Obama Says New Car-Fuel Rules Give Industry 'Certainty'

By HENRY J. PULIZZI

WASHINGTON-- President Barack Obama said new government rules designed to boost fuel efficiency and slash greenhouse-gas emissions will give auto makers "clear certainty" at a time when their business is enduring a "historic crisis."
"In the past, an agreement such as this would have been considered impossible," Mr. Obama said in a speech in the Rose Garden, where he was joined by auto executives, state governors and car-union officials.
"At a time of historic crisis in our auto industry... this rule provides the clear certainty that will allow these companies to plan for a future in which they are building the cars of the 21st century," the president said.

WSJ's Dennis Berman and Evan Newmark discuss the impact of new fuel-efficiency standards and what they believe may be the inevitable bankruptcy of Big Three auto maker General Motors.
The rules would require new passenger cars sold in the U.S. to meet an average mileage requirement of 39 miles per gallon by 2016. Light trucks would have to deliver an average of 30 mpg. That's a dramatic rise from current averages--27.5 mpg for cars, 23 mpg for trucks--and would bring the overall average of cars and light trucks to 35.5 mpg by 2016, four years earlier than current federal law requires.
"Right now the rules governing fuel economy in this country are inadequate, uncertain and in flux," Mr. Obama said.
The new standards also resolve a dispute between the auto industry and California, which is seeking a waiver from the federal government to set its own rules on greenhouse-gas emissions from vehicles. California officials have agreed to defer to the national standard if they win the waiver.
Green groups applauded the administration announcement as a significant step toward addressing global warming and achieving energy independence. The Union of Concerned Scientists said it expects the plan to slash the U.S.'s dependence on oil by about 1.4 million barrels a day by 2020, almost as much as daily imports from Saudi Arabia. A UCS analysis also suggests that carbon-dioxide emissions would be cut by 230 million metric tons by 2020, and net savings to consumers would reach $30 billion by 2020, based on a gas price of $2.25 a gallon.

But the rules also will raise the cost of manufacturing new vehicles at a time when the auto industry is struggling, and Chrysler LLC is in bankruptcy, where it may soon be joined by General Motors Corp. Still, car makers have signaled support for the new standards, which would likely bring an end to long-running court battles with states over emissions and bring the regulatory certainty of a single national fuel-economy regulation.
Ford Motor Co. CEO Alan Mulally called the new rules a "crucial milestone."
"The framework of the national program will give us greater clarity, certainty and flexibility to achieve the nation's goals," Mr. Mulally said in a statement. "We will continue to work with the federal agencies to finalize the standards that we are committed to meeting."
An administration official said Monday that the cost of making a new vehicle will increase by $600, a cost the White House believes will be offset later by savings at the pump.
Mr. Obama said Tuesday that consumers who invest in the vehicles will pay off their investment in three years.
Unlike under existing rules, auto makers won't be able to boost the fuel efficiency of some models while leaving others untouched. That's because standards will be set for each vehicle size and manufacturer.
Questions remain over how the government can persuade car buyers to purchase the greener and more expensive vehicles, particularly if gas prices remain relatively low.
"U.S. consumers, despite their responses to surveys saying they would like their vehicles to achieve better fuel economy, truly do not have the same inclination for small cars as their European or Asian counterparts, given that the tax and cost structures of vehicle usage in the United States are completely different," IHS Global Insight automotive analyst Aaron Bragman wrote in a report.
"Thus, the government is going to have to come up with a way to entice people to buy the next generation of fuel-efficient cars, either through taxation changes or incentivisation of purchases," Mr. Bragman wrote.
--Josh Mitchell contributed to this report.
Write to Henry J. Pulizzi at henry.pulizzi@dowjones.com