising the standards. But as you embark on this process, I strongly urge you to recall our experiences in developing the first set of CAFÉ standards. You should feel confident that the automobile manufacturers do have the ability to achieve and in fact surpass whatever standards you set.

Mr. President, few industries can match the auto industry when it comes to threatening Congress. Almost every time the Congress has considered strengthening fuel economy, emissions and safety standards the auto companies have made calamitous threats about technology and jobs. And each time the threats have been hollow. It’s hard to believe the industry’s rhetoric was or is anything more than scare tactics.

In a story this past Sunday, the Washington Post assessed the industry’s dire predictions about the Kerry-McCain proposal by asking members of the National Academy of Sciences whether or not they were true. The Post concluded that, “Although any increase in gas mileage inevitably will come at a cost, the notion that the bill would rid American highways of S.U.V.s and pickup trucks—as some auto industry ads explicitly claim—is false.”

Let me repeat that, Mr. President, “the notion that the bill would rid American highways of S.U.V.s and pickup trucks—as some auto industry ads explicitly claim—is false.”

There are many good things to be said of the auto industry. It is has employed millions of Americans, created wealth and become a part of American culture. And I believe it will continue to do so. But, on this issue, the industry’s efforts can only be described as obstructionist and wholly disingenuous.

I want to read the lead paragraph from an editorial in the Automotive News written after a CAFÉ hearing in the Commerce Committee and at which the industry refused to discuss any notion of improving fuel economy. I should point out again that this editorial ran in the Automotive News: “Let’s get real. It’s time for automakers to deal forthrightly with fuel economy issues. These are not the 1970s or the 1980s or even the 1990s. To deny—or refuse to admit—that there is technology that can reduce fuel consumption significantly is ludicrous. The industry’s credibility is at stake.”

Mr. President, I want to emphasize the last sentence from the editorial. It reads, “The industry’s credibility is at stake.” I urge my colleagues not to believe the industry’s hollow threats.

Third, I want to address the final standard we selected, which is 36 miles per gallon for model year 2015 with a trading program that will reduce the fuel economy standards to 32.4 mpg. In making this decision we relied on the National Academy of Sciences, its panel of experts, some in the industry, and other experts who testified before the Committee, provided additional information and assisted the staff in general.

The automakers have argued that the Kerry-McCain proposal is extreme—they are wrong. I want to put the number we have selected into perspective. The fuel economy gains required in the proposal are within the range offered by the National Academy of Sciences and other technical assessments, are far less than gains achieved by the CAFÉ program in the 1970s and 1980s, and are similar to other proposals considered by the Senate.

∙ The proposal we have offered would improve car and light truck fuel economy of about 40 percent over 13 years depending on the use of the credit trading program.

∙ The original CAFÉ law improved car and light truck fuel economy nearly 80 percent over 10 years.

∙ The NAS provided estimates for increased fuel economy based on use of available technologies, including a technology package that would result in a 55 percent improvement in fuel economy over 10 to 15 years.

∙ I want to make an additional point about the NAS study. I have seen materials circulated by the auto industry and others arguing that our interpretation of the NAS report is flawed and the NAS does not allow for a 40 percent increase in fuel economy. I want the record to show that the Congressional Research Service concluded the following, “A study by the National Academy of Sciences concluded that it is possible to achieve a more than 40 percent improvement in light truck and S.U.V. fuel economy over a 10-15 year period at costs that would be recoverable over the lifetime of ownership.” That’s not my assessment or even the Commerce Committee assessment; that comes from the Congressional Research Service.

∙ In testimony before the Commerce Committee, Dr. Marc Ross, Professor of Physics at the University of Michigan and auto efficiency expert testified that over a 10 to 15 year time frame, the auto industry could improve fuel economy to 40 miles per gallon --- 4 miles per gallon greater than our proposal.

∙ The Union of Concerned Scientists estimates that it is technologically and economically feasible to improve CAFÉ standards by 60 percent over 10 years and 120 percent over 18 years. UCS has called for a combined fleet average of 40 mpg by 2012 and 55 mpg by 2020. This analysis assumes major market penetration of existing and emerging technologies and down weighting, not downsizing, of the largest trucks, but still does not include hybrids or fuel cells.

