New CAFE standards: $157 billion.

[Jesda]

I see where you're coming from Isaac, but again, you're advocating a policy that's incapable of moving quickly enough to stay current with technology and consumer trends, due to the nature of government bureaucracy (all this, in addition to the nature of GM's own corporate bureaucracy).

Your belief is that CAFE is necessary to preempt rising energy costs to soften the blow. The problem is, it has never been proactive enough to make significant difference. CAFE rules are updated in response to a crisis, never prepared for when they actually occur.

Consumer demand is what ultimately dictates the product mix of auto manufacturers. Today's highly competent small cars are a result of 2-3 years of product development (typical development time for a passenger car), a direct response to rising fuel costs. Manufacturer's changed their product mix far more quickly than the federal government's response.

Direct injection, the popularization of turbocharging beyond Saab and Volvo, more exotic lightweight materials, and transmissions with additional gears arrived as a result of forward-thinking manufacturers implementing new technologies in response to changes in the global environment. Those who were slow to react endured bankruptcy -- even Ford was susceptible but had the foresight to borrow before the recession and invest in product development.

In lieu of technological advancements, especially during the 80s and early 90s, manufacturers chose to import or build zero-profit (or loss making) small cars to maintain CAFE compliance. And as long as light trucks were profitable, this scheme was feasible. This resulted in the production and sale of SUVs in lieu of more efficient full size cars, which allowed Ford, Chrysler, and GM to maintain higher CAFE numbers for passenger cars while, overall, producing less efficient vehicles.

Sure, the CAFE numbers were "met," but the reality was entirely different from what your data depicts.

The product mix became very truck-oriented and made US manufacturers and the nation as a whole less prepared for spikes in fuel costs. Chrysler still lacks a proper small car, but Ford had the foresight to adapt the Focus for the US market in 2000. The Cavalier and Cobalt lines never made a profit for GM (Cobalt sort of did by the end of its product cycle), but Cruze is finally a hit.

Rising fuel costs (and sustained high prices) are what finally drove consumers to change their purchasing habits. Consumers transitioned from traditional light trucks to unibody crossovers and tall wagons, achieving highway fuel economy numbers of 25MPG or better, efficiency levels that finally matched the full size cars that were phased out a decade earlier.

A gradually rising fuel tax would have been far more effective at changing consumer habits and maintaining a more efficient nationwide fleet. It would have also funded much-needed infrastructure developments (assuming the federal government, like the state of Missouri, directed a minimum percentage of fuel tax revenue directly to building roads, bridges, etc). It could have also encouraged the use of mass transit and funded the development of interstate rail.

All of this, of course, is setting aside any philosophical discussion on whether its appropriate for a central authority to control an industry in such a way. Let's not go there, because I'm on vacation and that discussion could go on for weeks. As much as I genuinely enjoy debating with you, I'd rather download travel maps and upload pictures of Arizona than talk about the advantages and disadvantages of collectivism. You have, however, made several points that I'll take under consideration.

Again, I recommend picking up Lutz's latest book for an inside look at how automakers deal with CAFE and how US energy policy played a role in harming the industry and making the US more vulnerable to the price fluctuations of foreign oil. He describes the situation more effectively than me.

[IBCoupe]

The problem is, it has never been proactive enough to make significant difference.

Right there, Jesda? That's a wholly unsupportable statement.

Consumer demand is what ultimately dictates the product mix of auto manufacturers. Today's highly competent small cars are a result of 2-3 years of product development (typical development time for a passenger car), a direct response to rising fuel costs. Manufacturer's changed their product mix far more quickly than the federal government's response.

Direct injection, the popularization of turbocharging beyond Saab and Volvo, more exotic lightweight materials, and transmissions with additional gears arrived as a result of forward-thinking manufacturers implementing new technologies in response to changes in the global environment.

And yet, they are only slightly better than the federal regulations would have them.

The product mix became very truck-oriented and made US manufacturers and the nation as a whole less prepared for spikes in fuel costs. Chrysler still lacks a proper small car, but Ford had the foresight to adapt the Focus for the US market in 2000. The Cavalier and Cobalt lines never made a profit for GM (Cobalt sort of did by the end of its product cycle), but Cruze is finally a hit.

But here's the thing about CAFE: the averages are weighted by the number of cars sold. If nobody buys a Focus, or a Cavalier, or a Cobalt, its numbers don't get added to the mix. One car getting 100mpg in a line-up of 13mpg cars doesn't get them to 27.5mpg average unless people actually go out and buy a proportional number of those 100mpg cars.

