When Uncle “Cheats,” it’s OK

Guest Post by Eric Peters

Apparently, it’s ok for Uncle to “cheat.”

Not on emissions tests, as VW is being stoned to death for doing, but on federal fuel efficiency requirements (CAFE, in Uncle-speak).

Would you believe he is not only going to triple the “gas guzzler” fines applied to any automaker that doesn’t make the CAFE cut – the mandatory minimum “fleet average” MPG, which is currently 35.5 MPG – but also that these fines will be applied retroactively – to the 2015 and 2016 model year – as well as to future model years?

That’s two full model years before the 35.5 MPG mandatory went into effect – and tens of millions of dollars in fines, just because.

Dirty pool, as Gomez used to say.

But apparently it’s ok when Uncle does it.

And it’s not a proposal. It’s a fatwa. Done deal.

A “notice” was published in the July 5 Federal Register simply announcing Uncle’s decision (see here).

Technically, it is NHTSA’s decision.

NHTSA – the National Highway Traffic Safety Administration – is one of the many federal regulatory “agencies” (as they are innocuously styled) that operates as a legislature. It issues “rulings” that have the force of law, even though no one elected NHTSA or the bureaucrats within. What happens is that Congress passes a vague law – in this case, the Energy Policy and Conservation Act, way back in 1975 – which alphabet agencies like NHTSA (and EPA) are then given free reign to interpret.

This little shuck-and-jive allows Congress to take Grand Stands (we are saving energy!) without being held accountable for the specifics (new cars must average 35.5 MPG or you will be forced to pay heavy fines) while enabling unelected bureaucracies to impose the specifics without any fear of being held accountable.

It’s a slick con.

Your congressman or senator can get claps on the campaign trail hollering about the importance of more “efficient” cars. No one demands specifics from him. Later on, you read that a bureaucrat whose name you probably never heard – and whom you’ll never be given the opportunity to vote out of office – has decided to interpret the law passed by your congressman or senator. More “efficient” cars now means that every new car will average 35.5 MPG or else you’ll be hit with a fine.

That’s right – you.

And me and everyone else who buys the cars. The “gas guzzler” fines applied for not meeting the decreed CAFE mandatory minimums are simply folded into the price of the car you just bought.

Or did you think the automakers would simply absorb the fines as a kind of penance?

Now the fines are to be tripled – and applied retroactively.

The rate goes up from $5.50 to $14 for each 0.1 MPG that any automaker falls short of the “target,” as Uncle innocuously styles it. In fact it is a mandate. And the mandate just got a lot more expensive. Possibly catastrophically so.

Which may be on purpose.

NHTSA – a government agency that doesn’t have to worry about such drudgeries as balancing its books because it can simply take (via Congress) more of our money to finance its operations – may not grok that car companies do have to balance their books, have to convince people to buy what they are selling; cannot simply jack up the sticker price and shove their hands into people’s pockets and take what they feel like taking.

If this tripling of CAFE fines stands, it is probably going to put several car companies that are already in trouble into an unrecoverable spin.

Under the old fatwa – noncompliance with the lower (30.2 MPG “combined”) CAFE mandatory minimum – Jaguar Land Rover was socked with in excess of $46 million in “gas guzzler” fines over the period 2010-2014 alone –  all of that passed on to its customers. Of which there are fewer because of the fines.

Jaguar Land Rover is a relatively small automaker that sells no “efifcient” cars to boost its overall CAFE numbers – so the costs it must pass on to its customers (in the form of higher sticker prices) are proportionately higher than the costs born (and passed on) by rivals like BMW or Mercedes, which score better on CAFE because they sell some relatively “efficient” models whose MPG numbers offset the not-so-great MPG numbers of the others.

Even so, they, too, fork over millions – and have to charge customers millions, to make uo for what Uncle grabs

Even Fiat – which only sells “efficient” cars – is forced to pay millions to Uncle, which the company  recovers by charging its customers more for every car they buy.

And now the fines are going to triple.

And the CAFE fatwa is set to nearly double – to 54.5 MPG by model year 2025, just nine years away.

It is not an exaggeration to state that this could destroy the car industry by making it literally not possible to sell cars at a price people are not merely willing but able to pay. There is not one currently available new car – not even the Prius hybrid – that averages 54.5 MPG.

Consider what this means.

Unless – via unicorn farts, perhaps – a way is found to build cars that average 54.5 MPG less than ten years hence, every company selling cars that don’t average 54.5 MPG will be hit with triple the current “gas guzzler” fines. It will mean the certain extinction of most car types currently available, including mid-sized and larger sedans and especially SUVs and larger crossover SUVs, most of which don’t even come within spitting distance of the current 35.5 MPG fatwa.

And 54.5 MPG? As Tony Soprano used to say, forget about it!

But this business of ex post facto’ing the car industry is beyond egregious. It’s one thing for an unelected, unaccountable government bureaucracy to simply decree that next year or the year after that or nine years from now every car company’s roster of cars must average at least 35.5 MPG (the current, upticked standard – which went into effect this year) and something else to decree that the standard that was in effect last year no longer applies – and that a new standard will be applied retroactively.

This is tyrannical.

The trade publication Automotive News quoted a car industry executive – who wished to remain anonymous for the obvious reason that any government which engages in re-writing laws and applying punishment retroactively is a mafia and capable of anything – as follows:

“The most disturbing thing about it is that essentially no notice was given… you make your regulatory plans based on a certin set of assumptions. To have it change suddenly without notice and without the ability to respond is really troubling.”

Indeed.

What’s next? Fining companies that sold cars without air bags before the air bag mandate went into effect?

It would not surprise me.

To recall and paraphrase the immortal words of Richard Nixon: When an unaccountable, unelected federal agency does it, it’s not illegal.

Let alone “cheating.”