We also looked at some of the specific technologies. The National Academy of Sciences, the Environmental Protection Agency and others have identified several technologies that the auto industry could employ today to achieve the higher standard in our proposal. They include the following:

∙ multi-valve cylinders, ∙ variable valve timing, ∙ idle stop/start, ∙ cylinder deactivation, ∙ higher gear transmission, and ∙ continuous variable transmission.

In addition, there are more evolutionary technologies also coming on line that were not considered in the NAS fuel economy estimates but that already exist in the market place. The first is hybrid technology.

∙ Honda has introduced its Insight (a 2-seater that gets 61 mpg city and 68 highway) and plans to introduce a hybrid Civic (2- and 4-door) in 2002.

∙ Toyota sells the hybrid Prius (a 4-door that gets 48 mpg combined) in the U.S., sells a hybrid minivan in Japan that gets more than 40 mpg, and plans to start selling a hybrid S.U.V. next year in the U.S. Toyota announced this year the Prius is profitable. Toyota plans to sell 300,000 hybrids globally.

∙ Ford plans to introduce the hybrid Escape in 2003. Ford reports the Escape will get 29 mpg city and 40 mpg highway. Ford reports the Escape will not be a niche vehicle, it will be a “mass market” seller.

Diesel is another technology that holds great promise, but was not considered in the NAS fuel economy estimates. Diesel engines get up to 40 percent better fuel economy than a comparable gasoline engine according to the NAS.

∙ The reason they are not more widely used in the U.S. is poor customer acceptance because of low-quality models that were introduced, and failed, in the 1980s. However, this is changing.

∙ In Europe, almost half of all cars sold are diesel. In the U.S., Volkswagen is successfully selling two diesel sedans (Golf and Jetta) that get 49 miles per gallon on the highway.

∙ The challenge for diesel is for diesel to meet the new Tier 2 standards for air pollution that start 2007. I’m confident that they will.

~ Some automakers are pursuing diesel and have reported that they have already designed an engine to meet the 2007 emissions standard.

~ The EPA’s technical experts, who closely monitor the industry’s progress, report that they expect the industry to meet the standard.

~ And in a clear sign that the technology is viable, Corning, Inc. announced last fall that it is investing $200 million in a factory in New York to manufacture emissions technology that will allow diesel to meet the standard. Corning estimates that the market will grow to $1.5 billion by 2008. Corning says its primary competitors are Japanese manufacturers. Mr. President, there is an important point to make about technology. The auto companies argue that over the past decade they have invented several technologies that improve vehicle efficiency and have averaged about a 1.5 percent increase in efficiency. These technologies include fuel injection, multi-valve systems, changes in transmissions, better tires and so forth.

However, if you look at where technology has been used since 1988, you see that all of that technology has been used to increase horsepower, acceleration and weight. In fact, there’s been a decline in technology used for fuel economy. In other words, despite all the claims from industry that they will address fuel economy on their own, there has been absolutely no balance in their use of technology. The industry has not used a single technological advance to improve the overall fuel economy of the fleet — that is a terrible record.

Mr. President, I am confident that the auto industry can achieve the standard our proposal sets. We have looked closely at the NAS study and many others. And, I believe that the promise of hybrid and diesel engines is real and will allow automakers to exceed the standards we would require.

Fourth, we looked closely at whether Congress should set the CAFÉ standard or whether we should defer to the Bush Administration. On the one hand, industry argued that the Administration has greater technical expertise and a confidential regulatory process they prefer. On the other hand, industry has a truly horrendous record of forum shopping on this issue depending upon who is in the White House.

In the end, I was pursued by the auto industry’s record of obstructionism and by the fact that I believe the Senate is capable of making a decision on CAFÉ. In fact, that’s exactly what the Senate did in 1975 with the first CAFÉ program and what it does every session on a range of very technical issues.

Let me begin with the industry’s record.

The automobile companies are now arguing that Congress shouldn’t set the CAFÉ standard. They claim that the Senate is too political and that we must defer to the experts at the National Highway Traffic Safety Administration. This is an argument of convenience meant to prevent, delay and limit action to increase fuel economy. In fact, over the past decade the industry has changed its view as to whether the Congress or the Administration should set policy on CAFÉ depending, it appears, on how best it can block an improvement in fuel economy. ∙ In 1989, the industry testified that Congress shouldn’t act because the Administration was reviewing national energy policy.