A fuel tax might have been more effective. Without a crystal ball, I can't tell you for sure. But auto-manufacturers have always been capable of far exceeding the standards set by Congress. Which is why they've met Congress' demands every time. Except for hiccups shortly after CAFE's implementations, American and Japanese automakers have always met the CAFE requirements. Not one fine issued since the mid 1980s.

And since CAFE standards for passenger cars has not moved since the mid-1980s, that might be why. Is industry responding to consumer demands now? Of course it is; industry does that. But it also responds to regulatory demands. Over the past 25 years, had Congress demanded that the standards be moved from 27.5mpg (in 1985) to, say, 45mpg (in 2010), do you harbor any serious doubt that they'd comply?

If anybody reading this thread says, "No, they'd comply," then we need to ditch this American fantasy that government can't control industry. They haven't done it on their own, and why the hell should they? While consumers might opt to go for the cheapest, most fuel-efficient car on the market, that's still only the cheapest, most fuel-efficient car on the market. They have the capability to design better, and they're not going to unless they're forced to, either by competitors (who don't have much of an incentive to design better, either, unless they're forced to) or by regulators.

[IBCoupe]

And to be honest, I'm not going to read Bob Lutz' book. If you want to recount what he's said, or if Bob Lutz himself knocks on my door and asks to have a conversation, I'll gladly do it (as I would anybody), but I don't buy those kinds of books.

[AZhitman]

Fraud can occur in any field. Happens in insurance all the time. Bet you still have insurance. By and large, most people follow the rules and/or have no access to getting around the regulations. That said, there are some levels of safeguards in place. Vehicles are randomly chosen to be required to go to smog-only stations. Smog-only stations are a little more concerned about getting caught passing cars that shouldn't. Unlike repair shops that happen to also be licensed to do smog tests, smog-only stations have no other revenue generation to fall back on. Is it 100% effective? Nope. Does it balance the costs of preventing fraud with having effective results on reducing the number of polluters on the road? Likely.

Perhaps state run inspections would be more difficult to bypass. But are you saying that a government run agency is more efficient than private businesses?

With all due respect, that's an awful lot of excuses for a program that claims to be "leading the way".

Some people pay photo radar tickets, too. That doesn't mean it's effective.

And in response to your question: Efficient? No. Effective? Apparently so.

My issue is with the bureaucracy and pompous claims of a state that has no safeguards in place. As an auditor, it makes my skin crawl.

[AZhitman]

A gradually rising fuel tax would have been far more effective at changing consumer habits and maintaining a more efficient nationwide fleet. It would have also funded much-needed infrastructure developments (assuming the federal government, like the state of Missouri, directed a minimum percentage of fuel tax revenue directly to building roads, bridges, etc). It could have also encouraged the use of mass transit and funded the development of interstate rail.

...and the flaming anti-Big Oil liberals can't argue that they wouldn't prefer to see those billions plunged into infrastructure (creating jobs) rather than into the pockets of Exxon and their ilk, especially when the bulk of those billions would come from their main redistribution-of-wealth targets: the wealthy who statistically drive lower-MPG vehicles.

Smart people make lots of pretty Kool-Aid-flavored charts to justify their continued existence. There's a few running CAFE. Don't swallow.

[AZhitman]

But here's the thing about CAFE: the averages are weighted by the number of cars sold. If nobody buys a Focus, or a Cavalier, or a Cobalt, its numbers don't get added to the mix. One car getting 100mpg in a line-up of 13mpg cars doesn't get them to 27.5mpg average unless people actually go out and buy a proportional number of those 100mpg cars.

Let's not be making things up.

The regulatory language describes the calculation as: “the number of passenger automobiles manufactured by the manufacturer in a model year; divided by the sum of the fractions obtained by dividing the number of passenger automobiles of each model manufactured by the manufacturer in that model year by the fuel economy measured for that model.”

It says NOTHING about sales.

Cheaper cars can be sacrificed in the name of profitability. It happens.

(I read a statistic once that said if Ford ceased production of EVERYTHING except pickup trucks, it would still turn a profit.)

