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Dealers say mileage mandates are too much, too soon: But consumer group contends heightened demand for fuel-efficient vehicles should allay industry's fears

July 30, 2007

The region's largest consumer advocacy group is trying to counter efforts by Indiana car dealers who want to water down higher fuel economy standards passed by the U.S. Senate.

Citizens Action Coalition has been rallying its base to pressure the Indiana delegation to stand behind aggressive fuel economy targets that would require a carmaker's fleet to average 35 miles per gallon by 2018.

With gas supplies pinched and prices relatively high,"this is a very current and important issue," said Dave Menzer, utility policy coordinator at CAC. He noted that it's the first time in three decades that corporate average fuel economy standards, or CAFE, have been up for such significant revision.

CAC usually focuses on utility issues, but its base has been seeking help with rising gasoline prices, Menzer said. CAC has been partnering with groups lobbying in Washington, such as the National Environmental Trust and Union of Concerned Scientists.

CAC's rallying cry comes less than two weeks after the Automobile Dealers Association of Indiana sent eight dealers from the state to Washington, D.C., to ask for more time to comply with new CAFE standards.

Local dealers were Bill Estes, who sells Chevrolets in Indianapolis and Fords in Brownsburg, and Kevin Kahlo, who has Chrysler stores in Knightstown and Noblesville.

Dealers favor a bill co-authored by Indiana Rep. Baron Hill, a Democrat representing the 9th District. The Hill-Terry bill, also named for co-sponsor Lee Terry, RNebraska, sets the corporate average at 32 miles per gallon by 2022 rather than the Senate's 35 mpg by 2018.

It also would allow manufacturers to continue counting non-traditional vehicles, such as the Chrysler PT Cruiser, toward their truck average; other bills would close this loophole.

Kahlo said he supports Hill-Terry because, to combine car and truck averages without giving manufacturers sufficient time to rework product offerings would hurt companies like Chrysler, with about 68 percent of its sales in trucks.

"If [the new fuel economy rule] is too abrupt, too quick, you're going to effectively take the large SUVs and trucks out of the market. That segment of sales is significant," said Marty Murphy, executive director of the Automobile Dealers Association of Indiana.

He said dealers generally support higher fuel economy mandates.

Some consumer and environmental groups counter that dealers and automakers care first and foremost about preserving fat profit margins on gas-hogging SUVs and trucks-still lucrative even though sales of big vehicles have fallen with rising gas prices.

"It will mean, for a while, these guys will have to take a hit," said Giles Hoyt, who has driven a Toyota Prius hybrid since 2002.

But the Indianapolis resident noted Toyota's success in selling the gasoline-electric hybrid, and hybrid versions of conventional models automakers are rolling out.

"Green can be good business, depending on how they market it," Hoyt said.

Menzer points to a new study by the University of Michigan that says Ford, Chrysler and General Motors could actually make more money under the more aggressive CAFE standards proposed.

But on the front lines, dealers like Kahlo aren't so confident there will be enough Giles Hoyts out there anytime soon. Forcing automakers to rush radical new products to market isn't the answer, Kahlo said.

For example, Kahlo said he priced the replacement cost for batteries on one hybrid and was given a quote of $7,000. He figures that will spook some buyers. He added, wryly, "What do you suggest the cattle farmer move his cattle in?"

CAC's Menzer isn't buying it.

"People are still going to be able to buy the products they want," he said.

Menzer figures dealers are underestimating consumer demand for better fuel economy. He cited a recent survey for the National Environmental Trust that found 83 percent of U.S. pickup truck owners surveyed favor increased fuel efficiency standards.

Strangely enough, following a story on its Web site decrying the more stringent fuel economy proposals, the National Automobile Dealers Association carried an item about how Nissan Motor Co. is suffering for not having enough fuel-efficient vehicles.

Indiana has 615 franchised dealerships with 2006 sales of $12.2 billion, according to the state dealers association. Those dealers employed 23,321 people.
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