∙ In 1991, the industry testified that Congress shouldn’t act because the Department of Transportation was studying the issue.

∙ In 1995, the industry flipped. Andrew Card, who then lead the American Automobile Manufacturers Association, testified that the Department of Transportation holds too much authority on CAFÉ and that Congress must act. Card declared that “It is time for Congress to take back CAFÉ policy responsibility.”

∙ In the 104th, 105th and 106th Congresses the automakers supported a legislative rider attached to the Department of Transportation appropriations bill that blocked any administrative action, preventing the National Highway Traffic Safety Administration from even studying fuel economy.

∙ Now, the industry wants us to believe that CAFÉ is once again the Administration’s responsibility.

Mr. President, I don’t know if I’ve ever seen such a record of blatant hypocrisy. And that’s only the beginning.

The other claim we have heard from the industry and its supporters is that Congress is incapable of selecting an appropriate level of fuel economy. They argue that only NHSTA has the technical expertise to select an appropriate number. This argument is flawed and grossly inconsistent.

∙ For the past three Congresses the industry has supported riders on the Transportation appropriations bill that specifically prevented the NHTSA from studying the issue, thereby setting the CAFÉ standard.

∙ Many of the people who argue that Congress should not set a standard have endorsed the CAFÉ provision in H.R. 4. The House provision is a nearly meaningless proposal that would increase CAFÉ by less than 1 mpg over 10 years, but it nonetheless would result in a specific change in the program. The Alliance of Automobile Manufacturers touts the provision in its literature. The Republican leadership has called for the immediate passage of H.R. 4. The Bush Administration has expressed support for the CAFÉ provision in H.R. 4. This is a blatant contradiction. The industry claims that the Senate is incapable of determining an appropriate level of fuel economy, but that the House is capable of setting the level and has passed a provision the Senate should now support. This is not about the process or the Senate’s ability to craft policy, it is simply that the Senate might set a standard the industry won’t like.

The final argument is that the Senate, all of us, are too political and that somehow the Administration will make a purely technical, nonpolitical decision. They claim that our decision is arbitrary and that the NHTSA process will be informed. Does anyone believe that line? We all know that claim is simply silly. The Department of Transportation, Department of Energy, Office of Management and Budget, Environmental Protection Agency, Council of Economic Advisors, National Energy Policy Development Group, the White House and other agencies, offices and individuals will be involved. It is simply an unbelievable claim that the NHSTA regulatory process will be free of lobbying pressure.

The fact of the matter is that auto companies prefer NHTSA because with a friendly White House they know that they will get no increase or an incremental increase at worst, something far short of what can be done. Why do they know that?

Foremost, I suspect they are very confident that the Bush White House will protect them, but they also know that NHTSA is a friendly agency with a friendly process. Here are the reasons:

First, a statutory standard would start the process immediately. On the other hand, if we delegate the standard to NHTSA it will take at least 2 years before the standard is in place, giving the industry another 2 years to delay and litigate. And if anyone thinks the industry won’t litigate, I want you to know that you’re just plain wrong. The auto industry’s record of litigation is as long and as fierce as any industry’s. Consider this: In 1983, after years of litigation over air bags, the U.S. Supreme Court found that “the automobile industry waged the regulatory equivalent of war against the air bag and lost” -- adding that the “industry was not sufficiently responsive to safety concerns.” If the industry will do that to fight air bags, I am sure it will have no qualms about litigating fuel economy standards to death.

Second, NHTSA may set a two or three year rule, meaning instead of working toward an achievable longer term goal like we have in the Kerry-McCain proposal, we will have an incremental increase in CAFÉ, only to revisit the issue again and face the same kind of delay. The fact of the matter is that NHTSA has dismal record of setting CAFÉ without a Congressional mandate. NHTSA lowered the standard in the 1980s and in the past 16 years the standard has barely changed.

Third, there are problems with NHTSA. It is unfortunate to say, but the agency is failing. It is failing because the auto industry has too much control. A series of articles in the Detroit News has detailed how NHTSA has failed to implement or delayed implementation of many important safeguards. One of the reasons for NHTSAs’ failure, Mr. President, is political intervention. This is very important, Mr. President. We hear that NHTSA’s process is free of politics but the record tells another story. Consider these headlines from Detroit News:

March 4, 2002: “NHTSA Forfeits Oversight Role: Lives Lost Because Meek Agency Slow To Spot Defects”

~ The article reads that NHTSA’s problem “is one reason the highway death toll is struck at 41,800 a year, with 3 million injuries a year. NHTSA fails to spot patterns, quickly launch defect investigations and force vehicle recalls. As a result, millions of potentially dangerous autos stay on the road for years.”