So, fleets (rental car, government, big businesses) are bought every year at significant discounts (think of them as loss-leaders, for those of you who took Econ 101). Does it matter that they make a dime on those? Nope. Does it matter if they're rarely, if ever, driven? Nope. Those numbers all go into the mix. Hell, I wouldn't put it past Chevy to build 1,000 Aveos and crush them before they ever reach a dealership.

So, it's another example of bureaucracy without real-world applicability - another sham. A fuel tax would at least have the desired effect (reduced reliance on foreign oil and decreased emissions) without being disingenuous.

[Jesda]

I dont know what else to tell you Isaac. Ive explained how cafe had an adverse effect on fuel economy by contributing to the rise of suvs and how other methods, like fuel taxes, would have achieved the same goals with far less bureaucracy, loppholes, and BS with the added bonus of additional funds for infrastucture.

An impasse, my friend.

Ive been meaning to post a review of lutz's book with excerpts but never got around to it. Its through and interesting and in it he admits several of his own mistakes as a manager. If you dont read it for the politics (i disagree with lutz on several issues, and note that lutz favors several forms of regulation) then read it because its genuinely good fun, because its interesting to see what goes on behind the scenes at the manufacturers who design and build our cars.

As you can tell, im typing on the ipad again.

[AZhitman]

It's not an impasse.

It's a bloodied, outmatched grappler who's too confused to tap out.

[IBCoupe]

Let's not be making things up.

The regulatory language describes the calculation as: “the number of passenger automobiles manufactured by the manufacturer in a model year; divided by the sum of the fractions obtained by dividing the number of passenger automobiles of each model manufactured by the manufacturer in that model year by the fuel economy measured for that model.”

It says NOTHING about sales.

Cheaper cars can be sacrificed in the name of profitability. It happens.

So, you're saying that Ford doesn't sell all its focuses? They're just out there rusting? You're drawing a distinction without difference.

(I read a statistic once that said if Ford ceased production of EVERYTHING except pickup trucks, it would still turn a profit.)

Well, yeah. If their pick-up trucks aren't being sold at a loss to begin with, that's kind of a no-brainer, right?

So, it's another example of bureaucracy without real-world applicability - another sham. A fuel tax would at least have the desired effect (reduced reliance on foreign oil and decreased emissions) without being disingenuous.

Not necessarily. I drive 37,000 miles/year. I'm over a barrel until I graduate law school. Fuel tax hits me and I've already bought my car. Fuel tax continues to hit me regardless of how efficient cars get. They can get 5% more efficient, or they can get 25% more efficient. If it turns out that 5% more efficient is all that Chevy needs to hit to keep up with or slightly outmatch its competitors, that's what it'll do. In the meantime, I still drive 37,000 miles/year.

If the government mandates all manufacturers to get 20% more efficiency, they'll do it, as they've done all along.

[IBCoupe]

I dont know what else to tell you Isaac. Ive explained how cafe had an adverse effect on fuel economy by contributing to the rise of suvs and how other methods, like fuel taxes, would have achieved the same goals with far less bureaucracy, loppholes, and BS with the added bonus of additional funds for infrastucture.

I'm not suggesting that CAFE can't be better. I'm not suggesting that there aren't better way to regulate. I'm not even suggesting that CAFE was good. I'm arguing two things:

CAFE compliance made auto-manufacturers seek certain minimum levels of efficiency.
CAFE compliance did not kill American automakers.

If I had my way, CAFE standards for passenger cars wouldn't have stopped rising in 1985. CAFE standards might have included a loophole, but it would have been one that discounted light trucks, not eliminated them from the averages, because there's still something to be said for giving automakers leeway on trucks used purely for utility*. CAFE standards would have accompanied a gas tax to promote less driving.

If our goal is to maximize efficiency, we need expert regulators who are inventing right along with automakers. That's not gonna happen. In the meantime, we can set up goalposts, and tell automakers to get through them. Having the market regulate itself is fine if you really don't care about reliably seeing actual improvements - you're only going to see the improvements that are profitable in the instant market. They might improve, they might not, but they're only going to improve as much as they have to. Setting a regulatory standard makes it so that we say, "You are going to improve, and it will be by at least this much."



*I can see this being accomplished with a credit on light trucks for business-owners, though, and that might be the better way to do it; who knows.

[IBCoupe]

And you're right, Greg; it shouldn't be an impasse. What I'm saying is common freakin' sense.

[C-Kwik]

With all due respect, that's an awful lot of excuses for a program that claims to be "leading the way".

