Snow: Automakers Open to Fuel Efficiency

Published 12:00 am Monday, December 26, 2005

WASHINGTON – Car makers are embracing fuel-efficient vehicles and bringing a new perspective to energy challenges, the chairman of the firm that bought an 80 percent stake in Chrysler said Wednesday.

“We’re not the old automobile industry,” said former Treasury Secretary John Snow, chairman of Cerberus Capital Management, in a speech at the National Press Club. “I know a lot of people feel that the auto industry has had its head in the sand _ that it’s stonewalled for 30 years.”

“I think the auto industry today recognizes that a new age has dawned _ a new age is here,” said Snow, whose private equity firm purchased an 80.1 percent stake of Chrysler Group in May.

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“We’re the fresh eyes on today’s problems,” he said.

Snow said the industry “lost some credibility in this town” by fighting fuel economy increases during the past three decades. But he noted that carmakers are supporting a plan in the House that would impose stiffer requirements.

He said that plan would be an improvement over a Senate measure that he said would place more of a burden on automakers and would be unworkable for the industry.

The Senate last month approved new fuel efficiency requirements for automakers that would set a combined standard of 35 mpg by 2020. The auto industry vigorously opposed the Senate plan, saying it would hurt manufacturers and lead to a reduction in the variety of large vehicles offered to consumers.

The House may consider upgraded standards as part of a broad energy package before its monthlong August recess.

Fuel efficiency rules are crucial for automakers because increasing the standards would cost companies millions of dollars as they plan their future vehicle lineup. The changes have been pushed by environmental groups concerned about global warming and the nation’s dependence on imported oil.

Environmentalists and many Democrats are supporting a stricter proposal pushed by Rep. Edward Markey, D-Mass., that would require a combined average of 35 mpg by 2018. Markey’s bill is supported by about 150 lawmakers and would push the auto industry to meet the benchmarks two years earlier than the measure approved by the Senate.

Domestic automakers, Toyota Motor Corp. and business groups are supporting the alternative cited by Snow that would give the auto industry more time and force them to meet rules of up to 35 mpg by 2022 _ or a minimum of 32 mpg _ for cars and trucks.

The proposal, led by Rep. Baron Hill, D-Ind., has the support of about 60 lawmakers, including House Energy and Commerce Committee Chairman John Dingell, D-Mich.

On Wednesday, the committee’s top Republican, Rep. Joe Barton of Texas, proposed a more moderate increase in the standards: He called for the requirements to be raised to 35 mpg for passenger cars and 27.5 mpg for trucks by 2022.

Barton said his approach “does the best job of protecting the automobile industry in this country while improving fuel efficiency.”

Snow’s firm reached an agreement in May with DaimlerChrysler AG to buy most of its U.S.-based Chrysler unit. Under the deal, Cerberus agreed to invest $6.1 billion in Chrysler and its financing arm and to pay DaimlerChrysler $1.4 billion.

Cerberus has agreed to take on most of the automaker’s $19 billion in long-term retiree health care costs.

Snow said domestic automakers have suffered from rising health care costs and was pleased that most of the presidential candidates were discussing reforms. “This is the issue of both American competitiveness going forward and it’s the issue of American fiscal stability going forward,” he said.

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A service of the Associated Press(AP)