March 4, 2002: “Politicians Undermine Clout: Automakers Avoid Recalls After Top Officials Intervene”

~ The article reads that “Over the past 20 years, each of the Big Three automakers has launched lobbying campaigns with the government to avoid massive recalls that would cost millions. In each case, the automaker succeeded after a government authority higher than the National Highway Traffic Safety Administration intervened.”

March 4, 2002: “Agency Slow To Add Staff”

~ The article reads that “Sixteen months after Congress mandated and funded the hiring of eight more safety-defect investigators, the federal safety agency has hired only four.”

March 6, 2002: “New Priorities Push Auto Safety To The Backseat”

~ The article reads that “With its focus on fighting terrorism and ensuring homeland security, the Bush administration isn’t likely to put any new emphasis on auto safety.”

March 6, 2002: “Critics: Agency Must Change How It Works”

~ The article reads that “the federal auto safety agency could learn a few things from the consumer product agency, the Department of Transportation’s inspector general found in a January report. NHTSA could become more effective if it also adopted practices of the Environmental Protection Agency and the Federal Highway Administration, other studies have found.”

The fourth major issue I want to discuss, Mr. President, is safety. As I have said, we have heard exaggerated and incorrect claims that strengthening CAFÉ will result in unsafe vehicles. That is simply not true.

While the National Academy of Sciences found that the implementation of CAFÉ in the 1970s and 1980s may have lead to increased fatalities, it said that fuel economy could be raised without harming safety. Honda and leading safety advocates have also made clear that fuel economy can be increased without harming safety.

∙ The NAS concluded: “Thus, it is technically feasible and potentially economical to improve fuel economy without reducing vehicle weight or size and, therefore, without significantly affecting the safety of motor vehicle travel.”

∙ Public Citizen and the Center for Automobile Safety have endorsed the fuel economy and safety provisions in the Kerry-Hollings proposal. These two groups are the leading automobile safety advocates in the nation, and they support strengthening fuel economy. They say, “The auto industry is using an outdated, inaccurate, and hypocritical argument about safety to try to derail stronger Corporate Average Fuel Economy (CAFÉ) standards. Public Citizen and the Center for Auto Safety have long been two of the strongest voices calling for safer vehicles in the United States. We do not believe that stricter fuel economy standards must cost lives, and know that a strong fuel economy bill could save lives by changing the nature of America’s vehicle fleet.”

∙ Honda, in testimony before the Senate Commerce Committee, said the following: “Honda concurs with the dissenting opinion expressed in the [NAS Report] that the data is insufficient to conclude that safety is compromised by smaller vehicles. The level of uncertainty about fuel economy related safety issues is much higher than stated in the majority report. Significantly, existing studies do not address the safety impact of using lightweight materials without reducing size, especially for vehicles with advanced safety technologies.”

∙ In February, Honda released a study that updates the NAS study with new data. The study concludes that with the inclusion of additional data, CAFÉ has not and will not result in increased fatalities even with weight reduction — which will not happen if automakers use technology to meet higher standards. The study concluded that “the overall net effect of a 100 pound reduction in passenger vehicle weight on the number of traffic fatalities is small and statistically insignificant.”

One common misperception about CAFÉ is that increased fuel economy standards have made vehicles smaller, therefore more dangerous. The issue is more complicated than that. In general, vehicles have increased size and fuel economy through technological innovation. We know from technical analysis that most of the fuel economy gains of the past 3 decades came from technological innovation and not downsizing. Let me provide some specific examples:

• The 1974 VW Beetle weighed 2,000 pounds and got 26 mpg. Today’s Beetle weighs 2,700 pounds and gets 31 mpg. That is 35 percent heavier and gets 23 percent better mileage.

• The 1974 Honda Civic weighed 1800 pounds and got 32 mpg. Today’s Civic weighs 2600 pounds and gets 40 mpg. It is 44 percent heavier and gets 25 percent better mileage, and hybrid Civic will be available this year that will get nearly 50 mpg.