What excuses? I've merely pointed out that there are safeguards in the system. And for practical purposes, its effective enough. Could it be more effective? Of course. But at what cost? Since we're bringing up ECON 101, I might just drop the term opportunity cost.

Some people pay photo radar tickets, too. That doesn't mean it's effective.

Its fairly effective at getting people to pay the fines regardless of their effectiveness on safety without much effort on those charged with enforcing payment of said fines. Turns out, for the majority, the honor system tends to work pretty well at a very low cost.

And in response to your question: Efficient? No. Effective? Apparently so.

My use of the word efficient was quite intentional as the intent of that statement was merely to poke at you about the generalization that government agencies are less efficient. Sorry if the smileys weren't enough to make that clear.

My issue is with the bureaucracy and pompous claims of a state that has no safeguards in place. As an auditor, it makes my skin crawl.

As I stated, there are safeguards. The question then becomes, how much more would it cost to achieve greater effectiveness? This is where any discussion about the efficiency of the system would come into play.

[Jesda]

Again, at the risk of sounding repetitive, the automakers complied with CAFE only on paper while selling mountains of light trucks. There's a difference between fuel efficiency in the real world and CAFE compliance -- statistics have to be examined and explained to understand the whole story.

Looking at two correlating lines and saying "CAFE did it!" is a limited way of analyzing the situation. You have to look at how the data were acquired and how they achieved compliance.

If you're going to be pro-regulation, in favor of government as a method of influencing the habits and choices of the population for what you believe is the common good, then:
Federal fuel tax > CAFE

The CBO issued a couple reports confirming this. It's more cost effective, more environmentally friendly, and more efficient to levy a fuel tax than to use CAFE to dictate economy standards.


I have a feeling I'm going to repeat myself over and over if I don't end the discussion now, so I will. Good discussion though. I like debating with people from whom I have something to learn and gain.

[AZhitman]

But here's the thing about CAFE: the averages are weighted by the number of cars sold. If nobody buys a Focus, or a Cavalier, or a Cobalt, its numbers don't get added to the mix.

You're drawing a distinction without difference.

And you're stating something that is false. You're shrugging your shoulders and saying, "eh, whatev - same thing".

The correct statement would have been: But here's the thing about CAFE: the averages are weighted by the number of cars manufactured. If there's no Focus, a Cavalier, or Cobalt built, its numbers don't get added to the mix.

Those cars can sit on a lot for 2-3 years. Some go back to the manufacturer, having never been purchased by a consumer.

Keep in mind that automakers can earn credits one year for exceeding CAFE standards and use them in the next year, or the following year, or three years down the road (OR to absolve themselves of failure three years PRIOR).

It's good business to make a metric s***-ton of econoboxes that won't sell, carry them over to the following year, and reap the benefits by "slacking" that year. CAFE's "Carry back" credits are the manufacturers' insurance policy to make sure they never run afoul of CAFE (they can be used retroactively, what a deal - no wonder they've not been fined... and you're impressed by that?)

In October, Bex couldn't find a SINGLE 2012 competitor for the Versa on ANY dealer lots. Why? Because they had a surplus of 2011's.

WHY did they have a surplus? Aren't the bean counters smart people? Shouldn't they be able to project sales? Hmmm. Yeah - they ARE smart. Smart enough to build a crap-ton of 2011's, let them languish on a lot, profit from the in-demand cars, and let the losers pad their CAFE credits balance so they can build uber-profitable GT500's and Raptors and supercharged ZR-1's.

It's also self-reported MPG figures, so it's likely that there's some fraud. The EPA only tests a small fraction for compliance, and even this is done as a "spot-check". I'm suuuuure there's no "ringers" in that run of cars.

All that complexity has to cost a lot of money. A fuel tax would be cheaper to implement, free of loopholes and excuses and gamesmanship, and would be an honest program that does what it was designed to do.

[AZhitman]

And for practical purposes, its effective enough. Could it be more effective? Of course. But at what cost?

The question then becomes, how much more would it cost to achieve greater effectiveness? This is where any discussion about the efficiency of the system would come into play.

I would argue that "Effective enough" isn't quantifiable. CA is broke. CARB costs money. Has CARB contributed directly to the decline in pollution? If so, what was the cost-per-PPM reduction? We can't say.

As such, I don't know either. You'd have to look at AZ's budget for emissions testing (which is just as strict as CA's, but without loopholes) and compare the two.

