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Is this crazy, or what: Iv automakers face a Department of Justice investigation and possible lawsuit considering they maybe conspired to, uh, build more fuel-efficient cars and assist make California's air cleaner. BMW, Ford, Honda, and Volkswagen are the reported targets of a Justice Department investigation into whether they skirted federal competition laws by agreeing with each other to agree to stricter emissions standards in California.

President Trump is mad at California and automakers standing in the way of his assistants's plan to whorl back climate alter regulations. It's possible the DOJ is onto something if information technology tin can show the automakers agreed among themselves to act in a manner that limits competition or product choices without involving the government beforehand. For instance, reducing the number of big SUVs sold there may be good for the air, just it might exist seen as collusion.

States' Rights vs. Executive Power

At a high level, the disagreement is over the rights of states to fix a higher standard for college fuel efficiency and lower air pollution–in this case, a right granted past federal laws (rather the 10th Amendment holding the "powers non delegated to the United States [are] reserved to the states respectively, or to the people"), and on the other manus, the powers of the executive branch.

The law at play here is the federal Clean Air Act, which dates to the 1960s. It has been modified over the years. Information technology says the feds, non individual states, get to set make clean air regulations. But there's a huge loophole: Because California is the land most afflicted by auto-driven air pollution since the end of World War Ii, the act lets California set more stringent standards. And information technology allows the other states to follow the same rules California sets (only not its own rules). Colorado, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Jersey, New Mexico (model year 2011 and newer), New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington currently use California's rules. These states represent the entire Pacific W Coast every bit well as the eastern seaboard from Maine to Washington, DC, and about a third of the US population. For what information technology'south worth, every California-rules state except Pennsylvania went for Clinton, not Trump, in the 2016 election.

In 2018, President Trump sought to roll back or freeze some fuel economy and air pollution standards. California wants to keep stricter rules. California Air Resources Lath Chairwoman Mary Nichols, who was involved in the July agreement with the four automakers, says California'southward emissions goals are achievable and they help The states automakers considering other countries, particularly People's republic of china, hew closely to California's rules. In other words, even if the The states were to coil back standards, any automaker that wants a global footprint however has to engineer cars to come across the most stringent standards.

Trump "Enraged." California Gov: "Political Interference."

The President used his bully pulpit — Twitter — to excoriate BMW-Ford-Honda-VW. He chosen them "politically right Automobile Companies [capitalizations his]" run by "Foolish executives" while the Gold State "will squeeze … [automakers] to a point of business ruin."

Trump also tweeted that "Henry Ford would be very disappointed if he saw his modernistic-solar day descendants wanting to build a much more than expensive car, that is far less condom and doesn't work as well." Pollution controls volition increment vehicle cost — $three,000 a car according to Trump, or $two,100 a machine by the Trump administration'south earlier statements. Factcheck.org said there'due south little or no prove that cars with higher mpg are less safety in accidents.

Lighter cars in accidents with heavier vehicles fare less well, but economic system improvements could come from greater efficiencies rather than lightening a vehicle. At the aforementioned fourth dimension, a lighter machine does less damage to another lighter-weight car.

Consumer Reports weighed in and said Americans equally a group will lose $460 billion in fuel savings "in the coming years if the federal government goes forward with plans to scroll dorsum the nation's fuel economy and emissions standards for new cars and light-duty trucks."

When The New York Times reported Trump was "enraged" past the audacity of California, his handlers opted to alarm others in the media that The Times has correctly captured the President'due south mood, according to Politico. California Gov. Gavin Newsom fired back at Trump's "blatant political interference."

Assistants critics of the BMW-Ford-Honda-VW deal with California say the deal to raise fuel efficiency could hateful the end of big SUVs and crossovers. Here, the 2019 Ford Expedition, with three rows of seats, room for eight, and EPA ratings of 18-20 mpg overall. The pact would raise efficiency to well-nigh 50 mpg by 2026, although fuel efficiency mpg is higher than real-globe mpg.

How It Came to This

The backstory dates to the early on 1950s and the understanding almost 70 years ago of how smog affects California, to California clean air legislation signed past so Gov. Ronald Reagan, federal fuel economy and clean air legislation of the 1960s, and the California-U.s.a. understanding thanks to the unique status of California and, in particular, the Los Angeles basin that traps smog.

California'due south say-so to act comes from the Make clean Air Human activity, which was signed by President Richard Nixon.

When the Trump administration sought to ease some of the clean air standards, 17 automakers urged the White House to proceed talks with California and avoid a legal boxing. They warned that failure to attain agreement would atomic number 82 to "an extended period of litigation and instability." Of the 17, BMW, Ford, Honda, VW continued to discuss with California their support for strong clean-air/higher-mpg standards. They announced an understanding in late July. That'due south what enraged the President.

The agreement has the 4 automakers like-minded to increment fuel efficiency standards past model year 2026, just six years away, to near l mpg (armada boilerplate). Note that what the government calls miles per gallon is considerably college than the existent-world mpg compliant cars would actually get. Betwixt credits and dispensations that are the work of accountants and legislators, not engineers, a vehicle that gets roughly 35-40 mpg would be, roughly, a l-mpg car for sake of the rules.

According to a Sept. 6 Wall Street Journal story by Timothy Puko and Ben Foldy with the tagline Politics (non Cars):

The 4 companies [BMW, Ford, Honda, VW] and the California Air Resources Board appear the deal in July to betoken back up for keeping one, nationwide emissions standard. Justice Department officials believe the understanding could effectively restrict competition by potentially limiting the types of cars and trucks the auto companies offer to consumers, co-ordinate to people familiar with the section's thinking. Such an touch on of the deal—potentially cutting production of sport-utility vehicles and crossovers that burn more than gasoline—could cross legal lines, the people said. Courts accept prohibited such deals even if the motivation was for a public good, the people said.

The automakers would also be pain themselves because large SUVs and pickups ofttimes take profit margins on the order of $10,000 per vehicle. To keep selling them, they'll demand to sell fifty-fifty more compact cars and hybrids, plug-in hybrids, and EVs.

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