• The 1980 Toyota Corolla weighed 2000 pounds and got 31 mpg. Today’s Corolla weighs 2500 pounds and gets 40 mpg. It is 25 percent heavier and gets 29 percent better mileage.

The point is, Mr. President, that vehicles can be made more efficient through engine technologies without downsizing. In fact, they can be more efficient and larger. But, it is not enough to know that automakers can make vehicles that are safe and more efficient, we need to ensure that they do. Part of that issue can be addressed by NHTSA doing a better job and implementing the standard appropriately. And part of that issue we have addressed in our legislation. We have included safety provisions to address rollover accidents and vehicle compatibility.

Each year over 10,000 people die in rollover crashes. Many of these deaths could be avoided because rollover crashes tend to happen at relatively low speeds. The problem is that roof structures, particularly in S.U.V.s are inadequate. The Kerry-McCain proposal includes a requirement that NHTSA issue new standards to protect passengers in a rollover accident.

Not surprisingly, the industry opposes these proposals.

∙ The industry consistently denies or obscures the problem of roof crush, claiming that the occupant “dives” into the roof before there is any crush. The industry has stated, by way of “clarification,” that the roof stays in the same place as the vehicle falls toward it.

∙ The Alliance of Automobile Manufacturers stated that “any incremental increase in roof crush resistance is unlikely to significantly reduce the neck injury potential of rollover events.”

The Kerry-Hollings provisions end that obstruction by requiring NHTSA to issue new rollover crash worthiness standards covering dynamic roof crush standards; improved seat structure and safety belt design; side impact head protection airbags; and roof injury protection measures.

We have also included a provision to address vehicle compatibility. This is simply the issue of a larger and taller vehicle colliding with a smaller and shorter vehicle. Because bumpers do not align and for other reasons, the driver in the small and shorter car can face greater risk. Our proposal would require NHSTA to address this issue. The provision will improve the overall safety of our highways by reducing the vehicle incompatibility. This language is not a threat to the continued existence of the S.U.V., but an opportunity for America’s most popular vehicle to become less deadly. NHTSA has already completed much of the research needed to write the required regulations.

Mr. President, we find ourselves in an odd place in regard to safety. The NAS has said we can improve fuel economy without harming safety. The leading auto safety advocates in the country have endorsed our proposal. Our proposal includes important safety provisions. The industry proposal does nothing to address safety and it opposes our provisions. And, yet, some claim that our proposal will harm safety. It’s just not true.

Mr. President, the last issue I want to discuss is market mix. This has been cast an issue of fairness. The Big 3 automakers have argued that because their model mix is skewed to lower fuel economy vehicles relative to foreign manufacturers, CAFÉ is essentially unfair. On the other hand, some of the foreign automakers have argued that market mix does not matter and that only technology matters. The truth is that both matter.

As I have said, market mix does matter. It would be dishonest to say that the difference between the companies product line doesn’t impact their future decisions. However, we can’t exaggerate the impact of market mix, either. DaimlerChrysler’s fleet is about 70 percent truck and 30 percent cars. But General Motors’ fleet is about 50/50 cars and light trucks, which is roughly the same as Honda or Toyota – however in the truck class there are differences.

Likewise, technology matters. We looked at this issue in the Committee. CAFÉ is an overall average, so technological improvements in any car will help a manufacturer comply. For example, you may find that a single Honda or Toyota vehicle achieves equal or even worse fuel economy than an equivalent GM, Ford or Daimler/Chrysler. However, when you look at the overall fleets, you see that Honda has put more technology throughout their fleet. For example, all of Honda’s cars have four valves, but the industry average is only 60 percent today. All of Honda’s trucks have had four valves since 1994, but the industry average is only 20 percent.

And if you look ahead, you see that three companies, Ford, Toyota and Honda have or will have shortly hybrids in the market, including S.U.V.s. You simply cannot argue that technology does not play an important role.

The bottom line is that both technology and market mix matter. And the question is how you deal with that from a policy perspective. Ultimately, what this market-mix issue involves is the structure of the CAFÉ program itself. Should we regulate fleet average with one target for all companies, should companies get individual targets, or should we have several standards for each kind of vehicle? But the problem is that the Big 3 are exaggerating this issue, exploiting it, and using it to thwart any improvement CAFÉ.