[IBCoupe]

I'm not saying that "CAFE did it," Jesda. I'm saying that, "CAFE required compliance at this level, and though they have all the reasons in the world to outperform their competitors, they have only barely exceeded their compliance requirements." Regardless of how many trucks they made, this is the truth I'm driving at. Even if you just judge them on the basis of their trucks, that truth remains.

Sure, it's possible that they would have been there anyways. They might be hovering at 30mpg average for all their passenger cars, absent a regulatory mandate. Neither you nor I could say.

And a gas tax might be more effective. I'm not disputing that. Now I'll repeat myself:

I'm not suggesting that CAFE can't be better. I'm not suggesting that there aren't better way to regulate. I'm not even suggesting that CAFE was good.

But there's one other thing that bugs me about a gas tax (besides the "it puts me over a barrel" argument), and it happens to be the one thing that makes it most effective: it's dishonest. You can force the market, or you manipulate it. With CAFE (or an improved CAFE, if you like), you limit the choices of consumers to simply "better" cars. With a gas tax, you artificially raise the price of fuel so that consumers desire "better" cars.

The former works in the open. The latter involves trickery. The former makes products better. The latter makes people better. I'm not gonna fight with the CBO, but that bugs the crap out of me.

[IBCoupe]

And you're stating something that is false. You're shrugging your shoulders and saying, "eh, whatev - same thing".

Because they effectively are. The only one of those little datapoints you raised, Greg, that could have any bearing on the difference between a manufactured car and a sold one as it has on the year-to-year averages is the number of cars sent back to the manufacturer for reprocessing. There's no difference between a car that's made and a car that's sold when every car that's made gets sold eventually. It shifts the numbers around a bit, sure, but only three years forward or back, and it doesn't actually affect the averages in any noticable way - it may puff up a bit in one year and drop down in another, but in each year, the NHSTA hasn't had a care in the world about it.

Remember, Greg - the credits go to pay fines, they don't change the data. The data is that passenger cars have been in compliance for a long time, now. Trucks, too.

And I'm pretty sure that Bex's inability to find a 2012 Versa competitor has more to do with local buying trends and dealership practices, not automaker practices.

[AZhitman]

The NHTSA and CAFE haven't had a "care in the world" because they know the game. It's self-preservation. It's justification for their continued existence. As such, I reject the notion that CAFE works "out in the open" as if there's no tomfoolery involved. You and I both know that the lobbyists get taken care of, and the automakers know which palms to grease.

At least with a fuel consumption tax, it's "blind". Whether Kim Kardashian is fueling her Bentley, or Joe Sixpack is buying $5 of gas for his '87 Tempo, they both pay for what they use. There's no influence-peddling, no shifting of the numbers, and no artificially-imposed impact on manufacturer offerings. The market makes the rules.

We always come back to a similar disagreement - You're ok with limiting consumer choices, and having someone else decide what's best for you and your family, and I oppose both (on my behalf AND yours).

In Soviet Russia, Lada is good enough car for you!

[IBCoupe]

No, Greg, we're both okay with having somebody else decide what's best for us. You're just okay with them patting you on the head and saying, "Good boy. Way to make those good choices."

[AZhitman]

Hmmm.

That person hasn't stopped by lately. Maybe they think I'm still commuting in the 'vette.

[IBCoupe]

They don't need to because I'm winning. I want regulators to act like regulators. I don't want them to act like parents. The less they regulate consumers and the more they regulate the industry, the better. That's the ideal. Can't always happen, but when it can, it's preferred.


"Well, son, you could go buy that truck, but remember that your mother and I are going to look to you to support the family now that you're grown up. That's going to be an extra cost to you, chief. But, it's your choice, after all."

[audtatious]

We just need to be mandated to buy vehicle X and be done with it. The common man is too stupid to make decisions on their own. All problems with fuel economy and the environment would disappear in short order with politicians making decisions for us.

[IBCoupe]

Jawohl.

[C-Kwik]

I would argue that "Effective enough" isn't quantifiable. CA is broke. CARB costs money. Has CARB contributed directly to the decline in pollution? If so, what was the cost-per-PPM reduction? We can't say.

As such, I don't know either. You'd have to look at AZ's budget for emissions testing (which is just as strict as CA's, but without loopholes) and compare the two.

If you are asserting that my argument is void because I have no quantifiable data, then how can you make the assertion that CA emissions procedures are a sham or broke in the first place? Which brings us back to:

Now, if you guys would just make the testing stations state-run (like AZ) rather than independently-owned and operated, perhaps the emissions laws wouldn't be such a sham.

And they are, indeed, a sham.

Elaborate.

[C-Kwik]

The three year average thing merely tempers results so that unforeseen fluctuations aren't so damaging. Considering the CAFE standards are intended to be a long term solution, it makes no sense to punish a company for having an off year where their higher mileage vehicles may not have sold as much as they would have liked.

It's good business to make a metric s***-ton of econoboxes that won't sell, carry them over to the following year, and reap the benefits by "slacking" that year. CAFE's "Carry back" credits are the manufacturers' insurance policy to make sure they never run afoul of CAFE (they can be used retroactively, what a deal - no wonder they've not been fined... and you're impressed by that?)

I don't see how that's good business at all. Its not like they get to build up a stock of high mileage cars and they are set for a few years. If, as you state, the CAFE statistics are determined by the manufacture of the vehicles, then the next year when they slow production of the high mileage cars (It would be financial suicide to continue to over produce them if there are too many units already on the lots), it would simply balance itself out. From a business perspective, it makes no sense to intentionally take this route. The better option is to try and take the opportunity to build a car that helps them meet the CAFE goals that might actually be desirable from which they might be able to post a profit rather than a loss.

Hell, I wouldn't put it past Chevy to build 1,000 Aveos and crush them before they ever reach a dealership.

I would. 1,000 Aveos will hardly have any effect on the CAFE numbers. I know that's likely an arbitrary number you pulled out but consider if it cost even just $5000 to build one. But consider 1000 Aveos is on the order of about 0.06% of Chevy's annual sales. Without having super high gas mileage ratings, its unlikely destroying $5M (conservatively) worth of product is going to pay any dividends. But lets consider if you take the CAFE goal for 2010 (27.5 mpg) and Chevy's annual sales (Only sources I could find put monthly sales at about 140K; so 1680000 annual) and work in an additional 1000 units of Aveos, the effect on their CAFE number is 0.005 mpg. Cafe fines are imposed on tenths of miles at $5.50 per tenth times the number of units. If Chevy were off the mark by a tenth of a mpg, they would need to manufacture ~20,000 Aveos. Think they will really destroy $100M to avoid $9.2M in penalties? Is that quantifiable enough for you? Keep your arguments in the realm of reality please.

[AZhitman]

If you are asserting that my argument is void because I have no quantifiable data, then how can you make the assertion that CA emissions procedures are a sham or broke in the first place?

Because I have personal knowledge of several people with so-called "illegal" cars who register them every year in CA surreptitiously by using "homey hook-ups" at their local testing facility... Hell, many of them share info on this very forum.

...and then you have to go and bring math into things. Good work - I stand corrected (on that point).

I remain steadfast in my position that the government needn't be telling companies what they can and can't build, outside of the consumer protections already codified and overseen by other federal agencies. What's next? Are they going to make me shut down the forums for 3 hours per day because too many people in our demographic aren't doing their homework?

[C-Kwik]

Because I have personal knowledge of several people with so-called "illegal" cars who register them every year in CA surreptitiously by using "homey hook-ups" at their local testing facility... Hell, many of them share info on this very forum.

So do I (Hell, you do know I had a turbo 240 years ago right?). But they are far and few between. Lest you think that these people you know are a good cross sectional representation of California drivers/car owners. I see plenty of modified cars for sure. Of those, how many are modified illegally? And what percentage of the cars in CA do they represent? I see a lot less modified cars on the road than stock cars. A lot less. Common sense alone should tell you that the percentage of illegally modified cars in CA is going to be quite small relative to the actual number of cars. This is probably true virtually everywhere. It makes little sense to try and spend more money to go after the small percentage by trying to change the way we handle smog checks (through private shops). That said, since last year, the government has been looking at statistical anomalies in comparison to roadside smog checks and random inspection requirements (I received one of these on my CRX this year). They have been performing sting operations on such shops. Arrests have been made and smog licenses have been revoked (at a greater rate than before).

...and then you have to go and bring math into things. Good work - I stand corrected (on that point).

It was a rather obvious conclusion to make even without the numbers. But I crunched the numbers just to see and the magnitude even surprised me, so I shared.

I remain steadfast in my position that the government needn't be telling companies what they can and can't build, outside of the consumer protections already codified and overseen by other federal agencies. What's next? Are they going to make me shut down the forums for 3 hours per day because too many people in our demographic aren't doing their homework?