The fleet average we now use was put in place for companies to provide flexibility. It allowed companies to hit an average and seek the lowest cost efficiency gains throughout their fleet. To further address the issue of market mix, we discussed an attribute-based system with automakers, as did the NAS. But the answer, under any formulation, was no.

On January 24, 2002, the Alliance of Automobile Manufacturers testified before the Commerce Committee that they oppose any changes to the CAFÉ program. Their Vice President for Environmental Affairs testified that “The Alliance believes, however, that Congress does not need to set new standards or change the structure of the program.”

On December 6, 2001, DaimlerChrysler testified before the Commerce Committee and said the following: “Nevertheless, with all its flaws, CAFÉ is a program that we understand and we have made long-term product decisions to comply with the program’s standards. While we and others have examined alternatives to the current CAFÉ system, they turn out to be either politically unacceptable or have significant “unknowns” or problems that prevent us from endorsing them at this time.”

On February 1, 2002, Secretary Mineta voiced his support for an attribute-based system. The response from the automakers was decidedly negative. "Proposals like that would just create different winners and losers," said the Alliance of Automobile Manufacturers. "You set it up one way, you benefit some companies and not others. You set it up another way, you benefit others. So there are a lot of details that have to be looked at."

And I should note that the House provision doesn’t address market mix either. It provides no new authority for an attribute-based system or uniform percentage increase or anything else. What it provides is a low—a very low—number. The House proposal does nothing about market mix and doesn’t set a number. So while the industry claims to be concerned with market mix, when comes right down to it, what they want is a low number or no number.

Nevertheless, we do recognize the issue of market mix. There are two components of the proposals that can help address the issue of market mix. The bill provides 13 years lead time. According to the NAS, with a 10 to 15 year lead time, each of the companies will have the necessary time to develop technologies for the mix of vehicles they plan to sell. And with the proposal’s credit program, a company that wants a lower fuel economy --- possibly because of market mix --- can purchase credit, remain in compliance and still benefit the environment.

Mr. President, I want to end by telling my colleagues exactly what the entire industry proposal is about: misinformation and delay.

There have been two aspects of the industry’s approach to the CAFÉ program. The first is misinformation. When I came to this process and began crafting the legislation before us, I had an open mind. We held hearings, requested input, asked about alternative regulatory systems, and the response was also the same. The industry refused to help.

Now that I see their ads and read their briefing materials it is clear that talking to the industry was destined to be fruitless from the outset. The reason is that the companies will say anything to anyone if they believe it will help them defeat a CAFÉ proposal. That is why we have demonstrably false ads running throughout the country and here in Washington. That is why Capitol Hill is papered in industry literature espousing the same false claims.

The second aspect is delay. It is a very simple strategy. It works like this:

If Congress plans to act on CAFÉ, industry protests that CAFÉ is the Administration’s responsibility. If the Administration plans to act, the industry protests that CAFÉ is Congress’ responsibility.

If the Administration wants to study CAFÉ, then the industry gets Congress to enact riders for six years that block even the study of CAFÉ.

If Congress decides to act based on the National Academy of Sciences study, then the industry argues that the NAS study is incomplete and that Administration needs to study CAFÉ.

When the Commerce Committee considers changing the structure of CAFÉ to respond to industry’s concerns over market mix, the industry argues it doesn’t want those changes and prefers the existing regulatory structure in the CAFÉ program. But when the Commerce Committee supports the existing structure, the industry tells other Senate offices that its primary concern is market mix and program structure.

The industry tells us that the Senate can’t pick a number. But they endorse the CAFÉ provision in the House energy bill, which picks a number. It just happens to be a number so low as to be meaningless.

The result is that after 16 years the CAFÉ number has not changed. The Reagan Administration lowered and raised CAFÉ. The first Bush Administration did nothing. When the Senate tried to act in 1990, the bill lost on a filibuster with 57 votes. When the Clinton Administration considered action, the industry sought and got riders that blocked even the study of CAFÉ. Here we are now, 16 years with no improvement, the industry is filling newspapers complete with misinformation, trying to scare our constituents and threaten us. What do they propose after 16 years of nothing? That we give NHTSA a chance to study the issue for 24 months and maybe they’ll act.

It comes down to this: How many times will this Senate, this Congress and the federal government be fooled by this industry? Has 16 years been enough? Or are we going to once again bend to this industry’s wishes? Are we going to delay once again? I hope not.