Realize I've left other aspects of the argument alone. But I'll go ahead and interject a few thoughts. There are many ways to try and increase the overall efficiency. There are pros and cons to every method. Personally, I'm afraid of what a gas tax would do to the price of goods in general, so I'm very reluctant in supporting that. From an economic perspective, if the price of most of our goods rise, its likely people will buy less of them. Large trucks used to transport our goods generally do not get great gas mileage. Large frontal area and a poor aerodynamic profile is hard to improve upon. And long haul trucks aren't going to get much benefit from hybrid drive trains. So an increased cost of fuel is going to impact the prices of a lot of goods across the board. Especially if the effective goals (CO2 levels) remain the same. I suspect the price of fuel would have to be rather dramatic in order to produce the kind of forcing that would push the level of innovation we are seeing now. And its unlikely the path would change either (engineers are likely to still think of the same solutions as they are now). Where we might see a difference though is on the consumer end. Dramatically high gas prices would be likely to put people into a position where they don't care as much about anything but gas mileage. Its already much higher priority than it used to be and compromises are already being made. Not to mention, people already complain plenty about the price of gas. The fallout from increasing the tax on it would likely to ruin a lot of political careers.

[IBCoupe]

The three year average thing merely tempers results so that unforeseen fluctuations aren't so damaging. Considering the CAFE standards are intended to be a long term solution, it makes no sense to punish a company for having an off year where their higher mileage vehicles may not have sold as much as they would have liked.

It's good business to make a metric s***-ton of econoboxes that won't sell, carry them over to the following year, and reap the benefits by "slacking" that year. CAFE's "Carry back" credits are the manufacturers' insurance policy to make sure they never run afoul of CAFE (they can be used retroactively, what a deal - no wonder they've not been fined... and you're impressed by that?)

I don't see how that's good business at all. Its not like they get to build up a stock of high mileage cars and they are set for a few years. If, as you state, the CAFE statistics are determined by the manufacture of the vehicles, then the next year when they slow production of the high mileage cars (It would be financial suicide to continue to over produce them if there are too many units already on the lots), it would simply balance itself out. From a business perspective, it makes no sense to intentionally take this route. The better option is to try and take the opportunity to build a car that helps them meet the CAFE goals that might actually be desirable from which they might be able to post a profit rather than a loss.

Hell, I wouldn't put it past Chevy to build 1,000 Aveos and crush them before they ever reach a dealership.

I would. 1,000 Aveos will hardly have any effect on the CAFE numbers. I know that's likely an arbitrary number you pulled out but consider if it cost even just $5000 to build one. But consider 1000 Aveos is on the order of about 0.06% of Chevy's annual sales. Without having super high gas mileage ratings, its unlikely destroying $5M (conservatively) worth of product is going to pay any dividends. But lets consider if you take the CAFE goal for 2010 (27.5 mpg) and Chevy's annual sales (Only sources I could find put monthly sales at about 140K; so 1680000 annual) and work in an additional 1000 units of Aveos, the effect on their CAFE number is 0.005 mpg. Cafe fines are imposed on tenths of miles at $5.50 per tenth times the number of units. If Chevy were off the mark by a tenth of a mpg, they would need to manufacture ~20,000 Aveos. Think they will really destroy $100M to avoid $9.2M in penalties? Is that quantifiable enough for you? Keep your arguments in the realm of reality please.

You went into way more detail than I was willing to yesterday afternoon, and I thank you for it.

In my defense, I'm writing a research paper at the same time.

[AZhitman]

Large trucks used to transport our goods generally do not get great gas mileage. Large frontal area and a poor aerodynamic profile is hard to improve upon. And long haul trucks aren't going to get much benefit from hybrid drive trains. So an increased cost of fuel is going to impact the prices of a lot of goods across the board.

Or, maybe it would drive manufacturers to increase efficiency due to consumer demand...

[IBCoupe]

Not necessarily, Greg. You're assuming that when consumers see an increase in price, they're going to associate that with their car. When your TV gets more expensive, you don't remark, "Oh, that's just my car choices and the car choices of society coming back to bite me." When vegetables get more expensive, very few exclaim, "Darn me and my choices!" Some consumers might try to get some cost savings in response, but only some fraction of them will go and say, "Let me buy a new car."

Woo, externalities!